Gross yield is the annual rent divided by the total purchase cost, multiplied by 100. Net yield subtracts the yearly running costs and the management fee, and allows for the months when the home is empty. Always use the total cost, including purchase taxes and fees, not just the price, because otherwise the yield looks better than it is. In the example below, a total cost of €270,000 gives a gross yield of 8.9% and a net yield of 5.7% on a holiday let, before income tax. This guide gives the formulas, two worked examples, the costs people forget and a checklist, and you can test your own figures in the yield calculator. It is general information, not tax or investment advice.
What is gross yield?
Gross yield = annual rent ÷ total purchase cost × 100. It is the quickest way to compare two homes, and the easiest to overstate. Use the total cost: the price plus the purchase taxes and fees, which are explained in the Spain buying costs guide and the Portugal property taxes guide.
What is net yield?
Net yield = (rent collected − yearly running costs − management fee) ÷ total purchase cost × 100. Running costs normally include community fees, property tax, insurance, repairs and utilities. “Rent collected” allows for empty months. Net yield before income tax is the figure to compare across homes, and net yield after tax is what you keep.
A worked example: a holiday let
Assume a home with a price of €250,000 and €20,000 of purchase taxes and fees, so a total cost of €270,000. It is let at €120 a night, booked 55% of the nights in a year, with a 20% management fee and €4,000 of yearly running costs. These are the defaults of our calculator, not a forecast.
| Item | Amount |
|---|---|
| Rental income (€120 × 365 × 55%) | €24,090 |
| Gross yield on €270,000 | 8.9% |
| Management fee (20%) | €4,818 |
| Running costs | €4,000 |
| Net income before tax | €15,272 (≈ £12,900 / $17,100) |
| Net yield before tax | 5.7% |
Conversions are approximate and use the European Central Bank reference rates of 14 October 2026 (€1 = £0.844 = $1.120). Rates move every day.
If income tax of 19% applied to the net income, as it can for an EU or EEA owner under the Spanish rules in renting out property in Spain, you would keep about €12,370 a year, a net yield after tax of 4.6%. Rates and deductions depend on where you live and on the property, so this is only an illustration.
A worked example: a long-term let
With the same total cost of €270,000, suppose the home is let long term at €900 a month with €2,400 of yearly costs and no management fee. Annual rent is €10,800, net income €8,400 and the net yield before tax is 3.1%. The holiday-let figure is higher, but it needs more work, depends on a licence and carries more risk of empty weeks. Compare the two by net yield after tax and by the effort and risk, not only by the headline.
Which costs do people forget?
- Vacancy. Even a long-term let can be empty between tenants.
- Purchase taxes and fees. They belong in the denominator.
- Income tax. Non-residents pay tax on rental income in the country of the property; see the non-resident tax guide.
- Licences. A holiday let needs a licence in most places; see Spain holiday rental rules.
- Repairs and replacement of furniture in a furnished let.
- Platform and cleaning fees.
- Mortgage interest if you borrow; it changes your return on cash, not the yield of the property.
- Currency. If your income and the rent are in different currencies, exchange rates change your real return; see how to transfer money.
How do I use the calculator?
- Enter the price including purchase taxes and fees.
- Enter a nightly rate and the share of nights booked that you can support with local evidence, not an optimistic advert.
- Enter the yearly running costs and the management fee.
- Read the net income and the net yield, then run a cautious case with lower occupancy.
- Repeat the exercise for each home you consider.
How should you use yield?
Yield is a screening tool. A high figure can signal a risky area, a seasonal market or a property that needs work, and a low figure may still suit someone who wants the home mainly for their own use. Compare the net yield after tax across homes, and treat any single figure as an estimate. For regional examples of how asking prices and yields vary, see Algarve vs Silver Coast and Costa del Sol vs Costa Blanca vs Costa Cálida.
What are the common mistakes?
- Dividing by the price instead of the total cost.
- Using a peak-season rate for the whole year.
- Counting income from a licence you do not have.
- Ignoring tax in the country where you live.
- Treating a seller’s or agent’s advertised yield as a guarantee.
What if occupancy is lower than you hoped?
Run the holiday-let example again with fewer nights booked, keeping the same rate, fee and costs. At 40% of nights, rental income is €17,520, net income €10,016 (≈ £8,500 / $11,200) and the net yield before tax 3.7%. At 30% it falls to €13,140 of income, €6,512 of net income and 2.4%. The fixed running costs do not shrink with occupancy, which is why the yield falls faster than the income. Use this kind of test before you buy, and be ready to accept the lower case.
Does a mortgage change the yield?
Not the yield of the property, which is calculated on the total cost. A mortgage changes the return on the cash you invest, and it can turn a positive cash flow into a negative one if the interest and repayments are larger than the net income. Treat financing as a separate calculation, and read the non-resident mortgage guide for Spain or the Portugal guide before you rely on borrowing.
How do you compare two homes fairly?
- Use the same method: total cost as the base, net income before tax, then net income after tax.
- Use the same level of caution for the occupancy and rate in both.
- Separate what is a fact (the price, the community fees, the tax bill) from what is an assumption (the rate and the nights booked).
- Compare the effort: a holiday let needs guests, cleaning and a licence, while a long-term let needs a tenant and a contract.
- Add the cost of the sale at the end, because taxes on a later sale reduce the total return.
Where can you find realistic inputs?
The nightly rate and the occupancy are the two numbers that change the result the most, and they are also the easiest to inflate. Look at several comparable listings in the same town and building type, check the calendars for the months that are already booked, and ask a local management company for the average occupancy of similar homes through the whole year, including winter. For running costs, ask the seller for the last community fee statement, the property tax bill and the utility bills, and keep a repair allowance on top.
What should you check on tax?
Before you rely on a net figure, ask a tax adviser how the rent is taxed in the country of the property and in the country where you live, which expenses you can deduct and whether the home needs a licence to be let. The answers can move the after-tax yield by more than a few tenths of a point. For Portugal, start with the non-resident property taxes guide; for Spain, with non-resident property tax.
Frequently asked questions
What is a good rental yield abroad?
There is no single answer. Compare net yield after tax across homes in the same area, and test a cautious case with lower occupancy.
Should I use the price or the total cost?
Use the total cost, including purchase taxes and fees, because that is the money you actually put in.
Is gross yield the same as net yield?
No. Gross yield ignores running costs, management, vacancy and tax, so it is always higher.
Do I pay tax on rental income as a non-resident?
Usually in the country where the property is. For Spain, see the guide on renting out property.
Can I trust a yield quoted by an agent?
Treat it as a starting point and check it against your own occupancy, costs and taxes.
This is general information, not legal or tax advice. Rules and rates change, and your situation may differ. Confirm the figures with the tax authority and a qualified lawyer or tax adviser before you commit. Facts last checked on 16 October 2026.
Sources
Official sources (check these for the current rule):
Also cross-checked against published guides, because practice varies between notaries, registries and banks:
- See the sources of our renting out guide.
