Average yield

Average Yield - The average yield of a property is the annual return from rental income, averaged over a defined period, relative to the market value or the acquisition cost. It serves as a benchmark for the profitability of real estate investments and is used in the income approach (§ 17 ImmoWertV) as the basis for determining the sustainable gross yield. The average yield smooths out fluctuations caused by vacancies, tenant turnover, or special effects and reflects a property’s long-term earning power.

Calculation and Key Figures

The average yield is typically averaged over 3-5 years:

Formula: Average yield = Sum of annual gross yields ÷ Number of years

Related key figures:

• Gross rental yield: Annual gross yield ÷ Purchase price × 100 (before expenses)
• Net rental yield: (Annual gross income - Operating costs) ÷ Purchase price × 100
• Sustainable gross income (ImmoWertV): Market-rate rent less non-recoupable operating costs - forms the basis of the income approach

Factors influencing the average yield

| Factor | Effect on yield | |---|---|---| | Vacancy rate | High vacancy significantly reduces the average yield | | Tenant turnover | Frequent tenant changes result in months of vacancy and leasing costs | | Rent trends | Rising market rents increase the yield upon new leasing or rent adjustments | | Maintenance costs | High maintenance costs reduce the net yield | | Type of Use | Commercial rents fluctuate more than residential rents - higher risk, but often higher yield |

Average Yield by Location - Estimated Values for Nuremberg (approx. 2024)

District / Location	Base Rent approx.	Purchase Price approx.	Gross Rental Yield	Note
Erlenstegen, Rechenberg	14-17 €/m²	5,500-7,500 €/m²	2.8-3.5%	Prime location, very low yield
St. Johannis, Maxfeld	€13-16/m²	€4,000-6,000/m²	3.2-4.2%	Sought-after older building areas
Gostenhof, Südstadt	€12-15/m²	€3,000-5,000/m²	3.5-5.0%	Upgrading area, wide range
Langwasser, Eibach	€10-13/m²	€2,000-3,500/m²	4.5-6.0%	Peripheral location, higher returns
Commercial near downtown	€10-14/m²	€2,500-4,000/m²	4.5-6.5%	Commercial rental market, vacancy risk

Source: Own assessment based on the Nuremberg Appraisal Committee, ImmobilienScout24 (guideline values approx. 2024).

Average yield in the income approach

The income approach according to ImmoWertV does not use the actual average yield, but rather the sustainable gross yield-a standardized value based on the rent typically achievable in the market. The difference is practically significant: If the actual rent is significantly below the market rent due to long-term leases, the income approach determines a higher value than the actual return would suggest-and vice versa. For investors, this means: A property with existing rents well below market rates has a high value under the income approach, but in reality initially yields a low current return. The average yield from the past therefore provides only limited insight into future earning power. The decisive factor is always the question of what rent could actually be achieved in a new lease.

Practical Tip for Property Owners in Nuremberg and Franconia

When evaluating an investment in the Nuremberg metropolitan region, you should consider the average yield over at least 3 years and consistently exclude special factors (rent-free periods, graduated rent adjustments, vacancy periods following a tenant change). In Nuremberg, average gross rental yields for residential properties range from 3.5-5.5%-depending on the neighborhood and year of construction. Properties in Gostenhof or the Südstadt tend to yield 3.5-4.5%, while properties in Langwasser or Sandreuth often achieve yields of 4.5-5.5%. Note: An above-average yield may indicate a backlog of renovations, a problematic tenant structure, or inflated current rents that cannot be achieved with new leases. We recommend always verifying the average yield against the market rent according to the qualified Nuremberg rent index, taking into account the property’s level of modernization.

Frequently Asked Questions

How does the average yield differ from the sustainable gross yield?

The average yield is based on the actual rental income generated by a property and is averaged over a period of time-it reflects historical yield performance. The sustainable gross yield according to ImmoWertV, on the other hand, is a standardized figure based on the rent achievable under market conditions, from which standard market operating costs (administration, maintenance, risk of rent loss) are deducted. If the actual rent is significantly above or below the market rent, the two values will differ. Banks and appraisers use the sustainable gross yield for valuation purposes, not the owner’s historical average yield.

What time period should I use for the average yield?

For residential properties, a 3-year average is standard-it smooths out short-term fluctuations caused by individual months of vacancy or extraordinary maintenance measures without going too far back in time. For commercial properties with longer lease cycles (typically 5-10 years), a 5-year average is recommended. When determining the mortgage lending value, banks use the sustainable gross yield based on current market data, regardless of the property’s historical average yield. For your own investment analysis, you should compare the historical yield with the expected future yield trend.

Is a high average yield always a good sign?

Not necessarily-an above-average yield can have various causes: inflated actual rents that are unsustainable when tenants change due to rent control; deferred maintenance that will soon require significant investment; a high-risk tenant mix with poor payment habits; or a market risk reflected in a high yield spread relative to the market. The key factor is the sustainability of the yield: Check whether the current rent corresponds to the market rent, whether leases are set to expire in the foreseeable future, and whether there is a significant need for renovation that will reduce future yields.

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