The yield you see advertised and the one that actually lands in your bank account are two very different figures. This article shows you how to calculate it properly before making any decisions.
The problem with gross yield
Market reports and property portals often quote gross yields of 5%, 6%, even 7% in some areas of Madrid. These figures are real—but incomplete. Gross yield is simply the ratio between annual rental income and purchase price. It doesn’t deduct anything.
Net yield—the number that actually matters—can be 2 to 4 percentage points lower. And that gap is often the difference between an investment that performs and one that disappoints.
| BASIC FORMULA |
| Gross yield = (monthly rent × 12 / purchase price) × 100 Net yield = ((annual rent − total expenses) / (purchase price + acquisition costs)) × 100 |
Real example: 75 m² apartment in Chamberí
| Concept | Amount |
|---|---|
| Purchase price | 420.000 € |
| Acquisition costs (6% transfer tax + notary + registry + legal) | ~32.000 € |
| Total investment | 452.000 € |
| Market monthly rent | 1.700 €/mes |
| Gross annual income | 20.400 € |
| Gross yield | 4,85% |
◆ Now, the costs that reduce that 4.85%
|
Estimated amount | |
|---|---|---|
| Property tax (IBI) | 700 € | |
| Building fees (community) | 1.200 € | |
| Home insurance | 300 € | |
| Maintenance & repairs (~1% of value) | 1.400 € | |
| Vacancy (1 month/year) | 1.700 € | |
| Property management (~8%) | 1.632€ | |
| Total expenses | 6.932€ |
Net annual income: €20,400 − €6,932 = €13,468
Real net yield: €13,468 / €452,000 = 2.98%
From nearly 5% gross to under 3% net. This is the calculation you need to run before deciding whether an investment actually makes sense.
Real yields by area in Madrid
|
Avg. gross yield | Estimated net yield | Notes | |
|---|---|---|---|---|
| Salamanca / Recoletos | 3.2 – 4.0% | 1.8 – 2.5% | Very high prices, low running yield | |
| Chamberí | 4.0 – 5.0% | 2.5 – 3.2% | Balanced quality vs return | |
| Malasaña / Chueca | 4.5 – 5.5% | 2.8 – 3.5% | Higher turnover, potential vacancy | |
| Tetuán / Cuatro Caminos | 5.5 – 7.0% | 3.5 – 4.8% | Best current yield in central Madrid | |
| Carabanchel / Arganzuela | 6.0 – 7.5% | 4.0 – 5.5% | Higher yield, more active management |
What the numbers don’t capture: capital appreciation
Rental yield isn’t the only return in real estate. Capital appreciation can be just as important—if not more—over time. Tetuán has appreciated 9.4% over the past year. Chamberí, 7.1%. Buyers from five years ago in these areas are sitting on significant unrealized gains.
To understand the full picture, you need to look at: net rental yield + expected appreciation − opportunity cost of capital. It’s an analysis worth doing properly, with real data, before committing to a purchase.
| HOW LORA GALEVA APPROACHES INVESTMENT |
| We analyse each property using real market data: rental comparables, price history in the area, and projected returns. We never present deals with optimistic assumptions. The goal isn’t to close a transaction—it’s to make sure the investment works. |
