Property yield and payback: how to calculate yield, NOI and the payback period
Property yield shows how much a property earns relative to its value, and payback shows how many years of rent it takes to return the purchase price. These are the two main numbers an investor uses to decide whether to keep a property or sell it.
Gross yield
Gross yield is the annual rent divided by the property value, as a percentage.
Formula: gross yield = annual rent / value × 100%
Example: a property worth €200,000, rent €1,200/mo = €14,400/yr. Gross yield = 14,400 / 200,000 × 100% = 7.2%.
Net yield and NOI
Net yield accounts for expenses. First you calculate NOI (Net Operating Income):
Formula: NOI = annual rent − operating expenses (property taxes, maintenance, insurance, management).
net yield = NOI / value × 100%
If you subtract €2,400 of expenses from €14,400, NOI = €12,000 and net yield = 6%. Net yield is what you compare between properties — it is more honest than gross.
Payback period
Payback shows how many years of rent it takes to return the purchase price.
Formula: payback period (years) = purchase price / annual rent
A €200,000 property at €14,400/yr rent pays back in ≈ 13.9 years (gross). Calculated on NOI (€12,000/yr) — in ≈ 16.7 years. The lower the period, the faster the property earns back the investment.
What else investors watch
| Metric | What it shows |
|---|---|
| Cap rate | NOI / market value — yield excluding financing |
| Appreciation | how much the property has gained since purchase |
| Flip profit | (sale price − purchase − investment) and ROI on resale |
Calculate by hand or automatically
In Excel these formulas are easy for a single property, but across a portfolio of 20–50 units in different currencies it becomes painful. KX Estate calculates yield, NOI, payback, appreciation and flip profit for each property automatically — in EUR/MDL/USD/RON, with National Bank rates.
In short: gross yield for a quick estimate, net yield and payback for the decision. Calculate across the whole portfolio in one currency so you compare properties fairly.
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