Rental Yield
Rental yield
How much a property earns per year from rental as a percentage of its price. It matters when investment real estate is bought not only for status but also for income.
- What it is
- How much a property earns a year from rent, as a percentage of its price
- Where it applies
- Assessing investment property, including for residence
- How it is calculated
- Annual rent divided by the price of the property
- Gross and net
- Net — after taxes, maintenance and vacancy
- Can it be assessed
- Yes: compare properties on actual, not promised, yield
In plain words
Rental yield is an indicator of how much a property earns a year from letting, expressed as a percentage of its price. For example, a property costing €300,000 that brings in €15,000 of rent a year has a yield of 5%. It is the key metric when real estate is bought not only for status but as an investment.
There is gross yield and net yield. Gross is simply annual rent against the price. Net is more realistic: taxes, upkeep, management, insurance and vacancy (months when the property stands empty) are deducted from the rent. It is net yield that shows what you actually take home, and it is always lower than the developer’s gross figure.
In citizenship and residence programmes, yield matters doubly: approved property is often priced above market because of the “programme premium”, which lowers the yield. That is why properties are compared on the actual rather than the promised figure, bearing in mind that the property must be held for part of the period under the programme’s conditions.
Where yield matters
What matters about yield
- Annual rent against price
- As a percentage
- Gross and net
- Less taxes
- Less upkeep
- Less vacancy
- Lower than gross
- Check against the market
- Not promises
- Programme premium
- Lowers the yield
- Holding period
How to assess yield
- 01Collect actual rental rates
- 02Calculate net yield
- 03Account for taxes and vacancy
- 04Compare properties
- 05An informed choice
What you need to know
- Yield is annual rent as a percentage of the price
- Net yield is always lower than gross
- Taxes, upkeep and vacancy are deducted from the rent
- Developers usually quote the gross figure
- The programme premium lowers the real yield
Common mistakes
- Looking at gross yield instead of net
- Trusting the developer’s gross figure
- Not accounting for vacancy and upkeep
- Ignoring the programme premium
- Forgetting taxes on rent
What this means for a BRIDGES client
We calculate the real, net yield of properties rather than taking the developer’s promises: we account for taxes, upkeep, vacancy and the programme premium. That way you compare real estate on actual income and choose a property that gives both status and money.
Frequently asked questions
01 /How is rental yield calculated?
Annual rental income is divided by the price of the property and expressed as a percentage. A property costing 300,000 with rent of 15,000 a year yields 5%.
02 /How does gross yield differ from net?
Gross is simply rent against price. Net is after taxes, upkeep, management and vacancy. It is net yield that shows what you take home.
03 /Why is the stated yield higher than the real one?
Usually the gross figure is quoted, with no deductions or vacancy. The real net yield is always lower, so it is calculated separately against the market.
04 /Does the programme affect yield?
Yes: approved property is often priced above market because of the programme premium, which lowers the yield. Properties are compared with this in mind.
05 /Should taxes on rent be taken into account?
Yes, without fail. The tax on rental income depends on the country and your residence and has a noticeable effect on net yield.
06 /How do you choose an income-producing property?
Compare several properties on actual net yield, allowing for vacancy, taxes and the programme premium, rather than on the promised figure.
See also
Read next
This material has undergone editorial review by BRIDGES.
Real estate for status and income?
We will calculate the real net yield of the properties and compare them — without the developer’s inflated promises.