Calculate your property yield

1. Return on investment (Yield)

Yield represents the percentage return on an investment over a certain period. In other words, it shows how much money an investment generates relative to the capital invested. This may be rental income, dividends, interest or other regular income.

The return on an investment can be fixed, variable or combined - for example, if an investor has a guaranteed minimum return of 3 % with the possibility of an additional variable component depending on market performance.

It is important to distinguish between the return and the total return of an investment. For example, if we buy a share for 100 euros and after a year its price rises to 115 euros, and the investor has received dividends of 4 euros, then:

Yield will be 4 % because only the yield is calculated (4/100 = 0.04 = 4 %).
Total profit however, will be 19 euros (15 euros of the growth in value + 4 euros of the dividend).

Within real estate, investors often judge performance by rental yield. For example, if a property is worth 35 000 000 CZK and generates rent annually 2 450 000 CZK, then the yield calculation will be:

Investors look not only at the rate of return, but also at the additional investment required in modifications and upgrades that may affect the final profit. The optimal return varies by location - while in a metropolitan area it may be around 5-6 %, in smaller towns it may be higher.

The right investment strategy consists not only in achieving the highest possible return, but also in assessing the long-term stability of income and potential risks associated with the property.

2. Rental Yield

Rental income is a basic indicator for investors in rental property. It measures the ratio between annual rental income and the total value of the property.

Example:

Annual rent: 24 000 CZK
Property value: 300 000 CZK

3. Capital Yield

- Capital return is the growth in the value of the property over time. When the value of a property increases, investors make a capital gain.

4. Yield from Operations (Operational Yield)

Income from operations is the net profit remaining to the investor after deducting all costs associated with the operation of the property.

Example:

Annual net rental income: 40 000 CZK
Total cost of running the property: 12 000 CZK

5. Internal Rate of Return (IRR)

Internal revenue income is a measure of the rate of return on a property investment and takes into account the time value of money.

(A more complex mathematical formula is used to calculate the IRR and it is not possible to provide a specific example.)

6. Yield on Sale

Proceeds from sales is the profit that the investor receives when selling the property compared to the original investment.

Example:

Original price of the property: 200 000 CZK
Selling price: 240 000 CZK