How to Calculate Net Yield on Your Overseas Property Investment
Introduction
Buying a holiday home or a rental property abroad can be an attractive way to diversify your portfolio, generate passive income and enjoy a second residence. For Irish expats and investors, the key question is whether the investment will really pay off once all costs are taken into account.
While developers and marketing brochures often quote impressive “gross rental yields”, the figure that matters to you is the net yield – the return after taxes, management fees, vacancy periods, financing costs and any currency‑exchange impacts. This guide walks you through the full calculation, provides real‑world examples, and highlights the most common pitfalls for Irish investors.
1. Gross vs. Net Rental Yield – What’s the Difference?
| Metric | How it’s calculated | What it shows |
|---|---|---|
| Gross Rental Yield | (Annual Rental Income ÷ Purchase Price) × 100 | Pure rental income relative to price – ignores any expenses. |
| Net Rental Yield | (Annual Net Income ÷ Total Investment Cost) × 100 | True cash‑flow return after all recurring costs and taxes. |
| Total ROI (including appreciation) | ((Annual Net Income + Capital Gain) ÷ Total Investment Cost) × 100 | Long‑term return that adds property price growth and exchange‑rate effects. |
For overseas purchases, the gap between gross and net yield can be 30 %–50 % because of higher management fees, foreign tax regimes and the risk of vacant periods.
2. Step‑by‑Step Net Yield Calculation
2.1 Gather the basic numbers
| Item | Typical source |
|---|---|
| Purchase price (incl. stamp duty, legal fees) | Sales contract, solicitor |
| Loan amount & interest rate (if financed) | Mortgage offer |
| Expected monthly rent | Local letting agents, comparable listings |
| Expected vacancy rate | Market research, historical occupancy data |
| Annual property tax & local rates | Municipal tax office |
| Management & maintenance fees | Property‑management contract |
| Insurance, utilities, HOA fees | Insurance quote, building management |
| Income tax rate in the country | Local tax authority or a tax adviser |
| Exchange‑rate conversion factor (to €) | Current spot rate or average of past 12 months |
2.2 Calculate Annual Gross Rental Income
Annual Gross Income = Monthly Rent × 12
2.3 Adjust for vacancy
Effective Gross Income = Annual Gross Income × (1 – Vacancy Rate)
Example: 10 % vacancy → multiply by 0.90.
2.4 Subtract recurring expenses
Annual Operating Expenses =
Property Tax
+ Management Fees
+ Maintenance & Repairs
+ Insurance
+ Utilities (if landlord‑paid)
+ Other Service Fees
2.5 Compute Annual Net Income before tax
Net Income (pre‑tax) = Effective Gross Income – Annual Operating Expenses
2.6 Apply income tax (if applicable)
Net Income (after tax) = Net Income (pre‑tax) × (1 – Income Tax Rate)
2.7 Include financing cost (optional but recommended)
If you have a mortgage, deduct the annual interest expense (principal repayments do not affect cash flow).
Cash‑Flow After Debt = Net Income (after tax) – Annual Interest Paid
2.8 Convert to euros (if the property is priced in another currency)
Cash‑Flow in € = Cash‑Flow After Debt × Exchange Rate (foreign currency → €)
Total Investment in € = Purchase Price × Exchange Rate + any upfront fees
2.9 Final Net Yield
Net Rental Yield (%) = (Cash‑Flow in € ÷ Total Investment in €) × 100
3. Key Cost Items Irish Investors Must Not Forget
- Stamp duty & registration – Varies widely (e.g., 5 % in Spain, 10 % in Thailand).
- Double‑taxation treaty relief – Ireland has agreements with many jurisdictions; claim foreign tax credits to avoid being taxed twice.
- Currency‑exchange fees – Banks often charge 0.3 %–0.5 % per conversion; consider forward contracts or multi‑currency accounts.
- Depreciation (capital allowances) – In the US and some EU states you can deduct building depreciation, boosting after‑tax cash flow.
- Legal & accounting services – Ongoing compliance (annual filings, tax returns) can cost €500‑€2 000 per year.
- Capital gains tax on disposal – 19 % in Ireland on worldwide gains, but foreign CGT may apply first; plan the exit strategy early.
4. Real‑World Example Calculations
4.1 Bangkok Condominium (Thailand)
| Item | Amount (THB) |
|---|---|
| Purchase price (incl. fees) | 5,000,000 |
| Monthly rent | 25,000 |
| Vacancy rate | 10 % |
| Management & maintenance | 30,000 |
| Property tax | 0 (Thai property tax negligible for condos) |
| Income tax (10 % of rent) | 30,000 |
| Annual interest (5 % on 70 % loan) | 175,000 |
Steps
- Gross annual rent = 25,000 × 12 = 300,000 THB
- Effective rent = 300,000 × 0.90 = 270,000 THB
- Operating expenses = 30,000 (management) + 30,000 (tax) = 60,000 THB
- Net pre‑tax = 270,000 – 60,000 = 210,000 THB
- After tax (90 % of pre‑tax) = 210,000 × 0.90 = 189,000 THB
- Cash‑flow after debt = 189,000 – 175,000 = 14,000 THB
- Convert at 1 € = 38 THB → €368 cash‑flow
- Total investment in € = 5,000,000 ÷ 38 ≈ €131,579
Net Yield = (368 ÷ 131,579) × 100 ≈ 0.28 %
Why the yield looks low: heavy financing and a modest rent level. Investors who purchase cash‑free (no loan) would see a net yield of about 4.3 %, matching the figure quoted in the source article.
4.2 Lisbon Apartment (Portugal)
Assumptions (2025 market):
- Purchase price: €350,000 (including €5,000 legal fees)
- Monthly rent (long‑term): €1,200
- Vacancy: 5 %
- Management fee: 12 % of rent
- Property tax (IMI): €800 per year
- Insurance: €250 per year
- Income tax for non‑resident: 28 % (after a €500 exemption)
- Mortgage: 60 % LTV, 3.5 % interest, €210,000 loan
Calculation
- Gross rent = €1,200 × 12 = €14,400
- Effective rent = €14,400 × 0.95 = €13,680
- Management fee = 12 % × €13,680 = €1,642
- Operating expenses = €1,642 + €800 + €250 = €2,692
- Net pre‑tax = €13,680 – €2,692 = €10,988
- Income tax = (€10,988 – €500) × 28 % ≈ €2,928
- Net after tax = €10,988 – €2,928 = €8,060
- Annual interest = €210,000 × 3.5 % = €7,350
- Cash‑flow after debt = €8,060 – €7,350 = €710
Net Yield = (€710 ÷ €350,000) × 100 ≈ 0.20 %
Lesson: Portuguese long‑term rentals are heavily taxed for non‑residents. Many Irish investors instead use short‑term holiday lets (Airbnb) where the gross rent can be 30 %–40 % higher, pushing the net yield into the 3 %–5 % band after accounting for higher cleaning and platform fees.
4.3 Comparison Table (2025 Average Net Yields)
| Country / City | Typical Net Yield (after tax, before financing) |
|---|---|
| Bangkok, Thailand | 4 %–6 % |
| Lisbon, Portugal (long‑term) | 1 %–2 % |
| Lisbon, Portugal (short‑term) | 3 %–5 % |
| Costa del Sol, Spain | 2 %–4 % |
| Texas, USA (single‑family) | 5 %–7 % |
| Dublin, Ireland | 3 %–4 % (high taxes, lower price growth) |
These figures help you set realistic expectations before you start hunting for a property.
5. From Net Yield to Total ROI – Adding Appreciation & Exchange‑Rate Gains
Net rental yield captures cash flow, but the total return also depends on:
- Capital appreciation – Average price growth in the market (e.g., 3 %‑5 % per year in many Spanish coastal towns, 1 %‑2 % in mature markets like the UK).
- Currency movement – If your home currency is the euro and you own a property priced in Thai baht, a 2 % depreciation of the baht against the euro adds to your ROI, while a euro‑strengthening erodes it.
Total ROI formula
Total ROI (%) = Net Yield
+ Expected Annual Capital Growth
+ Expected Currency Gain/Loss (in %)
Example: A Thai condo with a net yield of 4.3 %, expected price growth of 3 % and a 1 % baht depreciation vs. the euro gives a total ROI of ≈ 8.3 %.
6. Using the Calculation for Decision‑Making
- Set a benchmark – Irish investors often aim for a net yield of ≥ 4 % after tax and fees, which generally offsets the risk of foreign markets.
- Run scenarios – Model optimistic (low vacancy, high rent), base (average market) and pessimistic (high vacancy, tax increase) cases.
- Compare across countries – Use the same currency base (euros) and include financing costs to see which market gives the best risk‑adjusted return.
- Factor in exit costs – Legal fees, agent commissions, and possible CGT when you sell. Subtract these from the projected capital gain to avoid over‑optimistic ROI.
7. Tools & Resources for Irish Investors
| Tool | What it does | Link |
|---|---|---|
| Savills Rental Yield Calculator – UK & Ireland data | Quick gross/net yield estimate | https://www.savills.co.uk/resources-and-tools/rental-yield-calculator.aspx |
| Smart Money Tools – Rental Yield – Multi‑currency | Convert cash‑flow into euros automatically | https://smartmoneytools.co.uk/tools/rental-yield-calculator/ |
| Eurostat – Property Price Index – Country‑level trends | Historical appreciation rates | https://ec.europa.eu/eurostat |
| Irish Revenue – Double Taxation Treaties | Verify tax credit eligibility | https://www.revenue.ie/en/companies-and-charities/international-tax/double-taxation-agreements/index.aspx |
| XE.com – Historical Exchange Rates | Model currency scenarios | https://www.xe.com/currencytables/ |
8. Common Pitfalls for Irish Expats
| Pitfall | Why it hurts you | How to avoid |
|---|---|---|
| Using advertised gross yields | Ignores taxes, fees, vacancy → overestimates profit | Always calculate net yield with the steps above. |
| Neglecting foreign tax filing | Penalties and back‑taxes can wipe out cash flow | Engage a local tax adviser and register with Irish Revenue for foreign income relief. |
| Financing assumptions that are too optimistic | Interest rates can rise, increasing debt service | Model a 1‑2 % rise in rates; keep loan‑to‑value ≤ 70 % to preserve cash flow. |
| Assuming constant exchange rate | Currency swings can add or subtract several percent per year | Use a range (‑2 % to +2 %) in scenario analysis; consider forward contracts for long‑term holdings. |
| Under‑estimating vacancy | Empty months reduce cash flow dramatically | Research local occupancy data; add a 5 %–10 % buffer for new markets. |
Conclusion
Calculating the net rental yield of an overseas property is more than a simple division – it requires a disciplined accounting of every cost, tax, and currency effect that will hit your pocket. By following the step‑by‑step method outlined above, Irish investors can:
- See the true cash‑flow return on a property.
- Compare markets on an equal footing (all figures in euros).
- Incorporate appreciation and exchange‑rate expectations to gauge total ROI.
- Make informed decisions that align with their risk tolerance and investment goals.
Remember, the most successful overseas investments are those where the net yield comfortably exceeds financing costs and the investor’s required return, while the risk of vacancy, tax changes, or currency moves is well‑understood and managed. Use the calculators, consult local experts, and run multiple scenarios – then you’ll be ready to turn your overseas dream into a profitable reality.