Rental Yield and Cashflow. A Worked Example

A property can show a positive rental yield and still need a monthly contribution from its owner. Yield and cashflow answer different questions. State what costs the calculation includes before comparing two listings.

Define the calculation

Here, gross annual yield means rent excluding utilities and service charges, divided by the purchase price. NatWest explains the distinction between gross and net yield. Calculators may include different costs, so inspect their definitions.

For this example, net operating yield deducts the owner's operating expenses and planned reserve before tax and financing. Both yields use the purchase price as the denominator. Acquisition fees, furnishing and renovation are excluded from the simplified model and would need adding to an actual investment assessment.

An illustrative apartment

These are chosen inputs for explaining arithmetic, not market estimates, mortgage terms or a client result.

With full occupancy, annual rent is €9,600 and gross yield is 4.8%. Deducting €2,400 of annual expenses and reserve leaves €7,200. That is 3.6% under the operating-yield definition used here.

Monthly cashflow after financing is €800 minus €200 minus €650, leaving a €50 shortfall. Part of the mortgage payment repays principal and reduces the debt. Negative cashflow is therefore distinct from an accounting loss. This example does not calculate tax.

Test a vacant month

One month without rent reduces annual income to €8,800. Keeping the other assumed costs and payments unchanged gives an annual cash shortfall of €1,400. Real expenses may change too, so use the circumstances of the actual property.

Record a source or an explicit assumption for every input. Advertised rent is not confirmed income, and an asking price is not a completed sale price.

Use market context without treating it as a promise

We build MapaTrhu with Samuel Wittlinger of Wittlinger.dev. Its price overview supports comparisons, while the data sources explain provenance.

Check comparable properties and the asking price before a viewing. Keep model estimates separate from confirmed transactions, and calculate costs, financing and reserves for the apartment you are considering.