Rental yield in Prague: how net yield is calculated
The rental yield on a model 2+kk flat (two rooms plus a kitchenette) in Vinohrady comes to 2.96 % gross and 1.90 % net — of every crown the tenant (nájemce) sends, the owner keeps roughly sixty-five hellers (hundredths of a crown). The difference between the two figures is not a calculation error; it is six operating deductions and one tax. Below, each of them is named, and at the end the whole calculation is set out line by line.
Gross yield: the figure that leads you astray
Gross yield (hrubý výnos) is the annual rent (nájemné) divided by the purchase price. In our model, CZK 288,000 divided by CZK 9,720,000, i.e. 2.96 %. It takes ten seconds to calculate, and that is precisely why it appears in adverts (inzerát).
It has two flaws, and both are structural. The first is in the numerator. The tenant sends one amount, but the lease agreement (nájemní smlouva) contains two: the rent and the advance payments for services (zálohy na služby). The advances for heating, water, common-area electricity and the running of the lift (výtah) merely pass through you to the supplier and are settled once a year — not a single crown of them belongs in the yield. The numerator takes only the amount on the “rent” line of the lease agreement, never the total from the account statement (výpis z účtu).
The second flaw is in the denominator. The purchase price is not what you have put into the flat.
The initial investment is not the purchase price
To the purchase price of CZK 9,720,000 you add the administrative fee (správní poplatek) for the application for registration (návrh na vklad) in the Land Registry (katastr nemovitostí), i.e. CZK 2,000 for a paper filing (item 120 of the tariff of Act No. 634/2004 Coll., on Administrative Fees; via the Land Registry portal it is reduced by 20 % under § 9). Then the contract documentation and the attorney escrow (advokátní úschova) of the purchase price; their price is agreed individually, and in the model we count CZK 25,000. And the furnishings without which you will not let the flat at the price your table assumes: appliances, storage, lights, painting — CZK 180,000 in the model.
The buyer does not pay a fee for representation; on a sale it is paid by the owner. Real estate acquisition tax (daň z nabytí nemovitých věcí) has been abolished, so it no longer enters the calculation.
The initial investment is therefore CZK 9,927,000, CZK 207,000 more than the purchase price. That alone brings the gross yield down from 2.96 % to 2.90 %, and we have not yet deducted a single operating item.
Whether CZK 180,000 per metre is the right figure for this address is a separate question, answered by how the price of a property is determined. For the yield, it is enough that the numerator and the denominator come from the same market and the same moment. The model treats Vinohrady as an address above the Prague average, and this calculation shows it.
Six operating deductions between gross and net
Vacancy
A flat earns nothing between tenants. Between one tenant moving out, cleaning, minor repairs (drobné opravy) and the next tenant moving in, some time always passes, even when the changeover is prepared in advance. In the model we count half a month a year, i.e. CZK 12,000, which corresponds to a change of tenant roughly once every two and a half years. Anyone who leaves this item out is calculating with a flat that never stands empty.
Contribution to building and land management
The schedule of advance payments (předpis záloh), the document in which the owners’ association (společenství vlastníků jednotek) breaks down the monthly payments, contains two groups of lines. The advance payments for services are settled once a year. The contribution to building and land management (příspěvek na správu domu a pozemku), in everyday speech the repair fund (fond oprav), is not settled in this way and is borne by the owner, not the tenant. Its total amount is approved by the assembly of owners (shromáždění vlastníků), so it differs from building to building; in the model CZK 40 per m² per month, i.e. CZK 2,160 a month and CZK 25,920 a year. It is the largest operating deduction in the whole table; only income tax (daň z příjmů) is higher, and that is calculated differently.
Property tax
Property tax (daň z nemovitých věcí) is calculated from the adjusted floor area (podlahová plocha): the area times 1.22 if the unit is in a residential building (bytový dům) and a share in the land belongs to it, otherwise times 1.20. For the model 54 m² with a share in the land, this makes 65.88 m², rounded up to 66 m². The rate for a residential unit (bytová jednotka) of CZK 3.50 per m² is multiplied in Prague 2 by a coefficient of 4.5, and the tax then by the inflation coefficient of 1.0 for 2026 and the local coefficient of 1.5; the result is CZK 1,560 a year. The tax return (daňové přiznání) is filed by 31 January of the tax period (zdaňovací období) — whoever buys in 2026 files the return for 2027.
Insurance
The building is insured by the owners’ association out of the management contribution, so you do not pay for it twice. You pay for insurance of the unit and of liability arising from owning it, CZK 3,600 a year in the model. One thing needs to be checked specifically in the insurance policy: whether the insured flat is used for letting. The policy may be written for a permanently occupied household, and the payout may then be reduced.
Letting brokerage
Our fee for letting is one month’s rent and is paid by the owner, i.e. CZK 24,000. It is spread over the annual yield according to how long the tenant stays: with a change once every two and a half years, CZK 9,600 a year; with a change every year, the full CZK 24,000. It is the only line in the table that is ours, and we deliberately do not hide it in another item.
Repairs and renewal of furnishings
The structure of the building is covered by the repair fund. What is inside the flat is not: mixer taps, the dishwasher, the hallway floor, repainting when the tenant changes. We model CZK 18,000 a year, which is three quarters of a month’s rent. For a flat furnished for CZK 180,000, this means you renew the furnishings once every ten years. It is a realistic assumption, not a generous one.
Income tax on rental income: flat rate, or actual expenses with depreciation
Letting by an individual (fyzická osoba) is taxed under § 9 of Act No. 586/1992 Coll., on Income Taxes (zákon o daních z příjmů). There are two routes to it, and for this flat there is a gulf between their results.
Flat rate. You deduct flat-rate expenses (paušální výdaje) of 30 % of income, at most CZK 600,000, and tax the remainder at 15 % (23 % on the part of the total tax base above 36 times the average wage). From the CZK 276,000 collected, the base is CZK 193,200 and the tax CZK 28,980. No cost records, no receipts, no discussion.
Actual expenses. You deduct what you actually paid, i.e. CZK 58,680 from the previous section, plus depreciation (odpis). The flat belongs to the fifth depreciation group (odpisová skupina) and is depreciated over 30 years: 1.4 % of the input price (vstupní cena) in the first year and 3.4 % thereafter. The value of the share in the land is separated out of the input price, as it is not depreciated — in the model we count 8 %. Even after this separation, from the second year onwards the depreciation comes to over CZK 300,000 a year, i.e. more than the whole annual rent. The tax base is then zero and a tax loss (daňová ztráta) arises.
The difference between the two routes is CZK 28,980 a year, which is 0.29 percentage points of net yield. On a yield of around two per cent, that is not a detail; it is fifteen per cent of the result.
There is another side to it, and calculations tend to miss it. Depreciation claimed reduces the residual value (zůstatková cena). If you sell the flat before the holding period test (časový test) has been met — 10 years for property acquired from 1 January 2021, 5 years for property acquired up to 31 December 2020 — you pay tax on the difference between the sale price and the residual value, and the depreciation you claimed earlier makes that difference larger. The exemption also applies where the flat was the seller’s residence for at least two years immediately before the sale, which a let flat by its very nature cannot meet. The choice between the flat rate and depreciation is therefore a decision about the holding period, not about the tax return.
Annex: net yield calculation for a model 2+kk flat
The table is set out as a sheet: at the top a title block (popisové pole) with the inputs, below it numbered lines, at the bottom the result and the sensitivity. Inputs marked as model are our estimates; for a specific flat they are replaced with figures from the schedule of advance payments and from the latest statement of service costs (vyúčtování služeb).
Title block
| field | value |
|---|---|
| unit | 2+kk flat, 54 m², Vinohrady, Prague 2 |
| condition | renovated, furnished |
| calculation date | 28 September 2026 |
| tax method | flat-rate expenses of 30 % under § 9 |
| expected length of tenancy | 2.5 years |
A · Initial investment
| # | line | CZK |
|---|---|---|
| 1 | purchase price (54 m² × CZK 180,000/m²) | 9,720,000 |
| 2 | administrative fee for the application for registration | 2,000 |
| 3 | contract documentation and attorney escrow (model) | 25,000 |
| 4 | furnishings and preparation for letting | 180,000 |
| total initial investment | 9,927,000 |
B · Annual operation
| # | line | CZK |
|---|---|---|
| 5 | rent excluding advance payments for services (24,000 × 12) | +288,000 |
| 6 | vacancy, 0.5 months a year | −12,000 |
| rent collected | 276,000 | |
| 7 | contribution to building management, CZK 40/m² per month (model) | −25,920 |
| 8 | property tax, Prague 2, year 2026 | −1,560 |
| 9 | unit and liability insurance (model) | −3,600 |
| 10 | letting brokerage, 1 month’s rent per 2.5 years | −9,600 |
| 11 | repairs and renewal of furnishings | −18,000 |
| operating profit before tax | 217,320 | |
| 12 | income tax (276,000 − 30 % = 193,200, of which 15 %) | −28,980 |
| net annual return | 188,340 |
The advance payments for services of CZK 3,800 a month do not appear in the table at all. They pass through the owner’s account to the supplier and belong neither in the yield nor in the costs.
C · Result
| indicator | formula | value |
|---|---|---|
| gross yield on the purchase price | 288,000 / 9,720,000 | 2.96 % |
| gross yield on the initial investment | 288,000 / 9,927,000 | 2.90 % |
| net yield on the initial investment | 188,340 / 9,927,000 | 1.90 % |
| share of the gross yield that remains | 1.90 / 2.96 | 64 % |
D · Sensitivity
| change in one input | net yield | difference |
|---|---|---|
| actual expenses with depreciation instead of the flat rate | 2.19 % | +0.29 |
| rent CZK 1,000 a month higher | 2.00 % | +0.10 |
| purchase price CZK 500,000 lower | 2.00 % | +0.10 |
| management contribution CZK 60/m² instead of 40 | 1.77 % | −0.13 |
| change of tenant every year instead of every 2.5 years | 1.64 % | −0.26 |
The order in the sensitivity table is more instructive than the numbers themselves. The tax method and the length of the tenancy move the result more than a discount of half a million off the purchase price.
Where the rental yield on a flat is most often calculated wrongly
Advance payments for services in the numerator. Rent of CZK 24,000 plus advances of CZK 3,800 looks like CZK 27,800 of income and raises the gross yield from 2.96 % to 3.43 %. Half a percentage point out of nothing.
The purchase price in the denominator. Lines 2 to 4 of the annex add up to CZK 207,000. They never appear in the advert.
Missing vacancy and renewal of furnishings. Two lines, together CZK 30,000 a year, i.e. 0.30 percentage points. They drop out all the more easily because no invoice ever arrives for them.
Tax calculated from profit. The tax is not calculated from the operating profit of CZK 217,320 but from the tax base, which under the flat rate arises differently: CZK 276,000 minus 30 %. Two different methods happen to give similar results, and that is the trap.
On top of that, published texts calculate the profitability of a flat (rentabilita bytu) with as many as three denominators: the purchase price, the initial investment, or the flat’s current market value. Each gives a different figure. When you compare two listings (nabídka), both must come from the same denominator; otherwise you are comparing two different quantities with one unit.
What our own calculation cannot do
The whole table rests on an assumption we cannot influence: that the tenant stays two and a half years. If they leave after a year, two lines change at once — vacancy from CZK 12,000 to 24,000 and brokerage from CZK 9,600 to 24,000 — and the net yield falls from 1.90 % to 1.64 %. A quarter of a percentage point from a single decision made by someone else. We estimate the average length of a tenancy; we do not guarantee it, and no yield calculation can.
The second limitation is more fundamental. Rental yield is only one of the two components of the total return. The other is the change in the flat’s price, and we do not put it in the table, because we would have to make it up. A flat with a net yield of 1.90 % can be a better purchase than a flat with 3.50 % if the first stands at an address where the last new building is going up and the second where building will continue. The table does not answer this; the choice of the specific building does, and that can be seen in the projects we manage.
The third point is the least comfortable. Every input marked as model in the annex is our estimate, not a measurement — three of the twelve lines, including the largest operating deduction. For a specific flat, we replace them with actual figures from the schedule of advance payments, from the statements of service costs for the last two periods and from the latest lease agreement. The biggest difference between model and reality tends to be in the contribution to building management (příspěvek na správu domu), and it is a difference that is hard to estimate from outside.
Frequently asked questions
What is a good rental yield on a flat in Prague? For the model renovated flat in Vinohrady, the net yield comes to 1.90 %, roughly a third less than the gross. The figure on its own says nothing until you know which denominator it came from and what has been deducted in it.
Is the repair fund included in the yield? Yes, as a cost to the owner. Unlike the advance payments for services, the contribution to building and land management is not settled and is not recharged to the tenant. In the model flat it is CZK 25,920 a year, the largest item after tax.
How much is the tax on letting a flat? With flat-rate expenses of 30 %, 70 % of the rent collected is taxed at 15 % (23 % on the part of the total tax base above 36 times the average wage). On CZK 276,000, that is CZK 28,980. With actual expenses including depreciation, the tax on a flat bought at today’s prices usually comes to zero.
What is the difference between gross and net yield on a property? Gross yield works only with the rent and the purchase price. Net yield deducts vacancy, the contribution to building management, property tax, insurance, brokerage, repairs and income tax, and divides by a wider denominator. For the model flat, the difference is 2.96 % against 1.90 %.
Which pays off more: the flat rate or actual expenses? For a flat bought at today’s prices, actual expenses with depreciation come out better for as long as you hold the flat. Once you sell before the holding period test has been met, the depreciation claimed increases the taxable difference against the residual value. The decision belongs to the holding period, not to a single tax period.
Summary
Between gross and net yield there is not one discount rate but seven specific lines, three of which have no invoice and two of which are mere estimates. Gross yield takes ten seconds to calculate and is not enough for a purchase decision; net yield needs the schedule of advance payments, the latest statement and an estimate of the length of the tenancy, and even then it is only one of the two components of the return. The order in the sensitivity table shows where it pays to be precise: the tax method and tenant stability move the result more than a negotiated discount on the price. This is how we calculate model flats, and we use the same method to examine units in the projects we manage.