Gross rental yield
It is often calculated by dividing annual rent by the purchase price and multiplying by 100. This excludes non-recoverable charges, maintenance, vacancy, acquisition costs and financing.
Understanding the figures
Real estate returns in Switzerland.
Return measures an outcome relative to the capital committed. The appropriate formula depends on the investment: rent for a rental property, interest for a loan, and distributions or capital gains for an equity interest.
Percentages are comparable only when period, fees, tax, risk and calculation method are consistent. The examples below are illustrative and do not constitute offers.
Foundations
Gross return, net return and total outcome.
Gross return provides an initial indication. Net return is closer to what the investor retains, but its definition must specify which costs have been deducted.
Net rental yield
It deducts selected expenses from annual income before comparing it with capital. When comparing calculations, check which fees, works, taxes and vacancy periods are included.
Loan return
For a simple-interest loan, gross interest equals capital multiplied by the annual rate and the fraction of a year. The final outcome may be lower because of fees, tax, delay or default.
Capital gain and total return
An increase in value becomes a realised gain only upon sale and after costs. A complete calculation separates income received, value changes, remaining capital and holding period.
Simulations
Simple-interest examples over twelve months.
At a hypothetical annual rate of 8% over 12 months, the formula is capital × 8 / 100 × 12 / 12. It does not apply to rental yield and excludes the factors described below.
10'000 CHF
Theoretical gross interest: 800 CHF. Theoretical total: 10'800 CHF if principal and interest are paid in full at maturity.
25'000 CHF
Theoretical gross interest: 2'000 CHF. Theoretical total: 27'000 CHF under the same simplified assumptions.
50'000 CHF
Theoretical gross interest: 4'000 CHF. Theoretical total: 54'000 CHF under the same simplified assumptions.
Comparison
What influences the actual outcome.
Actual duration
An annual rate must be adjusted to the effective term. A six-month investment at 8% per year does not produce 8% over six months under simple interest, but 4% before costs and incidents.
Fees and tax
Platform, vehicle, transaction, management and financing fees can reduce the outcome. Tax depends on the investor's circumstances and should not be generalised without suitable analysis.
Cash-flow timing
Two investments showing the same rate may produce different results if one pays progressively and the other at maturity, or if capital remains committed for longer than expected.
Loss or delay
A higher return may reflect greater risk. A delay reduces annualised return, while a default may erase several years of interest or result in a loss of capital.
Reading risk
Return is never an isolated promise.
To assess an opportunity, compare expected return with borrower or project strength, security, ranking, liquidity and the quality of underlying assumptions.
Rental property
The outcome depends on rent collected, expenses, works, occupancy, financing and resale price. Property values can rise or fall.
Participatory real estate loan
The rate is set by contract, but payment depends on the borrower. Expected return should be assessed with the term, default risk, seniority and any security.
Equity participation
Performance depends on the transaction outcome and distribution order. Additional costs, delays or a sale below forecast may reduce or eliminate the expected gain.
Method
Compare two returns correctly
A comparison becomes useful when figures use the same definitions and cover the same period.
01Identify the income source: rent, interest or capital gain
02Check whether the rate is annual, total, gross or net
03Bring results onto a comparable time horizon
04Deduct known fees and state what remains excluded
05Compare expected return with risk and liquidity
Frequently asked questions
Key points to understand before investing.
How is gross real estate return calculated?
For rental property, a common formula divides annual rent by purchase price and multiplies by 100. For a loan, interest is compared with capital and duration. These returns do not describe the same economic reality.
What is the difference between gross and net return?
Gross return is calculated before selected expenses. Net return deducts certain costs, which should always be specified. Net return before tax is not necessarily the amount ultimately received by the investor.
Does an annual rate of 8% produce 8% over six months?
No, not under a simple-interest formula. Over six months, the theoretical gross result is 4% of capital. Contract terms, fees and potential delays must still be considered.
Is a higher return always preferable?
Not necessarily. It may involve greater risk, a longer term or lower liquidity. The loss scenario and project quality should be compared, not only the expected percentage.
Related guides
Deepen your real estate analysis.
Investor area