How to Calculate Net Yield on a Property in Cyprus

Gross yield is a starting point, not the final answer. Here’s the correct way to calculate net yield on a property in Larnaca or anywhere else in Cyprus.

Step 1: Enter Annual Gross Rent

Monthly rental rate (or daily, in the case of short-term rentals) multiplied by the actual number of months/days the property is rented - not automatically 12 months, but considering a realistic occupancy rate.

Step 2: Deduct Operating Expenses

You need to deduct: property management fees (if applicable), cleaning costs and guest turnover (for short-term rentals), ongoing maintenance, property insurance, and homeowners/community fees in the case of apartment buildings.

Step 3: Deduct Tax

Rental income in Cyprus is taxed as regular income after a blanket deduction of 20% from the income, plus a GESY (health system) contribution of 2.65% on the gross income. The specific tax burden should be calculated according to the investor's personal tax bracket.

Step 4: Deduct Financing Costs (if applicable)

If the property was purchased with a mortgage, you need to deduct the interest payments (not the principal, which is capital increase) from the operating yield to get a complete picture of the free cash flow.

The Complete Formula

Net yield = (actual rental income − operating expenses − tax − mortgage interest) ÷ (property price + associated purchase costs) × 100.

Why It Matters

A gross yield of 7% may shrink to a net yield of 4%-5% after all deductions - still a nice yield, but significantly different from the initial marketing number. Accurate calculation is the basis for making the right investment decision.