Rental yield vs deposit interest after tax and costs

A listing says "yield 5%". A bank says "deposit 3%". The two numbers are not comparable. The first is usually gross, before costs and tax. The second is usually also gross, before tax, but it has far fewer costs behind it. This article walks from gross rental yield to net, in words, and compares the result with after-tax deposit interest. It is part of the series that starts with property or a bank deposit: which is more profitable.

From gross to net: the bridge

Gross yield is annual rent divided by the purchase price. To get to what stays in your pocket, take away these lines in turn.

• Vacancy. Months without a tenant, and time between tenants. Even a well-let flat is rarely occupied 12 months out of 12. Short-term lets have more vacancy and more work.
• Management. A manager or agency usually charges a share of rent; if you manage yourself, it costs time.
• Maintenance and repairs. Wear, appliances, repainting, and a reserve for the large items. A common planning rule is a percentage of the property value each year; the right figure depends on age and condition.
• Community and service charges that the owner cannot pass on to the tenant, such as the reserve fund of a building.
• Insurance for the building contents and liability.
• Property tax, where it exists.
• Income tax on the rent. Rules differ by country, and for a Polish tax resident with foreign rent see our article on tax on foreign rental income.
• Financing costs, if you borrow. See mortgage leverage.

Then there are costs outside the yearly bridge: purchase taxes and fees, furnishing, and the cost of selling later. Our article on total cost of ownership abroad lists them by type.

A hypothetical EUR 200,000 flat

This is an illustration with round numbers, not market data and not a forecast.

A flat costs EUR 200,000 and is let for EUR 9,000 a year in rent. That is a gross yield of 4.5%. Now the bridge, line by line, all hypothetical:

• Vacancy and gaps between tenants: EUR 500.
• Management: EUR 700.
• Maintenance and repairs: EUR 1,000.
• Community charges not passed on: EUR 800.
• Insurance: EUR 250.
• Property tax: EUR 600.

These costs total EUR 3,850. Rent less costs is EUR 5,150. Assume income tax of about 15% on that amount, roughly EUR 770. What remains is about EUR 4,400, which is a net yield of about 2.2% of the price.

So 4.5% gross became about 2.2% net, a loss of more than half. That is not unusual, though the share depends on country, property type and how it is let.

The deposit on the same money

Put the same EUR 200,000 on deposit. Assume 3.0% gross interest, a figure chosen for the example and not a quoted offer.

• With 19% tax (Poland as reported): interest EUR 6,000, tax EUR 1,140, net EUR 4,860, or 2.43%.
• With 15% tax (Czechia as reported): net EUR 5,100, or 2.55%.
• With about 26.4% tax (Germany as reported, before the saver's allowance): net about EUR 4,420, or about 2.2%.

On these assumptions the flat's net rent of about EUR 4,400 is below or equal to the deposit's net interest, which is between about EUR 4,400 and EUR 5,100. For the details on rates and tax, see deposit rates, inflation and real return.

So where does the advantage come from?

Not from rent alone. The deposit has no purchase costs, no vacancy and no repairs. Property has to make up the difference through capital growth, avoided rent or a higher yield.

Capital growth. In our example the deposit earns about EUR 460 more a year than the rent. Add the purchase costs: assume EUR 12,000 (6%), which over ten years is EUR 1,200 a year. The flat then needs to gain about EUR 1,660 a year in value, or about 0.8% a year, only to match the deposit. If prices rise 2% a year, the gain is EUR 4,000 a year and property pulls ahead. If they fall, it loses. Capital growth is not guaranteed.

Avoided rent. If you live in the flat instead of paying EUR 9,000 in rent, that EUR 9,000 is not taxed and you do not have the vacancy line. This changes the picture a lot. But only compare with renting if you would really rent a similar home.

A higher yield. Real gross yields differ by market. In our own 2026 country articles, which draw on Global Property Guide, brokers and portals and not on official statistics, the ranges look like this: Germany about 3-4% gross, Austria about 3 to nearly 5%, France 3.8-4.0% in the large cities, Portugal about 4-5% in the big cities, Spain about 6.5% on average and Italy about 6.6%, with a net of 2-4% for Spain and 3-4% for Italy. See the rental yield by country hub and the country articles, for example Germany and Spain. A high headline yield often comes with higher vacancy, higher risk or currency loss, which is why we look at net.

When a deposit wins on income

• Net rent is below after-tax interest, as in the example.
• You may need the money in under about five years.
• The flat is in a market with weak demand or restrictive rent rules.
• You would have to take a mortgage costing more than the net yield.

When rent can win

• The purchase price is low compared with local rents.
• Vacancy is low and you let long-term to reliable tenants.
• Taxes on rent are moderate and you know them in advance.
• You manage cheaply, for example through a trusted local manager.
• You count capital growth and avoided rent, and accept their uncertainty.

Use the calculators

Our calculators let you enter your own price, rent, costs and tax and see the net yield. Run three cases: a good one, a middle one and one with higher vacancy and lower rent.

FAQ

What is the difference between gross and net yield? Gross is rent divided by price. Net is what remains after vacancy, costs and taxes, divided by the price (and sometimes by the total outlay including purchase costs).

Which costs do people forget? Vacancy, the reserve for large repairs, the community charges the tenant does not pay, and the purchase costs spread over the years.

Is the yield in your country articles guaranteed? No. They are ranges from public sources with their dates and caveats. Your property will differ.

Does tax on rent make the deposit better? Both are taxed. The difference is that rent is taxed after deducting costs in many countries, while deposit interest is taxed from the first euro. Check the rules in your case.

Should I count avoided rent? Yes, if you will live in the property and would otherwise rent a similar one. If you would not, it is not a true saving.

How we help

We are a trilingual platform that finds properties and coordinates independent local lawyers and tax advisers. This text is informational and is not legal, tax or investment advice, and past performance does not guarantee future results. All examples are hypothetical; verify current rules and figures locally.