Calculating Rental Yield: Gross and Net Yield Explained

Anyone considering buying a rented apartment eventually runs into the term rental yield. It sounds like a single number, but it's really two: gross and net. And the difference between them often decides whether a property actually pencils out or just looks good on paper.

Gross Yield: the Quick First Read

Gross yield is the number that shows up in every listing. It sets the annual cold rent (rent excluding utilities) against the purchase price — nothing else. Closing costs, running costs, and financing are left out entirely. That's fine for a quick comparison across several listings. As the sole basis for a decision, it's not worth much.

Net Yield: What Actually Stays in Your Pocket

Net yield is more work to calculate, but more honest. It accounts for two things gross yield simply ignores:

• Closing costs — real estate transfer tax, notary, land registry, and usually the broker's commission all get added on top, increasing what's actually invested.
• Non-recoverable operating costs — things like management fees or the maintenance reserve. Costs that can't be passed on to the tenant and come straight off the yield.

5.76% versus 4.89% — not a huge gap at first glance. Over ten or twenty years it very much is one, and that's before financing or tax even enter the picture.

What Counts as a "Good" Rental Yield?

There's no single threshold that holds everywhere, however much you might wish there were. As a rough sorting line, many investors use a gross yield of around 5% — in Munich or Hamburg that's often wishful thinking, while in weaker-demand regions it's close to standard, usually with correspondingly higher risk attached. In the end, what matters isn't the yield on paper anyway, but what's actually left over each month after financing and tax.

Keep reading: Calculating property cashflow (before and after tax) →