A listing advertises "7.5% yield" for a furnished studio: the calculation, however, only holds up until you put the property tax, the insurance and the income tax on the table. This is the whole point of rental yield calculation: a single return figure is not enough. Between the gross figure shown in listings and the money that actually stays in your account each month, the gap often exceeds two percentage points of yield.
Before signing a preliminary sale agreement, you need to know how to distinguish three levels of return — gross, net and net-net — and the monthly cash flow that follows from them. This is the difference between a deal that is self-financing and an investment that costs you money every month. This article gives you the exact formulas, the costs to factor in, the impact of the tax regimes (micro-foncier, micro-BIC, real-expenses) and a full worked example.
Three returns for a single deal — the gross (rent / price), the net (after costs) and the net-net (after tax). Only the third reflects what you actually earn.
What this article covers
The three rental yield formulas (gross, net and net-net returns), the list of costs to deduct in order to move from gross to net, the impact of taxation depending on the regime (micro-foncier, micro-BIC under the LMNP status, real-expenses regime), the calculation of monthly cash flow once the loan is included, a full worked example on a property at a realistic market price, and the calculation mistakes that distort the purchase decision.
Gross, net, net-net: the framework for calculating rental yield
Rental yield is not a concept governed by a single piece of legislation: it is a financial calculation convention. But the elements that make it up are framed by law. The costs deductible from property income are set by the French General Tax Code (CGI — Code Général des Impôts, article 31), the split of charges recoverable from the tenant comes under decree no. 87-713 of 26 August 1987, and the tax regimes (micro-foncier, micro-BIC, real-expenses) are defined in articles 32, 50-0 and 28 of the CGI.
Understanding yield therefore means distinguishing what is a matter of free calculation (the formula) from what is a matter of an enforceable legal framework (deductible costs, tax allowances). An investor who confuses the two almost always overestimates their return.
Recoverable and non-recoverable charges
Decree no. 87-713 of 26 August 1987 sets out the exhaustive list of charges recoverable from the tenant (maintenance of common areas, water, lift, certain taxes such as the household waste collection tax). Anything not on that list remains the landlord's responsibility: these are known as non-recoverable charges. It is these, and not the total condominium charges, that weigh on the net yield.
The tax regimes for rental income
The applicable tax regime depends on the nature of the rental. An unfurnished rental falls under property income (revenus fonciers — CGI, article 14 et seq.); a furnished rental falls under industrial and commercial profits — BIC (Bénéfices Industriels et Commerciaux — CGI, article 35). This distinction is decisive for the net-net yield, because the allowances and deductible costs differ sharply from one regime to the other.
| Regime | Type of rental | Legal reference |
|---|---|---|
| Micro-foncier (30% allowance) | Unfurnished rental, rent ≤ €15,000/year | CGI art. 32 |
| Real-expenses property income | Unfurnished rental (by election or above the threshold) | CGI art. 31 |
| Micro-BIC (50% allowance) | Furnished rental (LMNP), receipts ≤ €77,700/year | CGI art. 50-0 |
| Real-expenses BIC | Furnished rental (by election or above the threshold) | CGI art. 39 |
These thresholds and allowances are dated parameters, liable to change with each finance act. The values above are those applicable to the micro regime as defined by the CGI. The choice of regime is not neutral: it can shift the net-net yield by several points.
The mechanism: from gross yield to net-net yield
Yield is built up in successive layers. You start from the most optimistic figure — the gross — then subtract the costs, then the tax. At each step, the yield falls and gets closer to the reality of your bank account.
Step 1 — The gross yield
The gross yield is the simplest to calculate, and the most misleading. Its formula:
Gross yield = (annual rent / total purchase cost) × 100
The "total purchase cost" must include the price of the property and the acquisition costs: notary fees (around 7 to 8% in the existing-property market), agency fees, and any initial works. Calculating the gross on the advertised price of the property alone, leaving out the costs, artificially inflates the yield by nearly a percentage point. This is the most common mistake in listings.
Step 2 — The net yield (after costs)
The net yield deducts from the annual rent all the costs borne by the owner and not recovered from the tenant. In practice, you remove:
To deduct in order to move from gross to net: the non-recoverable condominium charges, the property tax (taxe foncière), the rental management fees (through an agency, often 6 to 8% of the rent), the landlord insurance (PNO — non-occupying owner cover) and the unpaid-rent guarantee, plus a provision for rental vacancy (the period with no tenant between two leases).
The formula becomes: net yield = [(annual rent − annual non-recoverable charges) / total purchase cost] × 100. This is already a far more honest indicator than the gross. Between the gross and the net, the loss is typically 1 to 2 points of yield depending on the level of charges and whether or not management is delegated.
Step 3 — The net-net yield (after tax)
The net-net yield — sometimes called the after-tax yield — subtracts the tax on the rent. This is where the tax regime comes into play. Under the micro-foncier regime, the tax authorities apply a flat-rate 30% allowance on the gross rent (CGI, article 32): you are taxed on only 70% of the rent, at your marginal income tax rate (TMI — Taux Marginal d'Imposition), plus social charges. Under the micro-BIC regime for a furnished rental under LMNP, the allowance rises to 50% (CGI, article 50-0), which sharply reduces the taxable base.
Under the real-expenses regime, the calculation changes in nature: you deduct the actual costs and, for furnished rentals, the depreciation of the property and the furniture. Depreciation often makes it possible to reduce taxable profit to zero for several years — a powerful lever of LMNP under the real-expenses regime, which can bring the net-net yield close to the net yield.
Profile: an investor in a 30% TMI bracket hesitating between an unfurnished rental under micro-foncier and a furnished rental under micro-BIC — the furnished 50% allowance against the unfurnished 30% often tips the scales, for an equal rent.
Cash flow: what really stays each month
The net-net yield measures the performance of the investment, but not your cash position. For that, you calculate the monthly cash flow, which includes the loan repayment:
Monthly cash flow = rent − (loan instalment + costs + tax)
An investment can show a good net yield and a negative cash flow if the loan instalment is high (low down payment, short term). Conversely, a positive cash flow means the deal is self-financing, or even generates a surplus. This is the indicator that investors who want to avoid topping up each month from their income look at first.
Case study: a one-bedroom furnished rental
Let us take a worked example — the figures are given for illustration and are based on market orders of magnitude; they do not replace a personalised simulation. You buy a one-bedroom flat (T2) of 42 m² in a regional metropolitan area, bought for €158,000 excluding costs, which you let furnished at €690 per month, i.e. €8,280 of annual rent. You opt for the LMNP status under micro-BIC.
Scenario — Gross, net and net-net yield of a furnished one-bedroom flat at €158,000
| Item | Detail | Amount |
|---|---|---|
| Property price | Excluding costs | €158,000 |
| Notary fees | ≈ 7.5% (existing property) | €11,850 |
| Total purchase cost | Property + costs | €169,850 |
| Annual rent | €690 × 12 | €8,280 |
| Gross yield | 8,280 / 169,850 | 4.9% |
| Property tax (taxe foncière) | Annual cost | − €980 |
| Non-recoverable charges | Condominium, landlord's share | − €620 |
| Landlord insurance (PNO) + unpaid rent | Annual | − €310 |
| Rental vacancy provision | ≈ 1 month / year | − €690 |
| Rent net of charges | 8,280 − 2,600 | €5,680 |
| Net yield | 5,680 / 169,850 | 3.3% |
| Taxable base (micro-BIC) | 8,280 × 50% (allowance) | €4,140 |
| Tax (30% TMI + 17.2% social charges) | 4,140 × 47.2% | − €1,954 |
| Net-net yield | (5,680 − 1,954) / 169,850 | 2.2% |
The gap is telling: from the advertised gross (4.9%) to the actual net-net (2.2%), the yield is more than halved. This is precisely what the listing figure hides. Under the real-expenses regime with depreciation, the tax on the rent would here be largely neutralised, bringing the net-net much closer to the net (3.3%) — hence the value of comparing regimes before choosing.
The calculation mistakes that distort the decision
Mistake no. 1 — Calculating the gross on the property price without the costs
Dividing the rent by the advertised price alone, without including notary fees or any works, inflates the yield by nearly a percentage point. The correct denominator is the total cost of the deal: price + notary fees + agency fees + works. A "6%" gross calculated without costs can fall to 5.3% once the costs are included.
Mistake no. 2 — Forgetting rental vacancy
A property is never let 12 months out of 12, indefinitely. Between two tenants there are weeks of vacancy, sometimes renovation works. Providing for at least half a month to a month of rent per year for vacancy avoids building a financing plan on an unrealistic 100% occupancy rate.
Mistake no. 3 — Ignoring taxation in the comparison
Comparing two properties on their gross yield alone means comparing two figures that mean nothing once the tax is paid. A property under LMNP at the real-expenses regime (depreciation) and a property under unfurnished rental at micro-foncier do not have the same net-net yield at all, for an identical gross. Taxation must enter the comparison from the outset.
⚠️ Warning: beware of the double-digit yields shown on some listings or platforms. No yield is guaranteed: they almost always ignore vacancy, unpaid rent, works and taxation. A realistic net-net yield in an urban area most often sits between 2% and 5%.
Mistake no. 4 — Confusing yield and cash flow
A good net yield does not mean the deal is self-financing. If the loan instalment exceeds the net rent, your cash flow is negative: you have to top up each month. Conversely, a positive cash flow secures the investment. Always calculate both: the yield measures performance, the cash flow measures sustainability.
Calculate your real rental yield
Mon Simulateur Immobilier rental yield calculator
Calculate your three returns (gross, net and net-net) and your monthly cash flow from your real figures: purchase price, notary fees, rent, charges, property tax, tax regime (micro-foncier, micro-BIC or real-expenses) and loan terms. The calculator applies the statutory allowances and computes the tax according to your bracket to reveal what the deal truly earns.
To go further: the property income deficit calculator and the rent vs buy comparator.
Conclusion
Calculating rental yield never comes down to a single figure. The gross yield is used to quickly filter listings, the net to measure the weight of charges, and the net-net to know what you actually earn after tax. Monthly cash flow, for its part, tells you whether the deal stands up without dipping into your income. Choosing the right tax regime — micro-foncier at 30%, micro-BIC at 50% under LMNP, or real-expenses with depreciation — can shift the net-net by several points on the same property.
To move from formulas to your own situation, the Mon Simulateur Immobilier rental yield calculator chains the three returns and the cash flow from your own figures, applying the allowances and the tax — enough to compare two properties, or two regimes, on an honest basis before you sign.
