I'm struggling to work out how to calculate real estate rental yield in a way that makes it somewhat comparable to any other income-generating asset (e.g., given an investment of X, and a periodic payment of Y, the yield is Z%).
The sticking point for me is how to handle mortgage costs. The interest part of the payment seems pretty clearly a cost that should be deducted from the income to figure out profit, but how should one account for repayment of capital?
My initial thought was to just ignore it and use only mortgage interest when figuring out cost, but this Investopedia article (under the "Home Equity" heading) outlines one way to handle the second point by essentially treating the capital repayment as additional income. Is this a reasonable approach or are there other ways that might make a rental investment more comparable to another investment (say, the stock market)?