Yield is useful. But it is only useful when we are precise about what it measures.
Property listings and investment discussions often place a single percentage at the centre of the decision. That number is usually the gross rental yield: annual rent divided by the purchase price. It is quick to calculate and helpful for an initial comparison. It is not the amount an owner keeps.
01 / THE HEADLINE NUMBER
Gross yield is a filter,
not a conclusion.
Consider a property purchased for €300,000 and rented for €2,000 per month. Annual rent is €24,000, producing a gross yield of 8%.
The calculation says nothing about vacancy, maintenance, insurance, management, service charges, compliance, tax or financing. It also uses the purchase price alone, even though acquisition costs and initial works increase the capital required.
02 / FOUR DIFFERENT MEASURES
One property.
Four different answers.
Gross yield
Annual rent divided by purchase price. Useful for rapid comparison, but incomplete.
Net operating yield
Income after recurring operating costs, before finance and tax, divided by the property cost.
Cash flow
The cash remaining after operating costs and the full debt payment. Tax still needs separate treatment.
Cash-on-cash return
Annual pre-tax cash flow divided by the cash actually invested, including deposit and initial costs.
These measures answer different questions. Gross yield compares income with price. Net operating yield tests the asset’s operations. Cash flow tests liquidity after debt. Cash-on-cash return tests how efficiently the investor’s own capital is working.
03 / WORKED EXAMPLE
The journey from
8% to 3.7%.
The following scenario is illustrative, not a forecast. It assumes a €300,000 purchase, €24,000 annual rent and reasonable placeholder allowances that must be replaced with property-specific evidence.
After operating costs, the property produces €17,000 of net operating income. That is a 5.67% net operating yield on the €300,000 purchase price — before financing and tax.
If annual debt service were €13,200, comprising interest and principal, pre-tax cash flow would fall to €3,800. If the buyer invested €102,000 in deposit, acquisition costs and initial works, the cash-on-cash return would be approximately 3.7%.
Principal repayment is not the same as an operating expense: it builds equity. But it still leaves the bank account, so it matters when testing whether the property can support itself. Taxable rental profit and actual cash flow are also different calculations.
04 / QUESTIONS TO ASK
Replace optimism
with evidence.
- 01
Is the rent legally and commercially supportable? Use actual comparable evidence and the applicable rent-setting rules, not the highest advertised listing.
- 02
What happens without full occupancy? Model vacancy, tenant changeovers and delayed payments rather than assuming twelve perfect months.
- 03
Which costs are predictable? Verify service charges, insurance, management, registration and routine maintenance with real documents.
- 04
Which costs are irregular but inevitable? Create reserves for replacements, major repairs and periods of capital expenditure.
- 05
Does the financing still work under pressure? Test higher interest costs, lower rent and an unexpected repair before accepting the base case.
“The objective is not to make the spreadsheet pessimistic. It is to make the decision resilient.”— Zanoris
05 / THE ZANORIS VIEW
A return should be
understood, not advertised.
There is no single percentage that captures the entire economics of a property. A disciplined analysis separates the asset from its financing, recurring performance from capital growth, and accounting profit from cash movement.
That clarity does not eliminate risk. It makes risk visible — and visible risk can be priced, planned for or rejected.
SOURCES & METHODOLOGY
The example is hypothetical and provided for education. It does not represent a live property or expected return. Irish Revenue explains that net rental income is gross rental income less allowable deductions and provides examples of expenses such as insurance, maintenance, RTB registration and allowable mortgage interest. The RTB/ESRI Rent Index should be used as market context rather than as a substitute for property-specific rent evidence.
- Irish Revenue — How to calculate taxable rental income
- Irish Revenue — Allowable rental expenses
- RTB/ESRI Rent Index
- RTB — Setting and reviewing rent
This material is general information and does not constitute investment, financial, tax or legal advice. Assumptions and obligations vary by property, financing structure and owner.