Rental yield is the simplest way to measure whether your property is earning its keep. It's expressed as a percentage, and it answers the question: for every €100 I have tied up in this property, how much am I getting back each year?
Here's how to calculate it — and what to do with the number.
Gross rental yield
This is the quick version. It ignores costs and gives you a rough comparison between properties.
Formula: (Annual rental income ÷ Property value) × 100
Example:
- Monthly rent: €650
- Annual rental income: €650 × 12 = €7,800
- Property value: €130,000
- Gross yield: (€7,800 ÷ €130,000) × 100 = 6%
Gross yield is useful for comparing properties quickly. But it doesn't tell you what you're actually taking home.
Net rental yield
This is the number that matters. It accounts for the costs of running the property.
Formula: ((Annual rental income − Annual costs) ÷ Property value) × 100
What to include in annual costs
- Mortgage interest (not capital repayment — just the interest portion, if the property is mortgaged)
- Buildings and landlord insurance
- Maintenance and repairs — budget 1–2% of property value per year as a rough estimate
- Management fees if you use a letting agent (typically 8–12% of rent)
- Vacancy allowance — a realistic estimate of time the property might be empty between tenancies
- Tax on rental income — varies significantly by country
Example:
- Annual rent: €7,800
- Mortgage interest: €2,400/year
- Insurance: €360/year
- Maintenance budget: €800/year
- Tax (approximate): €900/year
- Total costs: €4,460/year
- Net income: €7,800 − €4,460 = €3,340
- Net yield: (€3,340 ÷ €130,000) × 100 = 2.57%
That's a significant difference from the gross figure. This is why gross yield is only useful as a starting point.
What's a good rental yield?
There's no universal answer — it depends on your mortgage rate, local market, and risk tolerance. Some general benchmarks:
- Below 3% net: Tight. You're relying heavily on capital appreciation.
- 3–5% net: Reasonable. Typical for well-located urban properties in Western Europe.
- 5–8% net: Strong. More common in secondary cities or lower-cost markets (Baltic states, parts of Poland, etc.).
- Above 8% net: Very high. Either a great deal or a market with higher vacancy/maintenance risk.
The most important comparison: your net yield should be higher than your mortgage interest rate. If your mortgage is at 4.5% and your net yield is 2.5%, the property is costing you money in real terms — you're banking on appreciation.
Yield vs. return on equity
If you bought the property with a mortgage, yield (based on full property value) understates your actual return. Your real return is on the money you actually put in — the deposit.
Return on equity: (Annual net income ÷ Cash invested) × 100
If you put in €30,000 as a deposit on a €130,000 property and net income is €3,340:
Return on equity = (€3,340 ÷ €30,000) × 100 = 11.1%
Leverage amplifies returns — and losses.
How to track yield accurately
Yield calculations are only as good as your income and expense records. If you don't know exactly what you earned and what you spent, you're estimating.
Leasily tracks all income and expenses by property. At the end of the year, you can see exact totals — which gives you the real numbers for your yield calculation, not estimates.
Track it once a year. Compare to the previous year. If yield is falling, either costs have risen or you haven't reviewed rent in a while.
One more thing: yield ignores capital growth
Yield only measures income return. It doesn't account for the property increasing in value. A property with a modest 3% yield but strong capital appreciation in a growing city may outperform a high-yield property in a stagnant market.
Most small landlords think about yield. Investors think about total return: yield + capital growth. Both matter.