Real estate
How do you calculate rental yield on a property?
Gross and net annual yield of a rental property.
Quick answer
Gross yield = (monthly rent × 12 ÷ purchase price) × 100. €650/month rent on a €120,000 property: (650 × 12 ÷ 120,000) × 100 = 6.5% gross. Net yield subtracts annual costs: with €1,800 costs, net = ((7,800 − 1,800) ÷ 120,000) × 100 = 5%.
Gross annual yield
6.5 %
- Net annual yield
- 5 %
- Annual rent
- $7,800.00
How it works
Gross yield is what agents quote; net yield is what you actually keep. Include taxes, condo fees, insurance, vacancy allowance and maintenance — omitting them makes every investment look better than reality.
Frequently asked questions
What is a good rental yield?+
Varies by city: 4–6% gross is common in many Italian provincial cities; Milan and Rome centres may be 2–4%. Compare net yield to mortgage rate and alternative investments.
Gross vs net yield — which to use?+
Always calculate net before buying. Gross is useful for quick screening of listings; net determines whether cash flow is positive after the mortgage payment.
Should I include expected vacancy?+
Yes — budget 1–2 months empty per year (roughly 8–15% of annual rent) unless you have long-term tenants. Student and seasonal markets need higher allowances.
Rental yield vs capital appreciation?+
Yield is income on purchase price; appreciation is price growth over time. Many prime-city flats have low yield but high appreciation potential — and vice versa in secondary markets.
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