Paris 1-bed villa at €869,400 and €3,258/month: does 4.5% gross survive?

A

AmaraCole

Landlord
Established
I’m assessing a 1-bed villa in Paris at €869,400, with expected rent of €3,258/month. That gives a headline gross yield of roughly 4.5%.

The building appears sound, but the lease length and resulting tenant turnover could materially change the outcome. My conservative model includes vacancy, management, routine maintenance and a reserve for one larger repair in a bad year. I’m comparing it unlevered first, then testing financing separately.

Which local ownership cost am I most likely to be underestimating—property tax, insurance, management extras or something else? And what net yield would make this risk worthwhile to you?
 
The gross calculation is right: €3,258 × 12 gives €39,096 before any costs. I would want the actual annual property-tax and insurance figures rather than estimates, plus a clear list of what the management fee excludes. Tenant placement, inspections or work coordination can sit outside the headline fee.

Is the rent supported by the current lease, or is it only an expectation for the next tenant?
 
It is the expected rent rather than income I can treat as guaranteed, which is why lease length is bothering me. A longer occupancy could reduce vacancy and placement costs, but I don’t want the model to assume perfect continuity.

I’ll ask for the latest property-tax amount, an insurance quote and an itemised management proposal. At present, those inputs are broader allowances rather than property-specific numbers.
 
I’d be careful with the phrase “one bad year.” Vacancy and a large repair are not necessarily separate events; work may delay reletting, so both can hit together. Run at least one scenario with no rent during the repair period, management or placement costs around the turnover, and the repair reserve spent in full. The average net yield matters less if the cash requirement is badly timed.
 
I partly disagree that lease length is automatically the main risk. A shorter lease can mean more turnover, but a dependable tenant staying longer may reduce vacancy, management effort and wear from repeated moves. The trade-off is flexibility over future rent and use of the property.

The missing figure for me is maintenance history. “Looks sound” is not the same as knowing which major items have already been renewed.
 
I’d put the decision into three columns: expected year, empty/turnover year, and repair-plus-vacancy year. In each, show rent actually collected, management, routine maintenance, insurance, property tax and the larger reserve. Then add financing only after the property-level cash flow is visible.

Also confirm whether €3,258 is the amount received before every management deduction. Small differences there flow directly into the net result.
 
There isn’t a universal net yield that compensates for this. Set a walk-away figure by comparing the resulting cash flow with your alternative use for €869,400, while accounting for the villa’s concentration and lack of liquidity.

I would not proceed from 4.5% gross alone. First replace every allowance with a written figure where possible, verify the rent assumption, and stress financing for higher cost or less favourable terms. If the deal only works with continuous occupancy and no major repair overlap, the margin is too thin regardless of the displayed net yield.
 
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