What Is Rental Yield and How to Calculate It
Learn how to calculate rental yield, which costs to include, and what is considered a good return in the Latvian real estate market.
Mārtiņš Kozlovskis
Key takeaways
Rental yield shows your return on investment. It helps compare properties objectively.
Gross yield is simple but incomplete — it ignores costs.
Net yield reflects reality by including maintenance, vacancy and taxes.
In Latvia, a good rental yield is typically around 5–8 % annually, depending on risk and location.
What is rental yield?
Rental yield is a metric that shows the annual return (in %) on your property investment.
It answers a simple question: is this apartment just nice — or also financially smart?
Gross yield (the simple formula)
Gross rental yield is calculated as:
(Monthly rent × 12) ÷ Property price × 100 %
Example:
- Property price: €100,000
- Monthly rent: €600
(600 × 12) ÷ 100,000 = 7.2 % gross yield
Useful for quick comparisons, but still incomplete.
Net yield (the realistic number)
Net yield includes real-world costs:
- Maintenance and repairs
- Vacancy periods
- Management fees
- Taxes
- Insurance
Example:
- Annual rent income: €7,200
- Annual costs: €1,700
(7,200 – 1,700) ÷ 100,000 = 5.5 % net yield
This is the number serious investors focus on.
What is a good rental yield?
- 3–4 % – low (often prime locations, new builds)
- 5–6 % – good and balanced
- 7–8 %+ – high, usually with higher risk
Higher yield often comes with:
- Weaker locations
- Older buildings
- Higher tenant turnover risk
What affects rental yield the most?
Purchase price
Lower purchase price makes strong yield easier to achieve.
Location
City centre = stability but lower yield. Outer districts = higher return but more risk.
Apartment type
Smaller apartments (studio, 1–2 rooms) often generate higher yield.
Quality
Good renovation and furnishing justify higher rent and reduce vacancy.
Takeaway
Rental yield is one of the most important metrics in property investing. Use gross yield to shortlist opportunities, but make decisions based on net yield.
With Hesti market data and transaction history, you can better estimate both realistic purchase prices and achievable rent levels.