Rental yield: How we calculate
Check gross and net rental yield with vacancy, costs and an explicit denominator.
How we calculate
Gross yield in percent = scheduled annual rent / purchase price × 100. Net yield in percent = vacancy-adjusted rent less operating costs, divided by (purchase price + acquisition and renovation costs) × 100. Financing is excluded. The 20% deduction tax scenario concerns a natural person’s residential lease, rather than accommodation services or commercial premises. Tax = actual annual rent received × 0.8 × entered tax rate / 100; actual operating costs are not additionally deducted from that tax base. Rental income after operating costs (NOI) is rent actually received less the owner’s operating costs, before loan payments and tax.
What the figures mean
- Rental income after operating costs (NOI)
Rent received less property operating costs. Loan payments and taxes have not yet been deducted.
Simple example: Annual rent of €12,000 less €3,000 of costs leaves €9,000 before debt payments and tax.
Example: rent and total investment
An apartment costs €100,000, with €5,000 in acquisition costs and €5,000 in renovation costs. Total investment is €110,000. Rent is €600 per month, vacancy is 5% and operating expenses are €100 per month. Other annual expenses are zero and tax mode is off.
Contractual annual rent is €7,200 and gross yield on purchase price is 7.2%. Vacancy reduces rent to €6,840; subtracting €1,200 of expenses leaves €5,640 in net operating income. Yield on total investment is 5.13%, before tax and financing.
How to read the result
Gross yield and yield on total investment use different denominators. Acquisition and renovation costs reduce the latter. This model excludes loan payments; vacancy and expenses are your assumptions rather than forecasts of future income.