When you’re investing in Singapore property, rental yield is one of the most important numbers you’ll look at. But many buyers and investors make simple mistakes when trying to calculate rental yield, which can seriously distort their view of property ROI Singapore and rental return. These errors can make a property look more attractive than it really is, leading to poor decisions and lower long-term profits.
This guide focuses specifically on the common how to calculate rental yield in Singapore mistakes that first-time buyers and investors often make. It’s designed as a practical, tactical companion to our main pillar guide, How to Calculate Rental Yield in Singapore (2025 Guide) | Homejourney, so you can avoid these pitfalls and build a more accurate picture of your investment’s true performance.
Why Getting Rental Yield Right Matters in Singapore
Rental yield tells you how much income your property generates relative to its cost. In Singapore’s high-priced market, even small calculation errors can make the difference between a cash-flow positive investment and one that quietly loses money after expenses.
As of late 2025, average gross rental yields in Singapore are around 3.3%, but net yields are typically 1.5–2.0 percentage points lower once you factor in mortgage interest, property tax, maintenance, and other costs. If you ignore these deductions or use the wrong inputs, your property ROI Singapore will be wildly optimistic and unreliable.
Mistake 1: Using Gross Yield as Your Only Metric
Many investors stop at gross rental yield and never calculate net yield. This is the most common how to calculate rental yield in Singapore mistake.
Gross rental yield = (Annual rental income ÷ Property purchase price) × 100
For example, a condo in Tampines selling for S$900,000 and renting for S$3,000/month has a gross yield of:
(S$36,000 ÷ S$900,000) × 100 = 4.0%
That 4.0% looks attractive, but it doesn’t account for any costs. In reality, your actual rental return (net yield) will be much lower.
Action step: Always calculate net rental yield using this formula:
Net rental yield = [(Annual rent – Annual expenses) ÷ Property purchase price] × 100
For the same Tampines condo, if annual expenses (mortgage interest, property tax, maintenance, insurance, agent fees, vacancy) total S$18,000, net yield drops to:
(S$36,000 – S$18,000) ÷ S$900,000 × 100 = 2.0%
That’s a very different picture of your property ROI Singapore.
Mistake 2: Using the Wrong Property Price
Another frequent error is using the wrong denominator in the rental yield formula. Some investors use:
- Market value instead of actual purchase price
- Valuation instead of transacted price
- Price per square foot instead of total price
For yield calculations, always use the actual purchase price (including any additional costs like legal fees and stamp duties if you want a very conservative estimate). Using a higher market value will artificially lower your yield, while using a lower valuation will inflate it.
Insider tip: On Homejourney, use our projects directory and property search to check recent transacted prices for similar units in the same development. This helps you verify whether the purchase price you’re using is realistic.
Mistake 3: Ignoring Mortgage Interest in Net Yield
Many investors exclude mortgage interest when calculating net rental yield, treating it as a “non-cash” expense. This is a serious mistake because mortgage interest is a real, recurring cost that directly affects your cash flow and property ROI Singapore.
In Singapore, mortgage interest rates for property loans typically range from 2.5% to 3.5% (depending on fixed vs. floating rates and your bank). For a S$900,000 loan at 3.0% interest, annual interest alone is about S$27,000.
Action step: Always include mortgage interest in your annual expenses when calculating net yield. Use a reliable mortgage rates calculator to estimate your actual interest payments based on your loan amount, tenure, and interest rate.
Mistake 4: Underestimating or Omitting Key Expenses
Net rental yield is only as accurate as the expenses you include. Common omissions include:
- Property tax (IRAS rates vary by ownership type and assessed value)
- Condo maintenance / MCST fees (can be S$300–S$800/month for a 3–4 room unit)
- Insurance (fire, home, and landlord insurance)
- Rental agent fees (typically 1–2 months’ rent per tenancy)
- Regular maintenance (e.g., aircon servicing, pest control, minor repairs)
- Vacancy loss (assume at least 1 month per year, especially for private property)
Insider tip: For HDB flats, factor in higher maintenance costs if the estate is older and undergoing major upgrading works. For condos, check the MCST’s sinking fund and upcoming major repairs, which can lead to special levies.
Action step: Create a checklist of all annual expenses and update it regularly. Use our aircon servicing and maintenance cost guides to estimate recurring upkeep costs.
Mistake 5: Using Projected or “Dream” Rental Income
It’s tempting to use optimistic rental figures when calculating yield, especially for new launches or properties in up-and-coming areas. But using projected or maximum possible rent instead of realistic, achievable rent leads to inflated rental return estimates.
Action step: Base your annual rental income on:
- Recent rental transactions for similar units in the same development or nearby estates
- Current listings on reliable platforms (including Homejourney’s property search)
- Advice from experienced agents familiar with the area
For example, if similar 3-room HDB flats in Ang Mo Kio are renting for S$2,800–S$3,200/month, use S$3,000 as a conservative estimate, not S$3,500 just because the unit is newly renovated.
Mistake 6: Forgetting CPF Opportunity Cost
When you use CPF Ordinary Account (OA) funds to pay for your property or mortgage, you’re giving up the 2.5% interest that CPF OA earns. This is an opportunity cost that many investors ignore when calculating property ROI Singapore.
While CPF interest isn’t a direct cash outflow, it represents a real cost of capital. If you’re using a large amount of CPF OA, consider adding this opportunity cost to your annual expenses for a more conservative net yield calculation.
Action step: For a more realistic long-term ROI, calculate a “CPF-adjusted” net yield by adding 2.5% of your CPF OA usage to your annual expenses.
Mistake 7: Not Accounting for Vacancy and Downtime
Many investors assume 12 months of rent every year. In reality, even well-managed properties experience vacancy, turnover, and periods of no income.
Action step: Always include a vacancy buffer in your net yield calculation. A common rule of thumb is to deduct 1–2 months’ rent per year as a vacancy allowance. For a unit renting at S$3,000/month, that’s S$3,000–S$6,000 in annual vacancy loss.
This makes your net yield more conservative and realistic, especially in areas with higher tenant turnover or oversupply.
Mistake 8: Comparing Gross Yields Across Different Property Types
Comparing gross yields of HDB flats, ECs, and private condos without adjusting for financing and expenses can be misleading. For example:
- HDB flats often have lower gross yields (2.5–3.5%) but lower financing costs and expenses
- Private condos may have similar gross yields (3.0–4.0%) but much higher mortgage interest, maintenance, and property tax
Action step: When comparing properties, always calculate and compare net rental yields
