Calculating the net-net return on a rental investment is an operation that takes into account the taxes and tax deductions related to this real estate investment. Find out the formula for calculating a net-net return.
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To succeed in your rental investment, it is above all to correctly calculate the costs and charges linked to this type of investment. The calculation of the gross yield gives a first idea of the profitability but the calculation of the net yield of charges proves to be much more precise. Finally, the calculation of the net-net return, that is to say the return net of taxes, provides an even more precise vision of profitability.
How to calculate the net-net return?
The net-net return takes into account taxation and any tax deductions. This calculation of the net tax return depends on the tax situation of each investor. This step will show the real profitability of the rental investment. In calculating the net-net yield, the deductions for works or borrowing will be taken into account.
Take into account taxes and fiscal arrangements
Several elements must be compared before choosing a rental investment, including taxation and tax arrangements.
What are the tax systems for a rental investment?
When investing in real estate it is possible to benefit from certain tax advantages. This is the case, for example, of the Pinel Law scheme for new buildings or the Denormandie scheme for old buildings. These tax reductions improve the profitability of the investment.
However, they come with constraints, in particular the fact that rents are capped. In addition, in the case of a tax system in Denormandia, the lease must be bare and renovation work must be carried out up to 25% of the price of housing.
The choice of the type of bare or furnished lease will also affect your taxation. In addition, the tax system (micro-land or real) will also have an impact, in particular on deductible expenses.
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