A hybrid methodology of vulnerability analysis is presented, involving elements from both empirical and theoretical methods. A model for correlating analytically calculated structural damage indices to loss (in monetary terms) is also proposed and calibrated against available statistical data. Probability damage matrices derived using this methodology are incorporated into a cost-benefit model tailored to the problem of estimating the feasibility of seismically rehabilitating the existing stock of reinforced concrete buildings in Thessaloniki, Greece. Losses calculated using the suggested procedure are found to be in good agreement with losses incurred during the 1978 Thessaloniki earthquake. The results of the present study also indicate that benefit/cost ratios for reinforced concrete buildings are quite low. Hence, it appears that a pre-earthquake strengthening programme is not economically justifiable.