Rental yield is the ratio between the rental income a property generates and the amount you paid for it. In Casablanca, Morocco\u2019s economic capital, demand for rental properties is stable, making the city an attractive option for those looking to invest in real estate. The exact return you\u2019ll earn depends heavily on the neighborhood, the type of property, the lease arrangement, and the costs you incur. Because these factors vary by property and by street, there is no fixed percentage that applies to everyone. In this article, you\u2019ll learn how to calculate gross and net rental returns, which neighborhoods are suitable for renting, what the difference is between long-term rentals and tourist rentals, and which costs and risks can reduce your return. This will help you make a realistic assessment on your own.<\/p>\n\n
Rental yield expresses how much a rented property generates annually relative to what the property cost you. It is the most important metric for evaluating real estate as an investment, because it shows you, in a single percentage, how hard your money is working. A property that generates high rent but was very expensive may have a lower yield than a less expensive property with a modest rent. That\u2019s why an investor never looks solely at the monthly rent, but always at the ratio between that rent and the total investment. In Casablanca, the combination of a large, growing urban population and an active business sector ensures a steady demand for rental properties, which forms the basis for a healthy return on investment.<\/p>\n\n
It\u2019s important to note that rental yield and appreciation are two different things. The rental yield measures the current income from renting, while any appreciation in value is only realized when you sell. Both can contribute to your overall return, but they behave differently and each carries its own risks. Those primarily seeking stable monthly income focus on rental yield. Those who believe in Casablanca\u2019s long-term growth will give greater weight to potential appreciation. In practice, many buyers combine both goals and evaluate a property as a whole. You can find more background on investing in the city in our article about Investing in Real Estate in Casablanca<\/a>.<\/p>\n\n There are two ways to calculate rental yield, and the difference between them is significant enough to influence your decision. The gross rental yield is the quickest calculation: you divide the annual rental income by the purchase price and multiply by 100. This method is useful for comparing properties at a glance, but it paints too rosy a picture because it doesn\u2019t take into account the costs associated with renting out the property. The net rental yield is more realistic: first, you subtract all recurring costs from the rental income and then divide that net income by your total investment, including the purchase costs.<\/p>\n\n You calculate the gross rental yield by dividing the total annual rent by the purchase price. For example, if you rent out an apartment for a fixed monthly amount, multiply that by twelve to get the annual rent. Then divide that annual rent by the price you paid for the property. The result is a rough estimate, but keep in mind that this figure overestimates the actual return. After all, it does not account for vacancies, maintenance, taxes, or the additional costs you paid at the time of purchase. Therefore, use the gross figure only to make a rough comparison of properties, not to determine your final return on investment.<\/p>\n\n To calculate the net rental yield, start again with the annual rent, but this time first subtract the recurring costs: the fee to the homeowners\u2019 association (syndic), annual taxes, a reserve for maintenance, and an estimate for vacancy. Divide the remaining net income by your total investment\u2014that is, the purchase price plus 6 to 8 percent in additional purchase costs<\/a>. This will give you a percentage that is much closer to reality. The net return is always lower than the gross return, and it is precisely that difference that makes it clear why you should never rely solely on the gross figure when making an investment decision.<\/p>\n\n The figures below are an example we have chosen ourselves for illustrative purposes; they are not market figures and are intended solely to demonstrate the calculation method. Suppose, in this example, you buy an apartment for 1,500,000 MAD and rent it out for 8,000 MAD per month, or 96,000 MAD per year. The additional purchase costs in this example amount to approximately 6.5 percent, bringing your total investment to about 1,597,500 MAD. Recurring costs include building association fees, taxes, and maintenance, totaling approximately 20,000 MAD per year, plus one month of vacancy at 8,000 MAD. The table shows how the gross and net returns differ.<\/p>\n\nGross vs. Net Rental Yield<\/h2>\n\n
Here's how to calculate the gross return<\/h3>\n\n
Here's how to calculate the net return<\/h3>\n\n
Illustrative example<\/h3>\n\n