Rental yield

What to include in the calculation

Gross yield is easy to work out: divide the annual rent by the flat's price and multiply the result by one hundred. Don't count service charge advances as rent – they aren't your income. If you use twelve times the monthly rent, you're calculating the potential for a flat let all year round. That may not be what you actually achieve.

A more accurate picture deducts vacancies, management, insurance, the owner's building costs and maintenance. Keep tax and financing costs separate. Without stated inputs, “net yield” can mean two different things for two different offers.

One flat, several correct figures

An illustrative example: a flat costs 6 million Kč and the annual rent excluding services is 300,000 Kč. The gross yield on the purchase price is 5%. If annual costs excluding tax and financing reach 60,000 Kč, the operating yield before tax and financing falls to 4%.

If you also paid 300,000 Kč for furnishings and acquisition, you relate the same 240,000 Kč to an investment of 6.3 million Kč. That comes to roughly 3.81%. Mortgage payments then affect cash flow, but the principal isn't an operating cost. Growth in the flat's value is a separate component of the investment, not guaranteed rent. Unless these differences are stated, the percentages are hard to compare.