How do you calculate the return on an investment property?

The return shows how an investment property performs. In principle it relates the rental income to the capital employed. A distinction is made between the simple gross yield and the more meaningful net yield, which also takes account of running costs. We give no fixed percentages here, because they depend heavily on the property, location and market.

Gross and net yield

Gross yield

The gross yield compares the annual rent with the purchase price. It is quickly calculated but leaves out the costs and therefore often looks too optimistic.

Net yield

The net yield deducts all running costs from the rental income – management, maintenance, non-recoverable operating costs and reserves. The purchase costs also belong in the calculation. Only this figure shows what is really left.

The gross yield sells the property; the net yield decides whether it adds up.

An example from practice

Suppose two properties advertise the same gross yield. One is a refurbished new build with little maintenance need, the other an older building with old pipework and long-standing low rents. After deducting the real costs, considerably less is often left with the older building, although the gross figure looked the same. That is exactly why a close look at the net yield pays off. Anyone who works both properties through properly makes a sound decision instead of being led by the prettier figure. We help you set up this calculation with realistic assumptions for the Graz market.

Typical errors of thinking

Many buyers calculate with the full rent without allowing for void periods and rent arrears. Others forget the purchase costs or underestimate maintenance in older buildings. Anyone who leaves out these items talks themselves into the property. Which running costs arise and are partly deductible is shown in Which costs can I claim as a landlord?.

How we support you

We place properties realistically in the Graz market and help you calculate with honest assumptions rather than brochure figures. Whether entering the market is worthwhile in principle is covered in Is property worthwhile as an investment?. On request we then take on the entire management and secure the calculated income. Arrange a conversation and we will work through your property together.