Working out the real return on a Georgian property
Gross yield is the number you will be quoted. Net yield is the number that reaches you. Here is how to get from one to the other before you commit.
Gross yield, and why it is only a starting point
Gross yield is a year of rent divided by the purchase price. It is quick to work out and quick to quote, which is why almost every listing and every broker leads with it. What it tells you is genuinely useful: roughly what a property earns before anything at all is taken out of it.
What it cannot tell you is what you will end up with. Two properties advertised at the same gross yield can finish the year far apart, because everything that separates them — management, vacancy, tax, building charges, wear on the furniture — sits below the line that number is drawn at.
What comes out before the money is yours
The recurring costs are the ones people forget to subtract: a management or agency commission if you are not there to run it yourself, the building's service charge, utilities during the weeks with no tenant, income tax on the rent, insurance, ordinary repairs, and the periodic replacement of furniture and appliances — a short-let apartment is let furnished, and furnishings do not last as long under guests as they do under an owner.
The purchase side has the same problem in reverse. The figure to divide by is not the sticker price but everything it took to reach a rentable property: the price itself, registration, legal and agency fees, and the cost of furnishing it to the standard the rent assumes. Net yield is annual rent less annual running costs, divided by that total. It is a smaller number than the one in the advertisement, and it is the only one worth comparing between properties.
Occupancy is what actually moves the result
Every quoted yield contains an occupancy assumption, whether or not it is stated. A return calculated on a flat being let most of the year and one calculated on it being let half the year are not the same claim, and the gap between those two assumptions is usually wider than the gap between any two properties you are choosing among. Ask what occupancy the figure was built on, and ask what it is based on rather than what it was hoped to be.
This is also where the two cities genuinely differ. A coastal apartment in Batumi can earn a large share of its year in a short high season, which means a strong peak and a long quiet stretch to carry. Tbilisi tends toward a flatter, longer year with lower peaks and a rental market that is not only holidaymakers. Neither shape is better than the other; they are different risks, and they suit different owners.
Income and appreciation are two different purchases
A property can pay well every month and appreciate slowly, or sit on modest rent while the district around it changes. Buying for income and buying for capital growth point at different neighbourhoods, different building ages and different unit sizes — a small central studio and a larger apartment further out are rarely the answer to the same question.
So the useful thing to settle before viewing anything is which of the two you are actually buying, and what mix you would accept. It sounds obvious written down. In practice it is the decision most often made backwards, after a particular apartment has already been seen and liked.
The currency the return is really in
Prices here are commonly discussed in dollars while day-to-day life, and often the rent itself, happens in lari. If you will eventually spend the proceeds somewhere else again, that is a third currency in the chain. A return is only real in the currency you will actually spend it in, and a yield that looks steady in one can move noticeably in another.
The practical question is short: which currency is the rent contracted in, and who carries the movement between the tenant paying and the money reaching you? Have it answered before signing rather than after the first transfer arrives smaller than expected.
This article is general information, not legal, tax, or financial advice. Laws and banking terms change; confirm current conditions before making any decision.
Questions about your own situation?
Tell us where you stand and we'll arrange a consultation.
Book a consultation