When a listing or an agent quotes a "yield," ask one question before anything else: gross or net? It's rarely volunteered, and the difference between the two is usually the difference between a good investment and a mediocre one.
Gross yield: the formula
Gross yield is simple by design — it's meant to let you compare properties quickly, not to tell you what you'll actually keep.
Buy a property for €300,000, rent it for €1,500 a month (€18,000 a year), and your gross yield is 6%. That's the number you'll see quoted most often — and the one that tells you the least about what lands in your account.
What separates gross from net
Net yield takes the same rental income and subtracts everything it actually costs you to hold and let the property before you see a return:
- Community fees — building maintenance, shared amenities, insurance on common areas
- IBI — the annual Spanish property tax, based on the cadastral (not market) value
- Non-resident income tax — 19% for EU/EEA tax residents, 24% for non-EEA, applied to rental income
- Management or letting agency fees — commonly 20-25% of gross income for a full-service short-term operator, considerably less for long-term lets
- Maintenance and repairs — a realistic annual allowance, not just what comes up
- Insurance — building and, if furnished, contents cover
- Voids — periods with no tenant, which for short-term coastal lets can mean a genuine off-season gap, not just the odd empty week
A worked example
Take that same €300,000 property renting for €18,000 a year gross (6% gross yield), let long-term to a resident tenant:
| Item | Annual amount |
|---|---|
| Gross rental income | €18,000 |
| Community fees | −€1,200 |
| IBI | −€600 |
| Insurance | −€300 |
| Maintenance allowance | −€500 |
| Non-resident tax (19%, on net rental profit) | −€2,926 |
| Net income | €12,474 |
| Net yield | 4.16% |
A 6% gross yield became a 4.16% net yield — without anything going wrong. That's simply the cost of owning and holding the asset correctly and legally. Run the same property as a managed short-term let instead, and a 20-25% management fee would pull the net figure down further still, though a well-run short-term let can also generate meaningfully higher gross income in the first place — which is why the two strategies aren't directly comparable on yield percentage alone.
Common mistakes when calculating your own yield
- Using the asking price, not the price you actually paid — negotiation, legal fees, and transfer tax (ITP) all change your real basis
- Using an optimistic rent estimate rather than what comparable properties are actually achieving right now
- Ignoring seasonality on short-term lets — a rate that holds in August rarely holds in February
- Forgetting furnishing and setup costs for a short-term rental, which can run into several thousand euros before the first booking
- Comparing a long-term-let yield against a short-term-let yield as if they're the same calculation — they carry different cost structures and different risk
None of this is complicated math. It just requires having the real numbers — actual comparable rents, actual fees for that specific building, and an honest occupancy assumption — rather than the optimistic ones a listing was written to make you believe.
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Cyrus has lived in Marbella since 2019 and works in real estate across the Costa del Sol, helping buyers see the real return behind a listing before they make an offer.