Gross rental yield = annual rent ÷ purchase price × 100%
A worked RES examination question on rental yield, from our Paper 2 bank — with the rule it turns on, and why each of the four options is right or wrong.
The question
Joel is weighing whether to keep letting the unit or to sell into a rising market, and as a first step wants the plain gross yield his rent represents against what he originally paid, before any costs are considered. Mr Joel Sim bought an apartment for $800,000 three years ago and has just let it at $2,500 a month. The unit is now valued at $960,000.
The gross rental yield on the purchase price is ______.
The answer, and why
Answer: B
The rule. Gross rental yield = annual rent ÷ purchase price × 100%.
Why B is correct. ($2,500 × 12) ÷ $800,000 = $30,000 ÷ $800,000 = 3.75%.
The other options.
- A (3.13%) divides by the current $960,000 value, not the purchase price.
- C (0.31%) uses the monthly rent instead of the annual rent.
- D (4.50%) uses a $3,000 monthly rent.
Exam note. Gross yield is on the purchase price unless the question says otherwise — annualise the rent first.
Want a full paper instead of one question?
The free half-paper is 20 questions with a Section B case study, explained to this same depth. The paid sets are ten full 80-question papers across Paper 1 and Paper 2, every figure checked against the current IRAS, CEA, HDB, URA and SLA position.
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Independent study material. Not affiliated with or endorsed by the Council for Estate Agencies. No pass guarantee — for study use only.