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Rental yield calculator
Gross, net and price factor
How do you calculate rental yield?
Gross rental yield is the annual base rent divided by the purchase price, times 100. Net rental yield additionally subtracts purchase costs and the operating costs the owner cannot pass on to the tenant, which makes it the more meaningful figure. The calculator on this page returns both instantly.
Gross yield = annual base rent ÷ purchase price × 100 · Net yield = (annual base rent − non-recoverable costs) ÷ (purchase price + purchase costs) × 100
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What is the rental yield formula?
Gross rental yield relates annual base rent to the purchase price: annual base rent divided by purchase price, multiplied by 100. It is deliberately crude, and its job is to remove from a long list the properties that cannot work arithmetically.
Net rental yield uses what actually arrives and what was actually paid. The numerator is net operating income — annual base rent less the operating costs the owner cannot recover from the tenant. The denominator is total investment — purchase price plus purchase costs.
The gap between the two is not a rounding difference. With purchase costs of 10% and 2,400 euros of annual running costs, net yield typically lands about a quarter below gross yield. Budgeting from the gross figure is structurally optimistic.
| Gross rental yield | annual base rent ÷ purchase price × 100 Expressed as a percentage. Excludes purchase costs and running costs. |
|---|---|
| Net rental yield | (annual base rent − non-recoverable costs) ÷ (purchase price + purchase costs) × 100 Expressed as a percentage. Before financing and tax. |
| Price-to-rent factor | purchase price ÷ annual base rent Also called the multiplier. The reciprocal of gross rental yield. |
| Net operating income | annual base rent − non-recoverable operating costs The basis of any income-based valuation. |
Gross vs. net rental yield — what is the difference?
Gross rental yield knows two numbers: rent and price. It can be read off a listing in seconds, which makes it useful for comparing — and unsuitable for deciding.
Net rental yield also knows the purchase costs and the costs you carry as the owner. It answers the question that matters: what does the capital employed return per year, before financing and tax enter the picture.
A practical rule: screen with gross yield, decide on net yield. No property should reach a shortlist on the strength of an attractive gross figure alone.
| Includes purchase costs | Gross: no · Net: yes In Germany purchase costs typically total around 8–15% of the price depending on the state and agent involvement. |
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| Includes running costs | Gross: no · Net: yes Specifically the non-recoverable ones: management, maintenance, vacancy allowance. |
| Includes financing and tax | Both: no Interest, amortisation, depreciation and your personal tax rate belong in a separate cash-flow model. |
| Best used for | Gross: screening · Net: deciding |
What is a good rental yield?
There is no universal target figure, and any source quoting one without knowing the location is guessing. Rental yield is a ratio: it is low where purchase prices are high, and rises where the market prices in risk — vacancy risk, deferred maintenance, a shrinking region.
The useful question is therefore not "is 4% good?" but how this property compares within the same market: against comparable properties in the same location, in the same condition, with the same rent structure. A high yield is not a mark of quality; it is first of all a signal that the market sees a risk here.
The second test is whether the property carries itself. A net yield below the financing rate means the property costs money rather than earning it, absent capital growth. That calculation belongs before the viewing, not after it.
Rental yield — frequently asked questions
How do you calculate gross rental yield?
Gross rental yield is the annual base rent divided by the purchase price, multiplied by 100. With 12,600 euros of annual base rent and a purchase price of 320,000 euros, gross rental yield is 3.94%.
How do you calculate net rental yield?
Net rental yield is net operating income divided by total investment, multiplied by 100. Net operating income is the annual base rent less non-recoverable operating costs; total investment is the purchase price plus purchase costs.
Should I use base rent or all-inclusive rent?
Rental yield is always calculated from base rent. All-inclusive rent contains service charges that the tenant carries and that never reach the owner as income. Using it produces a substantially overstated yield.
Which purchase costs belong in the calculation?
Net rental yield includes every cost actually incurred on acquisition: transfer tax, notary and land registry fees, and any agent commission. In Germany these typically add up to around 8 to 15 percent of the purchase price depending on the state and whether an agent is involved.
What counts as non-recoverable costs?
Non-recoverable costs are expenses the owner carries and cannot pass to the tenant through the service charge statement. They include management fees, the maintenance reserve and a calculated vacancy allowance.
What is the price-to-rent factor?
The price-to-rent factor, also called the multiplier, is the purchase price divided by the annual base rent. It states how many years of rent the price corresponds to and is the reciprocal of gross rental yield: a factor of 25 equals a 4% gross yield.
What is a good rental yield?
There is no universal target, because rental yield depends directly on the local price level. What is meaningful is the comparison with similar properties in the same location and condition. A conspicuously high yield usually signals a risk the market is pricing in, rather than a superior property.
Does rental yield account for financing?
No. Gross and net rental yield look at the property independently of how it is paid for. Interest, amortisation, depreciation and your personal tax rate belong in a separate cash-flow calculation, because they depend on the buyer rather than on the property.
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Portfolios, not single properties
This calculator looks at one property. EchoDestiny Real Estate Intelligence computes the same metrics across your whole portfolio, connects them to official market data, and names the source behind every figure.