Yield (taux de rendement)

The yield answers the investor’s question: “for every €100 actually paid out, how much does this property bring me each year?” The Charte de l’expertise en évaluation immobilière (the French property valuation charter) defines it as follows: yield = income / (market value net of purchase costs + transfer duties + notarial fees). It therefore relates the income to the total capital invested acte en main (all costs included), which distinguishes it from the capitalisation rate, calculated on the value net of purchase costs.

The Charte distinguishes three variants. The actual yield, based on the rents actually received, measures the immediate return. The theoretical yield, based on the market rental value, allows assets to be compared with each other. The potential yield combines actual rents and the valuation of vacant space, which suits partly empty buildings.

Where the rule comes from

Title III, chapter 8, § 8.2 of the Charte (6th edition, November 2025) gives the formula and the three variants. § 2.2.5 lists the risk components that the rate incorporates: time, liquidity, tenancy, property and external risks, together with the adjustment factors (location, quality of construction, nature of the leases, strength of the tenants). § 8.5.1 flags as a common error the confusion between value net of purchase costs and value including costs, and the use of the wrong income base.

In a valuation report

I always specify which rate I am talking about and on what base: gross or net income, passing rent or market rent, value net of or including purchase costs. When I analyse transactions to extract rates from them, I reconstruct the duties and fees paid by the buyer so that the references are consistent. The report points out that a yield quoted by a seller or a marketing agent is often calculated on a headline rent and a price net of purchase costs, which inflates it, and presents the rate recalculated on consistent bases.

Example

Commercial premises bought for €400,000 net of purchase costs, with €30,000 of transfer duties and notarial fees, that is €430,000 all costs included. Passing rent: €26,000 a year; market rent: €24,000. Gross actual yield: 26,000 / 430,000 = 6.05 %. Gross theoretical yield: 24,000 / 430,000 = 5.58 %. Capitalisation rate on passing rent: 26,000 / 400,000 = 6.5 %. Depending on the figure chosen, the same property appears to return between 5.6 % and 6.5 %: the report shows all three and states which one is used for the valuation.

Not to be confused with

The capitalisation rate is calculated on the value net of purchase costs and is used for valuing. The internal rate of return (IRR) measures the overall return on an investment over its whole life, resale included. The discount rate is used to bring future flows back to today’s value.