What is rental yield?

Rental yield measures the profitability of a real estate investment. It is the ratio between the income generated by letting the property and the total cost of the investment. It looks simple, but there are several ways to calculate it, and each tells a different story.

Gross yield: the first filter

This is the simplest and most widely used metric for quickly comparing properties or cities:

Gross yield = (Annual rent / Purchase price) x 100

Example: a flat bought for €100,000, rented at €600/month.
Gross yield = (600 x 12) / 100,000 x 100 = 7.2%

Gross yield is useful for an initial screen, but it ignores expenses, taxes and rental vacancy.

Net yield (after expenses)

More realistic, this version includes expenses that cannot be passed on to the tenant:

Net yield = ((Annual rent − Expenses) / (Purchase price + Acquisition costs)) x 100

Expenses to deduct:

  • Property tax (taxe fonciere)
  • Non-recoverable condo charges (around 25% of the total)
  • Non-occupying owner insurance (PNO)
  • Property management fees (6-8% of rent if using an agency)
  • Vacancy provision (about 1 month/year on average)
  • Maintenance provision (around 5% of rent)

In practice, net yield is typically 1.5 to 2.5 percentage points below the gross yield.

After-tax yield (the real bottom line)

This is the actual return that lands in your pocket after tax. It depends on your tax regime:

  • Micro-foncier (income < €15,000): 30% flat deduction, the rest is taxed at your marginal rate + 17.2% social charges
  • Regime reel: real-expense deduction, mortgage interest, depreciation (under LMNP)
  • LMNP at real costs: often the most advantageous thanks to asset depreciation

What yield should you aim for?

Benchmark thresholds for rental investment in France:

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

Pitfalls to avoid

  • Ignoring vacancy — one vacant month per year cuts gross yield by roughly 8%
  • Forgetting property tax — it varies up to threefold from one municipality to the next
  • Underestimating repairs — especially for older properties with poor EPC ratings
  • Chasing only the lowest price — a property at €500/sqm in a town with no rental demand will stay empty