Rental yield & ROI

Gross vs net yield: what the calculator shows

Two numbers decide a buy-to-let, and the calculator shows both.

• Gross yield = annual rent ÷ purchase price. It is the figure listings and agents quote, and it ignores every cost.
• Net yield = (annual rent − running costs) ÷ (purchase price + purchase costs). This is the one to judge a deal by, because it counts what you really pay in and what you really keep.

The calculator also shows the net income per year, the total invested and the payback period: total invested divided by net income, in years, before any rise in the property's value. Everything is before income tax and without a mortgage. Tax is covered below; for financing, use our mortgage calculator.

Purchase costs: set the slider to your case

The purchase-costs slider starts at 8% of the price. The real figure depends mostly on IMT. On a €250,000 flat bought as an investment, a tax resident pays about €12,100 in IMT, Imposto do Selo, notary and lawyer (4.8%), while a non-resident pays about €22,950 (9.2%) because of the flat 7.5% IMT. Our buying-cost calculator gives you the exact number to enter.

What goes into running costs

Running costs are entered as a share of the rent, 25% by default. That is a planning figure, not a law. It should cover:

• IMI: 0.3–0.45% a year of the property's tax value (VPT), at a rate set by each municipality. Using our model (VPT at 80% of price, 0.35%), a €250,000 flat pays about €700 a year, around 5% of a €1,100 monthly rent.
• Condomínio: the building's shared costs, which vary widely from building to building.
• Insurance: multi-risk building insurance and, if you want it, rent insurance.
• Maintenance and repairs: appliances, painting between tenants, the unexpected.
• Management: if an agency finds tenants and handles the property for you.
• Vacancy and unpaid months: weeks between tenants, and the risk that a tenant stops paying.

If you manage the flat yourself in a well-run building, 15–20% may be realistic; an older building or a remote owner points higher.

How rental income is taxed

Rent from housing is taxed in IRS at an autonomous rate of 25% (CIRS article 72). Long contracts lower it: 10 points off for contracts of 5 to 10 years (plus 2 points per renewal, up to 10 more), 15 points off for 10 to 20 years and 20 points off for 20 years or more. On top of that, rent earned from 2026 to the end of 2029 under housing contracts with a moderate monthly rent (up to 2.5 times the minimum wage, which is €2,300 in 2026) is taxed at 10%, unless a lower rate applies (Decreto-Lei 97/2026). You can also choose to add rental income to your other income and pay the normal progressive rates.

The tax is charged on rent minus deductible expenses. The law allows every expense you actually pay to earn or protect the rent, including rent insurance and condomínio charges. It excludes financing costs (so mortgage interest is not deductible), depreciation, furniture and appliances, and the additional property tax (AIMI).

Short-term (AL) vs long-term letting

Short-term rental under an Alojamento Local licence is a different business. It needs its own registration, and its income is taxed as business income (category B) under the simplified regime, where a coefficient is applied to turnover. In containment areas (áreas de contenção) that coefficient is 0.50. Gross rents can be higher, but so are cleaning, platform commissions, furnishing, utilities and empty nights. If you model an AL in this calculator, set running costs well above a long let.

Worked example: a €250,000 flat let at €1,100 a month

Now tax. As an illustration, if €2,000 of your costs are deductible, the taxable amount is €11,200. At the 10% rate for moderate rents, tax is €1,120, leaving €8,780 a year, an after-tax yield of about 3.25%. At the standard 25% rate the tax would be €2,800 and the after-tax yield about 2.6%. The 1.6-point gap between gross and net yield before tax is why we suggest you look past the headline figure. Rent levels by city are in our overview of house and rent prices.