Working out rental yield for a property held from abroad

The rental yield of a let property is worked out by deducting from the gross rent everything that nibbles at it: vacancy, service charges, council tax, insurance, management fees, periodic upkeep and, for a non-resident, the cost of currency exchange and bank charges. Gross yield sets annual rent against the value of the property; net yield starts from what actually remains for you, after charges and according to the tax treatment that applies to your country of residence. This page gives the complete grid of items, with no invented figures: your job is to set your own assumptions, with the right tools.

What exactly are you comparing when you work out a yield?

There are three storeys, and confusing them is the source of nearly every disappointment. Gross yield sets theoretical annual rents against the value of the property: a quick comparison indicator between two addresses or two cities, nothing more. Net yield before tax deducts vacancy, non-recoverable service charges, council tax, insurance, management fees and upkeep: that is the budgeting tool. Net yield after tax, finally, applies your own tax situation: furnished or unfurnished regime, allowances depending on how long you have held the asset, withholdings and treaties depending on your country of residence.

The detail of that third storey depends on each situation: it is laid out without ambiguity in our guides by country of residence. To frame the whole undertaking, from marketing the let to ongoing monitoring, our guide to letting your property from abroad remains the starting point. This page concentrates on the calculation grid itself, item by item.

Which items go into the calculation?

The method is simple: list everything coming in and everything going out, with no exceptions and no double counting. On the income side, the rents collected, smoothed over the year for short lets to neutralise seasonality. On the outgoings side, the list is longer than expected:

• Vacancy: months without a tenant in long lets, unlet nights in short lets; often the most underestimated item.
• Non-recoverable service charges, including provisions and their regularisations.
• Council tax, which follows the property and remains yours to pay.
• Insurance for a non-occupying landlord, with its excesses and optional cover.
• Management fees, if you choose to entrust management to a partner property manager.
• Routine upkeep and periodic refurbishment, to be provisioned at every letting cycle.
• In short lets, the running costs: cleaning, linen, welcome, detailed in our short-let conciergerie service page.
• As a non-resident, currency exchange and bank charges on every repatriation of income.

The table below ranks these items and flags the ones most often forgotten:

Item	Goes into the calculation	Often forgotten
Gross rents	Yes: the basis of everything, smoothed over the year for short lets	Seasonality, which deepens in winter
Vacancy	Yes: months without rent or unlet nights	The gap between two tenants after works
Service charges	Yes: non-recoverable share, provisions included	Works voted at the general meeting
Council tax	Yes: it follows you whatever happens	Rises after works or revaluations
Landlord insurance	Yes: cover for a non-resident landlord	Optional cover and excesses
Management fees	Yes: if you entrust management to a partner manager	Ancillary services, cleaning and linen
Upkeep and refurbishment	Yes: provisioned at every cycle	The real rhythm between two tenants
Exchange and bank charges	Yes: on every repatriation of income	The conversion spread, repeated all year

Gross or net: why the difference decides?

Gross serves to compare quickly: two properties, two cities, two strategies. Net tells the truth: what reaches your account, and what leaves it again. The gap between the two rarely comes from a spectacular item; it builds up from vacancy, charges and fees repeated every month. A property with a flattering gross figure can thus reveal a disappointing net one, especially in short lets, where running costs and seasonality weigh twice over.

The third storey, tax, deserves the same rigour. Depending on your country of residence, a tax treaty determines where the income is taxed and how double taxation is avoided; depending on the nature of the property, furnished or unfurnished, the applicable regime and the allowances, notably those tied to how long you have held the asset, change the final result. These mechanisms are explained without figures in our guides by country of residence: read them before any decision, because a good net yield before tax can reverse after it.

Exchange, bank charges, tax: the non-resident specifics

A non-resident owner repatriates rents, and every repatriation costs. International transfers carry fixed or proportional fees, converting one currency into another happens at the day’s rate, with a spread repeated on each transaction, and keeping a euro account abroad can carry a cost of its own. Three habits reduce the bill: grouping repatriations instead of multiplying them, keeping a euro float for local charges, and comparing the real costs of your banking channels.

On the tax side, the non-resident mechanics combine withholding at source in France under the applicable rules, taxation in your country of residence, and the role of the tax treaty in sharing rights and avoiding double taxation. Filings exist on both sides, with deadlines that do not always coincide. This is precisely the territory where figures vary from one situation to the next: our country guides frame it, and your dedicated French Realty contact points you to the right specialists when the situation calls for it.

How do you set sound assumptions?

A yield calculation is only as good as its assumptions. Start with the value: the public records of completed sales anchors your estimate in the levels actually observed locally, rather than in a memory of the purchase. Then set rents and vacancy in three scenarios, cautious, central, favourable: a single-scenario calculation leaves you unprepared for bad years. Finally, run the whole thing through the rental yield simulator, which crosses these assumptions and makes the result comparable from one property to another.

Write your assumptions down in black and white and date them: the rent retained, the vacancy assumed, the charges known. A documented calculation can be discussed, corrected and replayed; a mental one convinces nobody, not even you. This discipline also serves when changing strategy: replaying the grid is how you measure what a switch to furnished letting really adds, after charges and after tax.

Two reflexes complete the method. First, redo the calculation every year using the building’s real service charges and the vacancy actually recorded, not the original assumptions. Second, never overlook the obligations that come with the income: in short lets, listings and the tourist tax form a chapter of their own, covered in our article on online listings and the tourist tax. To keep reading, the Location & yield category of the Journal gathers every chapter of the letting cycle.

If you want to lay the full grid over your property, rents, charges, exchange and tax according to your country of residence, the complimentary personal study from French Realty lets you establish your real assumptions with your dedicated contact, before any commitment.