Calculate rental yield: gross, net and as a multiple

How do you calculate the gross rental yield?

The gross rental yield sets the annual net cold rent against the purchase price. It is quick to calculate but takes no costs into account.

Formula: gross rental yield = annual net cold rent ÷ purchase price × 100

The annual net cold rent (Jahresnettokaltmiete) is the monthly rent excluding service charges and heating costs, times twelve. Calculate with the rent actually paid (actual rent) for all let units. Vacant apartments at an assumed rent belong in a second, separate calculation.

The gross rental yield is the reciprocal of the purchase price multiple: 100 ÷ multiple = gross yield in per cent.

Exposés usually state the gross yield, because it is higher than the net yield.

How do you calculate the net rental yield?

The net rental yield shows what remains after the owner’s running costs, measured against the total investment. It is therefore the more realistic figure.

Formula: net rental yield = (annual net cold rent − non-recoverable costs) ÷ (purchase price + transaction costs) × 100

Non-recoverable costs are mainly three items. In Germany, the Operating Costs Ordinance (Betriebskostenverordnung) expressly excludes management as well as maintenance and repairs from operating costs (§ 1(2) BetrKV); they therefore remain with the owner:

• Management costs: property management, account keeping, annual accounts
• Maintenance: ongoing repairs and reserves for larger works
• Rent loss risk: vacancy, rent arrears, costs of legal action

Transaction costs in Germany are real estate transfer tax (Grunderwerbsteuer) (3.5 to 6.5% depending on the federal state, overview in the guide share deal or asset deal), notary (Notar) and land registry costs and, where applicable, an agent’s commission.

Interest, repayments and taxes do not belong in the net rental yield. Including them gives you the return on equity or the cash flow – which depends on your financing and your tax situation.

Worked example: apartment building with eight apartments

Fictitious example: all values have been chosen for illustration and do not describe a real property. The assumptions for management, maintenance and rent loss follow the model values used by the Senior Valuation Committee of Brandenburg (Oberer Gutachterausschuss) for 2025 (based on Annex 3 ImmoWertV). The transaction costs of 10% are an assumption.

Starting point: apartment building, 8 apartments, 560 m² of living space in total, all let at an average net cold rent of €7.50 per m² per month. Purchase price €1,000,000.

What the example shows: 5.04% gross becomes 3.52% net – around a third less. For an older building with a maintenance backlog, the gap would be larger. You can enter the same values into the calculator above.

What is a good rental yield?

There is no nationwide „good“ rental yield in Germany. What buyers actually pay is shown by the valuation committees (Gutachterausschüsse) on the basis of notarised purchase agreements. In the six cities covered by our regional pages, the calculated gross yield of apartment buildings most recently ranged from around 3.3% (Munich) to 4.5% (Hamburg), and was 5.3% in the district of Potsdam-Mittelmark.

* Our own conversion: 100 ÷ multiple, rounded. The valuation committees publish the multiple, not this percentage.
** Munich relates the multiple to the annual gross income; the values are therefore only partly comparable with the other cities.

How to read the table: the capitalisation rate (Liegenschaftszinssatz) is the rate of return at which the market actually values a building after deducting operating costs – a kind of official net yield of the market. It is not identical to your net rental yield, because the valuation committees additionally take land value and remaining useful life into account. It still works as a comparison: if the net rental yield of an offer is significantly below the local capitalisation rate, ask why.

How the multiple is derived and where its usefulness ends is explained in the guide calculate the purchase price multiple.

Which mistakes distort the rental yield?

Most misjudgements arise from wrong input figures, not from wrong arithmetic:

• Warm rent instead of net cold rent: service charges and heating costs are passed through to the tenant; they do not belong in the yield.
• Target rent instead of actual rent: an assumed rent for empty apartments flatters the result.
• Transaction costs forgotten: real estate transfer tax alone amounts to up to 6.5% of the purchase price, depending on the federal state.
• Maintenance set too low: for a period building with outstanding renovation needs, the upcoming works should be mentally added to the purchase price.
• Gross compared with net: the gross yield in an exposé cannot be compared with a capitalisation rate or a net yield.
• Financing mixed in: interest and repayments belong in the cash flow calculation, not in the rental yield.

Note: this guide explains key figures in general terms and is no substitute for a valuation, tax advice or financing advice.

How do you find properties with your target yield?

Write your target yield straight into the search, for example „apartment building in Leipzig up to €2 million with at least 5% yield“. The search interprets „yield from“ as gross yield and matches it against all anonymous profiles. This corresponds to a multiple of no more than 20.

With an account you can save the search as a search profile, for example „properties from 5% yield in Leipzig“. You will then hear about matching new anonymous profiles as soon as they come in. How the search and the release in three stages work is explained on the page buy off-market property.