What is the gross rental yield?
The gross rental yield relates the annual net rent to the purchase price. It tells you what percentage of the purchase price flows back as rent every year, before closing costs, management, reserves or interest are deducted.
That is exactly why it is so popular: you only need two figures, and both are in every listing. And that is exactly why it is only a first look. For the purchase decision you calculate the net rental yield next.
Gross rental yield = annual net rent ÷ purchase price × 100
Worked example
A flat costs €250,000 and is let for €850 net rent per month.
- Annual net rent: €850 × 12 = €10,200
- Gross rental yield: €10,200 ÷ €250,000 × 100 = 4.08%
- Price-to-rent multiplier: €250,000 ÷ €10,200 = 24.5
The calculator above is prefilled with this example. Replace the values with your own figures, the result updates instantly.
Price-to-rent multiplier: the same figure, the other way round
The multiplier divides the purchase price by the annual net rent. It tells you how many years of rent you pay for the property. Brokers and banks often talk in this figure, which is why the calculator shows both values side by side.
The conversion is simple: a multiplier of 20 equals a 5% gross yield, 25 equals 4%, 30 equals 3.3%. The higher the multiplier, the more expensive the property is relative to its rent.
What is a good gross rental yield?
There is no fixed target, but there are reliable ranges. The assessment in the calculator follows them:
- Below 3%: prime locations in Munich, Hamburg or Frankfurt and new builds. The return here comes from appreciation rather than rent.
- 3 to 5%: the usual range for existing flats in large and mid-sized cities.
- 5 to 7%: secondary locations, rural regions, older stock. Higher yield, higher risk of vacancy and maintenance.
- Above 7%: rarely without a reason. Check whether the stated rent is realistic and what renovation need sits behind it.
Rule of thumb: the older the property and the weaker the location, the more gross yield it has to deliver to absorb vacancy and repairs.
What the gross rental yield does not show
The gross rental yield only knows rent and purchase price. Everything that reduces your return in practice is missing:
- Closing costs: real estate transfer tax, notary, land registry and broker add up to about 5 to 12% of the purchase price depending on the federal state and broker, usually 8 to 12% with a broker.
- Running costs you cannot pass on to the tenant: management, maintenance reserve, repairs.
- Rent default and vacancy between two tenants.
- Financing and taxes: interest, repayment and your personal tax rate.
The net rental yield calculator includes the first three points. Financing and taxes are deliberately left out because they depend on you, not on the property.
What you need the gross rental yield for
- Pre-sorting: out of ten listings, the three worth a closer look remain.
- Comparing: two properties in different cities become comparable through their yield, regardless of size and price.
- Negotiating: if you know the multiplier and the yield, you talk to brokers and banks as an equal.
Share your calculation: the link above contains your inputs. Anyone who opens it sees exactly this calculation and can continue with their own figures.