The short answer
Gross rental yield is annual rent divided by purchase price; net yield deducts property tax, maintenance, vacancy and other holding costs first. Shophouse yields differ by tenant type, lease structure and condition, so always underwrite net yield from actual lease terms rather than a quoted headline percentage.
- Gross yield
- Annual rent ÷ purchase price
- Net yield
- After holding costs, on total acquisition cost
- Key costs
- Property tax, maintenance, vacancy, income tax
- Verify rates
- IRAS
Last reviewed 2026-11-05. Rules and fees change; confirm with the relevant agency before committing to a lease or fit-out.
The yield formulas
| Measure | Formula | Use |
|---|---|---|
| Gross yield | Annual rent ÷ purchase price | Quick comparison between assets |
| Net yield | (Annual rent − holding costs) ÷ total acquisition cost | True return underwriting |
| Effective rent | Total rent over term ÷ months, after rent-free | Compare lease offers |
Worked illustrative example
The numbers below are purely illustrative and are not market data. A landlord buys a shophouse for 10,000,000 dollars and lets it for 30,000 dollars a month, so annual rent is 360,000 dollars and gross yield is 3.6%. If annual holding costs (property tax, repairs, insurance, agent fees and a vacancy allowance) total 60,000 dollars, net rent is 300,000 dollars and net yield on price is 3.0%. Acquisition costs such as stamp duty and legal fees lower it further.
Underwrite net yield from the lease in front of you, not a headline percentage.
Costs that reduce landlord yield
- Property tax on non-residential property, assessed on annual value; check IRAS for current rates.
- Maintenance and repairs, including conservation-compliant façade and roof upkeep.
- Vacancy and rent-free fit-out periods between and at the start of tenancies.
- Leasing agent commission and legal fees.
- Income tax on net rental income, which IRAS taxes at the owner's rate after allowable deductions.
- Financing costs, if the purchase is mortgaged.
How tenant mix affects income stability
F&B tenants often pay higher rent per sq ft but carry higher turnover and fit-out risk. Office and professional tenants may offer steadier occupancy. Longer leases with fixed annual escalations improve predictability, while turnover-linked rent adds upside and volatility.
Sources and where to verify
See also our shophouses for rent hub and the commercial shophouse permitted uses overview.