Gross yield
It's the annual rent divided by the purchase price. A €150,000 flat let at €900 a month has a gross yield of 7.2%. It's the figure that usually appears in listings because it's the highest possible.
Net yield
Subtract empty months and recurring costs (property tax, community fees, insurance, maintenance) from the rent and divide by the total investment, which includes purchase taxes, notary, land registry and refurbishment. With 5% vacancy, €1,500 of annual expenses and €20,000 between purchase costs and refurbishment, the same flat drops to 5.15%.
What neither of them includes
Both are yields before personal taxes and without financing. If you buy with a mortgage, what matters is the cash flow after the loan payment and the return on the money you put in (cash on cash).
- Rental taxation depends on your personal situation; consult an adviser.
- Purchase taxes vary by autonomous community and type of property.
- An asking price isn't a transaction price.
Related tools
Sources
Informational content. It doesn't constitute financial, tax or investment advice.