Rental yield: five figures to work out before you buy
An advertised yield is not a real yield. The five figures that truly matter before signing for a buy-to-let property.
A listing shows a yield. A friend quotes another. Your banker works out a third. All three are correct, and none is enough to decide.
Before buying a property to let, five figures deserve to be calculated, and written down.
Gross yield. Annual rent divided by the purchase price. It is the figure in listings. It helps compare, not decide.
Net yield. Deduct non-recoverable charges, maintenance, insurance, management and taxes, and add purchase costs and works to the price. The gap with gross yield is often a surprise.
Monthly cash flow. Rent received, minus the loan instalment and charges. This figure tells you whether the property costs you money every month or pays for itself.
Vacancy. How many months without a tenant can the project absorb? One month a year already changes the result.
Sensitivity. What happens if the interest rate rises, if rent falls, if unexpected works arise? A sound investment holds up under a cautious scenario.
In Luxembourg, one more point applies: residential rent is capped by law, based on the capital invested. The expected rent must be checked before it goes into the calculation.
Two rules avoid most mistakes. Write down every assumption: price, rent, charges, rate, term. And test at least one unfavourable scenario before signing.
These calculations replace neither your bank's view nor your tax adviser's. They give you a clear basis to discuss with them.
That is what Property Analyzer by MAPA Property offers: a simulation built on your data and on assumptions you approve, delivered in a report where every figure is visible. A simulation, not a promise: no yield is guaranteed.