"6% yield" sounds good, but it is almost always a gross figure — the annual rent divided by the price. The real return is a different number, and usually a noticeably lower one. Here is how to work it out yourself before you buy a property to let.
The gap between the two comes from three places: empty months, running costs and a larger base — notary fees, local transfer tax, commission and furnishing are added to the price.
| Cost | How to estimate it |
|---|---|
| Tax on rental income | For an individual, the tax base is rent minus 10% statutory deemed expenses, taxed at 10% — effectively about 9% of the rent received (Art. 31(1) of the Personal Income Tax Act, ZDDFL). Details in our guide to tax on letting property. |
| Property tax and waste fee | Set by the municipality on the tax valuation — see our guide to property tax and the waste fee. |
| Insurance | The annual premium on your policy. |
| Maintenance and minor repairs | Budget an annual reserve — plumbing, appliances, repainting between tenants. |
| Empty months | Time between tenants when no rent comes in but costs continue. |
| Management fee | If you use a manager or agency — the agreed percentage or amount. |
| Depreciation of furnishings | Furniture and appliances wear out. Divide their cost by their expected life. |
Important: an individual landlord cannot choose between the 10% deemed expenses and actual costs — the deemed expenses apply automatically. Loan interest, repairs and depreciation do not reduce the tax, but they do reduce your return. That is why we count them separately.
Example — every number below is invented and illustrative, not market data.
| Item | Amount |
|---|---|
| Apartment price | €150,000 |
| Purchase costs (example) | €6,000 |
| Furnishing | €8,000 |
| Total invested | €164,000 |
| Rent | €700 a month → €8,400 a year |
| Gross yield (8,400 ÷ 150,000) | 5.6% |
Now the annual costs in the same example:
| Item | Amount |
|---|---|
| One empty month → rent received | €7,700 |
| Tax on rent (7,700 × 90% × 10%) | −€693 |
| Property tax and waste fee (example) | −€150 |
| Insurance (example) | −€100 |
| Maintenance and repairs (example) | −€500 |
| Management fee | €0 (owner self-manages) |
| Depreciation of furnishings (8,000 ÷ 8 years) | −€1,000 |
| Net annual income | €5,257 |
| Net yield (5,257 ÷ 164,000) | about 3.2% |
From 5.6% "in the listing" we arrive at about 3.2% in reality — in this example. With a paid manager, the gap widens further.
When you buy with a loan, the more important question is what your own money earns. Cash-on-cash return = annual cash flow after all payments, including loan instalments ÷ the cash you put in.
Continuing the example (illustrative terms, not a bank offer): a €105,000 loan over 25 years at 3% a year → an instalment of about €498 a month, about €5,975 a year.
| Item | Amount |
|---|---|
| Own cash invested (164,000 − 105,000) | €59,000 |
| Cash flow before the loan (excluding depreciation, which is not a payment) | €6,257 |
| Loan instalments for the year | −€5,975 |
| Cash flow | about €282 |
| Cash-on-cash (282 ÷ 59,000) | about 0.5% |
That looks weak, but part of each instalment — about €2,864 in the first year in this example — is principal repaid, which increases your equity in the property. Including it, the return on your own cash is about 5.3%. The takeaway: with a mortgage, rent may do little more than cover the instalment, and the gain comes from paying down principal and any rise in the property's value. Test what happens if the rate changes or you have two empty months instead of one.
This article is general information, not tax or investment advice for a specific case.
If you are thinking of buying a property to let, call us or visit our office. We will run the numbers for the specific property together — with a realistic rent, costs and scenarios.
