Why yield is the first metric to analyse
When investing in rental property, the classic trap is relying solely on the purchase price and the advertised rent. A property at 100,000 euros generating 500 euros per month in rent does not necessarily have the same yield as another at 80,000 euros with 420 euros per month. It all depends on expenses, taxation and financing.
Yield is the ratio that allows you to objectively compare two investments, regardless of their price. It is the first question to ask before even visiting a property: do the numbers add up?
Gross yield: the basic calculation
Gross yield is the simplest to calculate: (annual rent / purchase price) x 100. For example, a property bought for 150,000 euros that rents for 750 euros per month shows a gross yield of 6%. It is a useful first filter to quickly eliminate properties that are too expensive relative to the local rental market.
However, this figure does not account for expenses, taxes or renovation work. A gross yield of 10% can drop to 3% net if expenses are high. You therefore need to go further in the analysis.
On Buy&Rent, the gross yield is calculated automatically as soon as you enter the purchase price and rent. You can adjust the parameters in real time to see the impact on yield.
Net yield: factoring in actual expenses
Net yield deducts all annual expenses from the rent: property tax, landlord insurance (PNO), management fees, non-recoverable co-ownership charges and vacancy allowance. The formula becomes: ((annual rent - annual expenses) / total acquisition cost) x 100.
The total acquisition cost includes the property price, notary fees, agency fees and any renovation work. This is the base to use, not just the price displayed on the listing.
Net-net yield: after taxation
Net-net yield incorporates the tax impact. In France, rental income is taxed according to the chosen regime: micro-foncier, real regime, LMNP micro-BIC or LMNP real. Each regime has a different impact on your taxation and therefore on your actual return.
This is the figure that truly matters to know how much you keep in your pocket each month. A property under the LMNP real regime can have a much higher net-net yield than the same property under micro-foncier, thanks to property depreciation.
Buy&Rent automatically compares all 4 tax regimes for each simulation and identifies the one that maximises your cashflow. You can see at a glance which regime is the most advantageous.
3-4%
France average
5-7%
Good yield
8%+
Excellent
Going beyond yield: monthly cashflow
Yield is an annual ratio, but on a day-to-day basis, it is the monthly cashflow that matters. It is the difference between what you receive (rent) and what you pay (loan repayment + expenses + taxes). A positive cashflow means the property is self-financing and generating income for you each month.
Many beginner investors focus on yield without checking the cashflow. A property at 8% gross yield can generate negative cashflow if the loan term is too short or the deposit too small. You need to simulate the full picture for a complete view.