gross yieldnet yieldcash on cash returnreal estate metricsyield comparison
You spot a two-bedroom apartment in Marseille listed at €165,000. Monthly rent: €950. The listing highlights a 6.9% return. Attractive. But once you factor in co-ownership fees, property tax, landlord insurance, and notary costs, that number drops to 4.6%. And with a 20-year mortgage, your monthly cash flow turns negative.
Three numbers. Same property. Yet each tells you something fundamentally different about the investment's quality. Mixing up gross and net yield remains one of the most common mistakes among new investors — a confusion that can turn a profitable deal into a money pit.
Gross rental yield is the simplest calculation. It compares annual rent to the purchase price:
Gross yield = (annual rent / purchase price) × 100
For our Marseille apartment: (€950 × 12) / €165,000 × 100 = 6.9%.
This metric is useful for initial screening. When you're scrolling through dozens of listings, gross yield lets you quickly discard properties where the asking price doesn't match the local rental market. Below 5% gross in a mid-sized French city, the net figure will usually disappoint. In high-demand markets like Paris or Bordeaux, gross yields hover around 3–4%, which makes positive cash flow nearly impossible.
But here's the catch: the difference between gross and net yield can reach 2 to 3 percentage points. A property at 7% gross isn't necessarily better than one at 6% gross with lower running costs. A newer building with minimal co-ownership charges and a low property tax can outperform an older property with a higher gross yield but heavier expenses.
Key takeaway: gross yield ignores expenses, acquisition costs, and taxes. It's fast to calculate — and that's its only advantage.
Net yield accounts for all the recurring expenses that gross yield overlooks:
Net yield = [(annual rent − annual expenses) / (purchase price + acquisition costs)] × 100
Expenses to deduct include:
Acquisition costs added to the denominator include notary fees (7–8% for existing properties in France, around 2–3% for new builds) and any agency fees.
Note that this example doesn't include property management fees — our hypothetical investor manages the property directly. If you outsource management, add another 6–8% of annual rent to expenses, which can shave half a point off your net yield.
Let's revisit our Marseille apartment with real numbers:
Net yield = (11,400 − 1,200 − 960 − 180 − 950) / (165,000 + 13,200) × 100 = 8,110 / 178,200 × 100 = 4.6%
The gap from gross: 2.3 percentage points. That's significant. At REIOS, we regularly see this gap surprise investors who only looked at the yield advertised by the agency.
Some investors go further with the net-net yield, which factors in income tax and social contributions (prélèvements sociaux at 17.2% in France). This metric depends on your marginal tax bracket and chosen tax regime — micro-foncier (a flat 30% deduction on rental income under €15,000/year) or régime réel (deducting actual expenses). That makes it deeply personal and harder to compare across investors.
Cash-on-cash return shifts the perspective entirely. It doesn't measure the property's performance — it measures the performance of your capital actually deployed:
Cash-on-cash return = (annual net cash flow / total cash invested) × 100
This is the most relevant metric when you're using mortgage leverage — and in France, very few investors buy outright with cash. With a loan, you're only committing a fraction of the property's price out of pocket. Cash-on-cash measures exactly how hard that fraction is working.
Where net yield evaluates the property, cash-on-cash evaluates your strategy. Two investors buying the same apartment at the same price will get identical net yields. But the one putting down 10% will have a vastly different cash-on-cash than the one putting down 30%.
Let's extend our example with financing:
Cash-on-cash return = (−72 × 12) / 46,200 × 100 = −1.9%
A negative result. Your cash-on-cash is in the red because the mortgage absorbs more than your net rental income. That's not necessarily a deal-breaker — you're building equity with each mortgage payment, and the property may appreciate over time. But your liquidity is shrinking every month, and you need reserves to cover unexpected expenses like a boiler replacement or a prolonged vacancy.
Conversely, if rates drop or you extend the term to 25 years (payment of €640), cash flow turns positive at +€36/month and cash-on-cash climbs to +0.9%. The difference between a 20-year and a 25-year mortgage can flip this indicator from red to green. Leverage cuts both ways — it amplifies both gains and losses.
Each metric answers a different question:
| Gross yield | Net yield | Cash-on-cash | |
|---|---|---|---|
| Measures | Raw property performance | Real return after expenses | Return on your equity |
| Data needed | Price + rent | + expenses + fees | + financing structure |
| Best for | Screening listings | Comparing properties | Evaluating your financing strategy |
| Limitation | Ignores all expenses | Ignores leverage effect | Depends on loan terms |
Many investors make the mistake of picking one favorite metric and ignoring the rest. The real power comes from reading all three together. A property with a mediocre gross yield but strong net yield signals low running costs — a hidden advantage.
At REIOS, we display all three metrics side by side in your investor dashboard so you can make decisions with full visibility.
Relying on one metric alone leads to misleading conclusions. Here's a real-world comparison:
Property A crushes Property B on yield. Yet over 10 years, the Lyon apartment can generate 25–35% capital gains while the Saint-Étienne studio will likely stagnate. Yield metrics don't capture capital appreciation — a blind spot worth remembering.
The same trap applies to cash-on-cash return. A property with a negative cash-on-cash of −2% but 4% annual appreciation is still a solid long-term investment. Conversely, a positive cash-on-cash on a depreciating asset masks a silent erosion of your wealth.
A sound investment always requires multiple lenses. Net yield tells you whether the property covers its costs. Cash-on-cash tells you whether your money is working efficiently. Neither tells you whether the neighborhood is trending up or down.
Now that you understand the difference between gross yield, net yield, and cash-on-cash return, here are your next steps:
Yield is just one piece of the equation. But it's the first number every investor needs to read correctly.