What is Rental Yield?

Rental yield measures the profitability of a real estate investment. It is the ratio between rental income and the total cost of the investment. Simple in appearance, there are actually several ways to calculate it, and each tells a different story.

Gross Yield: The First Filter

This is the simplest and most commonly used calculation to quickly compare properties or cities:

Gross Yield = (Annual Rent / Purchase Price ) x 100

Example: an apartment purchased for 100,000 EUR, rented at 600 EUR/mois.
Gross yield = (600 x 12) / 100,000 x 100 = 7.2%

Gross yield is useful for initial screening, but it does not account for expenses, taxes and vacancy.

Net Yield (After Expenses)

More realistic, it includes non-recoverable expenses from the tenant:

Net Yield = ((Annual Rent - Expenses) / (Price + Acquisition Costs )) x 100

Expenses to deduct:

  • Property tax
  • Non-recoverable co-ownership charges (about 25% of total)
  • Non-occupant owner insurance (PNO)
  • Property management fees (if agency: 6-8% of rents)
  • Vacancy provision (1 month/year on average)
  • Maintenance provision (about 5% of rents)

In practice, net yield is generally 1.5 to 2.5 points lower than gross yield.

Net-Net Yield (After Tax)

This is the real yield, the one that ends up in your pocket after taxes. It depends on your tax regime:

  • Micro-foncier (income < 15,000 EUR): 30% allowance, the rest is taxed at your marginal rate + 17.2% social contributions
  • Real regime: deduction of actual expenses, loan interest , depreciation (under LMNP)
  • LMNP (real regime): often the most advantageous thanks to property depreciation

What Yield to Aim For?

Reference thresholds for rental investment in France:

  • > 7% gross — Excellent, typical of mid-sized cities (Saint-Etienne, Mulhouse, Limoges)
  • 5-7% gross — Good, yield/safety balance (Angers, Le Mans, Poitiers)
  • 3-5% gross — Moderate, banking on capital gains (Lyon, Bordeaux, Nantes)
  • < 3% gross — Low, only justified by strong appreciation potential (Paris, Nice)
A high yield rarely compensates for high vacancy risk. Favor cities with a diversified employment base and proven rental demand.

Pitfalls to Avoid

  • Ignoring vacancy — one month of vacancy per year reduces gross yield by 8%
  • Forgetting property tax — it varies threefold depending on the municipality
  • Underestimating renovation — especially for old properties with poor EPC
  • Focusing only on low price — a property at 500 EUR/m² in a city without rental demand will not find a tenant