Why gross yield isn't cash flow

Listings and portals like to quote gross yield: one year's asking rent divided by the asking price. It is easy to work out, and that is why it is quoted everywhere. It is also the most flattering number an investment can show. Cash flow is what is left after the property has cost you what it costs.

Gross yield leaves out

1. Purchase costs. IMT and 0.8% stamp duty raise the capital you put in. On a non-permanent-home purchase IMT follows the "other housing" table in article 17 of the IMT Code, with bands updated for 2026 (AT Ofício Circulado 40129/2026). Add notary, registry and legal fees, which you should get quoted.
2. Vacancy and collection risk. Twelve months of rent is a best case. For short-term letting, occupancy is seasonal.
3. Running costs. Condominium fees, insurance, maintenance, management (often a percentage of rent), and for short-term lets: cleaning, linen, platform commission and utilities.
4. IMI every year: 0.3%–0.45% of the property's VPT for urban property, at a rate the municipality sets (article 112 of the IMI Code).
5. Tax on rental income, which depends on your residence and how you choose to be taxed. It varies too much from case to case to model honestly here, so we don't.
6. Financing. Mortgage interest, plus stamp duty on the loan (0.6% for terms of five years or more, item 17.1.3 of the Stamp Duty Table).

A hypothetical example

Illustrative inputs, not market data. A €250,000 flat, bought as an investment (not the buyer's home), rented long-term at €1,250 a month.

• Gross yield: 1,250 × 12 / 250,000 = 6.0%.
• IMT for a Portuguese tax resident ("other housing" table): €8,105.50. Stamp duty 0.8% = €2,000. Capital in, before fees: €260,105.50. A non-resident buyer would pay a flat 7.5% IMT instead (DL 97/2026; see the IMT guide), which lowers the figures below.
• Assume one month vacant a year: rent collected €13,750.
• Assume, for illustration only, a VPT of €150,000 and an IMI rate of 0.35%: IMI €525.
• Assume €1,800 a year for condominium, insurance and maintenance together.

Net operating income: 13,750 − 525 − 1,800 = €11,425. Divided by €260,105.50 of capital, that is about 4.4%, before income tax, fees and financing. The 6.0% headline has already lost more than a quarter, and none of the assumptions above is extreme.

How to read yields on DwellSage

Wherever we show a yield, we show the inputs and label the assumptions. Change them for the property you are looking at: your VPT, your municipality's IMI rate, a realistic vacancy rate, and your own tax position. A yield is only as good as its assumptions.

Related reading

• IMT, IMI and stamp duty explained
• IMI rates by concelho
• Alojamento Local (AL) licence
• Mortgages for non-residents
• Lisbon
• Porto
• Algarve

Sources

1. Código do IMT, artigo 17.º (Taxas) — Portal das Finanças — accessed 2026-10-10
2. AT, Ofício Circulado n.º 40129/2026 (2026-01-06): IMT practical tables from 1 January 2026 — accessed 2026-10-10
3. Decreto-Lei n.º 97/2026, de 20 de maio, art. 6.º (CIMT art. 17.º n.os 10–12) — Portal das Finanças — accessed 2026-10-10
4. Tabela Geral do Imposto do Selo — Portal das Finanças — accessed 2026-10-10
5. Código do IMI, artigo 112.º (Taxas) — Portal das Finanças — accessed 2026-10-10

Last reviewed: 2026-10-10. Rules change; check the official source before acting.

This guide is general information, not financial, tax or legal advice. Confirm with Portal das Finanças, AIMA, Banco de Portugal or a qualified professional for your situation.