Rental Yields: From 3% to 8% Depending on Calculation

Rental properties: Real yield drops to 3% after expenses

A €200,000 apartment rented for €1,000 a month offers a 5.5% gross return. It sounds good. Until you deduct IBI (property tax), community fees, insurance, special assessments, vacant months, or a broken boiler. Then the figure sinks below 4%, and owners start looking at bank deposits differently. The core question is direct: Can you get more than an 8% annual return renting housing? The answer from accumulated experience is uncomfortable: only in exceptional cases and almost never from day one.

What net yield does a rental really leave?

The numbers used by those with years of experience fall within a narrow range. An owner with two properties—one new build in a coastal area and another rural home with foreign demand—calculates a 3.47% net return on the first and 6.90% on the second, averaging 5.18%. Another, after twelve years of renting, sold a flat that yielded €14,000 gross annually (about €11,500 net) for €480,000: a 2.5% net return on sale price.

Some argue that a 10% gross return isn't too difficult provided the tenant pays religiously and the flat is never empty. The nuance is important: that is gross, before taxes, expenses, assessments, and defaults. The most optimistic calculation assumes perfect occupancy; the pessimistic scenario starts with a single vacant month or serious repair eating up the entire year. Most circulating calculations place the net between 3% and 4%.

Why gross figures deceive: Expenses nobody puts in the Excel

The trap lies in what isn't seen. A €200,000 flat rented for €1,000 a month yields 5.5% gross on paper. Subtracting IBI, community fees, and liability insurance already drops it below 4%. If there's also a special assessment, a broken boiler, or a shower needing replacement, the year is lost. In Barcelona, flats costing €200,000–€250,000 rent for €1,000, while those renting for €1,500 cost €300,000 or €400,000.

The complete expense breakdown, item by item, is where the mirage collapses. Some compare brick-and-mortar returns with an S&P 500 index fund over the same years, and the result invites tears. It’s not an exaggeration: it’s simple subtraction.

Opportunity cost versus funds and deposits

With money market funds paying around 3.6% and having touched 4% weeks earlier, a 3% net rental doesn't compensate for managing tenants. This is the argument weighing heaviest among those who exited real estate. A flat causes problems; an ETF doesn’t call at three in the morning because the washing machine broke.

The comparison with stocks isn't idle. Telefónica at €4 per share distributes 30 cents gross annually, a 7.5% return without doing anything more than cursing the CEO occasionally. The question is why anyone enters a flat to earn half that.

The room-rental trick and other formulas to boost percentages

There is a way to exceed 8%: subdivision. In Barcelona, there are €300,000 flats converted into six rooms without living areas, rented at €600 each. That’s €3,600 monthly. The full calculation, including bunk beds and partitions, yields returns hovering around 11% or 12%, provided everyone pays and no one destroys anything.

Tourist rentals are another door. A flat from 1971 bought for €1,900 that nets €1,000 in a good summer month. Its owners don't consider traditional rentals. Fixed costs of a tourist rental—community fees, IBI, special insurance, soap replacement, linen washing, cleaning after each use—range between €5,000 and €6,000 annually, and no agency is needed if the cleaner handles check-in.

---

The conclusion left by this journey is uncomfortable for the narrative of real estate as a golden goose. The business was profitable when transfer taxes were lower, part of the payment could be made off the books, and rentals were opaque to Hacienda (Spanish Tax Agency). With everything declared and rates where they are, a 2.98% net return doesn't pay for the alucinación. And yet, housing prices continue to rise.