For Green Leaf Properties, we calculate the capitalisation rate for Property A to be 4.3% (calculated as £5,522 ÷ £127,000) and we calculate the capitalisation rate for Property B to be 4.8% (calculated as £8,358 ÷ £173,000). From these metrics, we can see that Property B had a higher gross yield and a higher capitalisation rate this financial year than Property A. The capitalisation rate is the better yield metric here, as it takes into account property expenses too, not just revenue. It shows us the yield we would have generated if we owned the property outright with no mortgage financing.
