Gross and net yield: the property fundamentals
Gross yield is the headline number agents quote: annual rent (12 × monthly) divided by purchase price. A €400,000 Berlin apartment renting for €1,500/month has a gross yield of 4.5%. Useful for comparing across cities or against alternatives, but it tells you nothing about what you actually take home.
Net yield deducts the recurring costs of owning and running the property. Typical European operating cost stack: property management 5–8% of rent (or DIY), maintenance reserve 0.8–1.5% of property value annually (older properties higher), vacancy allowance 4–6% of rent, building insurance €200–800/year, communal charges (Hausgeld/charges/spese condominiali) €60–200/month, non-recoverable owner share of property tax (varies wildly by country). Net yield typically lands at 60–75% of gross — so the 4.5% Berlin example becomes 2.8–3.4% net.
Cash-on-cash: the leveraged return
Most European property investors finance 60–80% of the purchase. Cash-on-cash return measures the annual cashflow (rent − operating costs − mortgage interest and capital repayment) divided by the cash you actually put in (down payment + notary + transfer tax + setup costs).
Example: €400k Berlin apartment, €120k cash down (30% LTV including fees), €280k mortgage at 4% interest-only over 10 years. Annual rent €18,000 − operating costs €5,500 − mortgage interest €11,200 = €1,300 cashflow. Cash-on-cash = €1,300 ÷ €120,000 = 1.1%. Thin — but if rent grows 3%/year and interest is fixed, year-5 cash-on-cash is roughly 3–4%. Switzerland and France with sub-2% mortgages produce much stronger cash-on-cash for the same property economics.
Total return: where most of the money actually comes from
European urban residential property has historically appreciated 2–5% per year above inflation in major cities (Berlin, Munich, Paris, Madrid, Milan) over 20-year horizons; Swiss cities 1–3% real. Capital growth is volatile year-to-year but tends to dominate cumulative returns over a decade.
Add mortgage amortization — every month you pay down principal, your equity grows even with flat property values. Over 10 years on a €280k loan, ~€60–80k of principal is repaid (rate dependent). Total return for the Berlin example over 10 years: cash flow + amortization + 30% appreciation = ~80–110% on the €120k initial investment, or roughly 6–8% annualized — modest, but with significant inflation protection.
Calculate every ROI metric in one place
Enter price, rent, mortgage and operating costs to see gross yield, net yield, cash-on-cash and total return projected over 10 years.
Open the calculator →Frequently asked questions
Why is Swiss rental yield so low?+
High property prices and historically tight rent controls keep gross yields at 2.5–3.5% in major cities. Swiss landlords accept low cashflow yield in exchange for capital preservation and low volatility — and historically thin mortgage spreads make the cash-on-cash work.
What's a realistic vacancy assumption?+
Major European cities (Munich, Paris, Madrid centro): 2–4%. Mid-size cities: 5–8%. Tourist-let or short-term rentals: 30–45% (massive seasonal swings).
Should I assume rental growth in my calculation?+
Yes, modestly. Use long-term sector inflation (1.5–2.5% in regulated markets, 2.5–4% in unregulated). Don't model recent boom rates as the new normal — German Mietpreisbremse and Swiss Mietrecht both cap growth.
Are short-term rentals more profitable?+
Gross, yes — typically 1.8–2.5× long-term rental income in tourist cities. Net, often less or worse: cleaning, management fees, vacancies, and increasingly restrictive city regulations (Berlin, Barcelona, Paris) eat the premium.
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