Gross Yield vs Net Yield: The Difference That Changes Every Investment Decision

June 9, 2026 · 5 min read

When a seller advertises a property with a “7% yield,” the immediate question should be: gross or net? This is not a minor detail. The difference between the two can represent several percentage points on the actual investment return and, consequently, hundreds of thousands of euros in the asset’s valuation.

What is gross yield?

Gross yield is the ratio of annual rental income to the purchase price, expressed as a percentage:

Gross yield (%) = (Annual rent / Purchase price) × 100

A building that costs €1,000,000 and generates €70,000 in annual rents has a gross yield of 7%. It is the simplest figure to calculate and the most commonly used in property listings. The problem is that it says nothing about what the owner actually receives.

What is net yield?

Net yield deducts from the numerator all expenses the owner bears to keep the asset in operation. The most common: council tax (IBI), service charges, building insurance, maintenance and repairs, management fees, and a vacancy allowance for void periods.

Net yield (%) = ((Annual rent − Annual expenses) / Purchase price) × 100

Following the example above: if those €70,000 in gross rent are reduced by €15,000 in expenses, the net yield is 5.5%, not 7%.

The most common — and costly — mistake

The typical error is to value an asset on gross yield and discover, once the deal is closed, that structural costs significantly reduce the actual return. This happens especially in buildings with services included in the rent, with high council tax rates due to cadastral classification, or with leases that do not pass service charges on to the tenant.

A real-numbers example

Office building, purchase price €1,200,000, annual rent €72,000. Gross yield: 6.0%. Annual owner expenses: IBI €4,200, service charges €1,800, insurance €900, estimated maintenance €2,400, management €1,200. Total expenses: €10,500. Net rent: €61,500. Net yield: 5.1%.

The difference of nearly a full percentage point represents, on the purchase price, more than €10,000 per year. Capitalised at the same rate, this translates to a value difference of over €200,000.

What to check before comparing assets

Before comparing yields across different assets, make sure you are comparing like for like: the same expense base, the same vacancy assumption, the same lease structure. At INVARA, we always analyse on real and projected net yield, and present data in itemised form so the investor can evaluate each line separately.