rental yield calculationnet rental yieldrental investmentreal estate ROIproperty metrics
You've just visited a 45 m² one-bedroom apartment in Marseille's 5th arrondissement. The estate agent proudly announces a 6.5% yield. The asking price is €155,000, the monthly rent is €840. You check the math: 840 × 12 / 155,000 = 6.5%. The numbers add up.
Except that figure is practically meaningless.
That 6.5% is a gross yield — a simplified version that ignores property tax, service charges, insurance, vacancy periods, and acquisition costs. Once you factor those in, your actual return typically drops by 2 to 3 percentage points. The net rental yield calculation tells the real story of your investment.
Gross yield is a one-step operation: annual rent divided by purchase price, times 100. It's the formula you'll find in every property listing. Its advantage is simplicity. Its flaw is that it lies by omission.
Net rental yield accounts for every real expense eating into your income. Non-recoverable service charges, property tax, landlord insurance, management fees, maintenance reserves — each line item reduces what you actually pocket.
Why does this distinction change everything? Consider two apartments:
After deductions, Property B delivers a higher net rental yield than Property A. Gross yield would have pointed you toward the wrong investment. For a deeper comparison, our article on gross vs net vs cash-on-cash yield breaks down each metric in detail.
Here's the formula every real estate investor should know:
Net rental yield (%) = ((Annual rent − Total charges) ÷ Total acquisition cost) × 100
Let's break down each element.
Gross annual rent is your starting point. But you need to subtract:
The price on the sales agreement isn't what you actually pay. You need to add:
Let's work through a concrete example. We'll calculate the net rental yield for a one-bedroom apartment in Marseille's 5th arrondissement, a neighbourhood popular with students and young professionals.
Starting data:
| Item | Amount |
|---|---|
| Purchase price | €155,000 |
| Monthly rent | €840 |
| Gross annual rent | €10,080 |
Step 1 — Calculate annual charges:
| Charge | Annual amount |
|---|---|
| Non-recoverable service charges | €720 |
| Property tax | €1,250 |
| Landlord insurance (PNO) | €210 |
| Vacancy reserve (1 month) | €840 |
| Maintenance reserve (5% of rent) | €504 |
| Total charges | €3,524 |
Step 2 — Calculate total acquisition cost:
| Item | Amount |
|---|---|
| Purchase price | €155,000 |
| Notary fees (~8%) | €12,400 |
| Total cost | €167,400 |
Step 3 — Apply the formula:
The advertised gross yield was 6.5%. The reality? 3.9%. A 2.6-point gap that fundamentally changes the investment analysis. At REIOS, we find this 2-to-3-point spread between gross and net yield is the norm, not the exception.
Certain cost items regularly fly under the radar — even for experienced investors.
Vacancy periods. One empty month per year shaves nearly half a percentage point off your yield. Between tenants, you need to account for refurbishment time, listing the property, viewings, and lease signing. In high-demand cities, one month is realistic. In softer markets, budget for two.
Routine maintenance. A water heater replacement (€800–1,200), a leak repair, repainting between tenancies — these expenses always materialise. Setting aside 5–10% of annual rent absorbs these surprises without destabilising your monthly cash flow.
Property management fees. If you outsource to an agency, the bill runs to 6–9% of collected rent. On a €840/month rental, that's €600–900 per year. This line item is often ignored by investors who plan to self-manage, then reconsider after the first missed payment or the third 11 PM call about a water leak.
The net rental yield we've just calculated doesn't yet account for taxation. The net-net yield (or after-tax yield) goes one step further by subtracting income tax on your rental earnings.
In France, two main tax regimes apply to unfurnished lettings:
Choosing the right tax regime can shift your net-net yield by 0.5 to 1.5 percentage points. It's a subject that deserves separate analysis with your accountant or by tracking the key metrics across your portfolio.
1. Trusting the "theoretical" rent. The rent you're targeting isn't necessarily what the market will bear. Check actual rents on listing portals for comparable properties in the same neighbourhood. In rent-controlled zones (Paris, Lyon, Lille, Montpellier, Bordeaux, and others since 2024–2025), the legal cap may be lower than your estimate.
2. Leaving acquisition costs out of the denominator. Many investors divide by the purchase price alone. But notary fees (7–8.5% for resale properties) are part of your investment. On a €155,000 property, that €12,400 in fees moves your net yield from 4.2% to 3.9%. An oversight that compounds across a multi-property portfolio.
3. Assuming 100% occupancy. No rental property stays occupied 365 days a year, every year, without interruption. Even in the tightest markets, budgeting at least one vacant month per year is the minimum for a realistic calculation. To understand how vacancy impacts your returns, see our guide on occupancy rate tracking and optimisation.
Net rental yield calculation isn't a theoretical exercise — it's your first filter for evaluating any investment. Before every viewing, estimate the likely charges and run the net yield. If the result falls below your profitability threshold (typically 4% net in major cities, 6% in mid-sized markets), move on to the next property.
Two habits to adopt immediately:
Keep in mind that net yield doesn't tell the whole story. A property yielding 3.5% in a rapidly appreciating neighbourhood can outperform a 7% return in an area with no demand. Yield is one metric among several — DSCR, cash flow, and capital growth potential complete the picture.
At REIOS, we've built our tools to automate this calculation from your real data, charges included. Because a good investment always starts with a good calculation.