Why is calculating rental yield crucial?
Investing in real estate can be an excellent way to generate passive income and build wealth. However, the success of a real estate investment is not measured only by the purchase price or the rent you can get. It is fundamental to perform a thorough yield analysis to ensure the operation is financially viable and meets your expectations.
What factors does our calculator consider?
To offer you a complete view, the tool considers all elements that impact the real return on your investment:
- Acquisition Costs: Includes purchase price, renovation costs, agency commissions, notary and registry fees, and Property Transfer Tax (ITP) according to your region.
- Financing: If you need a mortgage, we consider the percentage financed, the term, and the interest rate to calculate the monthly payment and the equity contributed.
- Annual Income and Expenses: From monthly rental income to recurring expenses like community fees, property tax, insurance (home, life, non-payment) and an estimated percentage for maintenance.
- Cash on Cash (CoC) / ROE: Measures the return on YOUR money (down payment + expenses), not on the property value. Thanks to mortgage leverage, you can get double-digit returns on your capital even if the property only yields 5%.
- ROCE (Return on Capital): The total profitability of your employed capital. Sums Cashflow and mortgage amortization. It is the metric that best reflects the growth of your net worth.
- 10-Year Projection: Visualize how your equity evolves against the bank debt. It's the map to understand when you will truly own 100% of your asset.
Frequently Asked Questions (FAQ)
Gross Yield (Income/Price) is a quick indicator but can be misleading. **Net Yield** is the real one because it subtracts taxes (IBI), community fees, insurance, non-payments, and repairs. Always make decisions based on Net Yield.