Before investing you want to know what it produces. That means calculating the yield: the relationship between your income and your total investment, including the purchase costs.
Gross yield #
The simplest calculation. Annual rental income divided by total investment, multiplied by 100.
It gives you a first indication and ignores every cost, which is why the figures quoted in advertising are almost always gross.
Net yield #
The realistic picture. Deduct all annual costs from your rental income, then divide by total investment and multiply by 100.
Those costs include tax, maintenance, insurance, community fees and management.
A worked example #
Say you buy for €250,000. With purchase costs your total investment is €270,000.
The rent is €1,500 a month, so €18,000 a year, and your annual costs are €3,000.
Gross yield: 6.67 per cent. Net yield: 5.56 per cent.
The difference shows how much the costs matter. And note what that example leaves out.
What a UK owner has to add #
The example above uses €3,000 of costs. For a British owner the tax alone changes that number considerably.
You pay 24 per cent on the gross €18,000 with no deductions, which is €4,320 of Spanish tax. Add the €3,000 of running costs and your net income is €10,680, giving a net yield of 3.96 per cent rather than 5.56.
That is the real number. Any yield calculation for a Spanish property that does not account for non-EU tax treatment is overstating your return by a meaningful margin.
What else to account for #
Letting is not full all year. Costs vary between years. Management and platform commission depress the yield further, typically 15 to 30 per cent of gross rent if you use a partner.
And occupancy assumptions are where most projections go wrong. Work from what comparable properties actually achieved rather than from what is possible in theory.
Practical points #
Use a conservative rental estimate. Include every cost, including the small ones. Compare yields across regions and property types. And look at risk and flexibility alongside the yield, because a property that yields 5 per cent and that you can also use yourself is a different proposition from one that yields 6 and you cannot.
In short #
Calculating both gross and net yield shows you the gap between the brochure and reality. A realistic calculation is what makes for a better decision.
Last reviewed 2026-08-24
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