Editorial update: · Richter Immobilien-Transaktionen
A positive rental yield does not tell you how much money will reach your household budget. A clear calculation separates the property's performance from borrowing, maintenance and tax, helping you decide whether keeping and letting your home makes sense.
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Start with the decision your calculation needs to support
You may be moving out of a house you have paid off, considering a rental use for inherited property, or deciding what to do when an existing tenant leaves. Each situation raises two separate financial questions. How much does the property earn in relation to the capital tied up in it? How much money could it contribute to your household after the bills have been paid? A single percentage cannot answer both questions reliably.
Use three distinct stages. Gross rental yield compares annual basic rent with a clearly identified property value. Net rental yield deducts the costs borne by the owner and, in the planning method used here, allowances for maintenance and rental losses. The cash surplus then accounts for financing and eventually personal tax. Different calculators include different items under the same labels. Always examine what has actually been included before comparing their results.
The denominator matters especially when you already own the property. Original acquisition costs describe an earlier investment. A reasoned current market value helps you assess whether you want to keep this amount of wealth invested in the same house today. An inherited house does not have an infinite yield simply because you did not pay a purchase price. It still has value, responsibilities and alternative uses.
Prepare an annual calculation alongside a monthly cash schedule. Label every input as documented, estimated or unresolved. This is more useful than giving an uncertain result several decimal places. All legal references in this guide concern Germany, including property in North Rhine-Westphalia, or NRW. For the wider decision, our guide to selling your house or letting it puts the financial calculation in its practical context.
Build the calculation on rent you can reasonably expect
For a rented house, start with the tenancy agreement and actual payment records. Use the basic rent, known in Germany as Nettokaltmiete, excluding operating costs. Advances collected towards heating or other recoverable costs are not additional rental profit. They have corresponding expenses and subsequent accounting. If a separately rented parking space contributes income, include its associated costs and vacancy exposure as well, rather than adding only the attractive side of the arrangement.
For a house previously occupied by its owner, assess the achievable rent using relevant comparisons. Location, size, condition, layout and fittings should be genuinely comparable. An ambitious online asking rent does not demonstrate that a tenant signed at that figure. Our guide to calculating an appropriate rent explains how to organise the information. Where the evidence supports a range, calculate more than one rental assumption and keep the lower outcome visible.
The amount you want to charge must also be legally permissible. Germany's restrictions on initial rent can apply in designated areas, while existing tenancies are subject to their own rent-increase rules. Check the municipality and the particular dwelling before treating an increase as dependable income. The statutory starting points are section 556d BGB and section 558 BGB; BGB is the German Civil Code. This is not a reason to substitute rules from an English-speaking country.
Our worked example uses a house in NRW with assumed basic rent of €1,500 a month. Twelve fully paid months produce €18,000. These figures are illustrations, not local market evidence or a rental recommendation. If the tenancy starts in April, the first calendar year cannot contain twelve months of rent. Keep the initial letting period separate from a later full year, and record preparation costs and the earliest realistic move-in date.
Calculate gross yield on a clearly stated value
The basic formula is annual basic rent divided by property value, multiplied by 100. We assume a current market value of €360,000 for the example. The calculation is therefore €18,000 divided by €360,000, giving a gross rental yield of 5%. This is a useful first orientation, but it says nothing yet about repairs, unpaid rent, mortgage payments or your individual tax position.
Suppose the house originally cost €240,000. The same €18,000 would represent 7.5% of that purchase price. The rent has not changed; only the denominator has changed. Make the basis explicit whenever you quote a yield. A historical return on the purchase price alone also leaves out original acquisition expenses and later investment. It should not be presented as the return on all the money ever committed to the property.
When assessing a possible new purchase, the full initial investment would include relevant acquisition costs and necessary early works. For property already owned, past expenditure does not become a new payment simply because you are considering letting. Future spending still needs to be funded. Show an upcoming investment separately or prepare an extended comparison with a clearly defined capital base. Avoid silently adding costs to one option while omitting equivalent costs from the other.
There is no single gross-yield threshold that makes every house a sensible rental investment. Two houses with identical figures can have very different building risks, management demands and rental prospects. A higher market valuation would also lower the current yield even if the rent stayed the same. That can prompt a useful review of your capital allocation, but it is not by itself an instruction to sell.
Deduct the costs and allowances that remain with you
Sort expenditure according to who ultimately bears it. Certain operating costs can be passed to tenants where the required agreement exists, under section 556 BGB. Administration, maintenance and repair costs are excluded from operating costs by section 1 BetrKV, the German Operating Costs Ordinance. Assuming the tenant pays every cost associated with a house would therefore overstate its performance.
In the example, annual owner costs that are not recovered from the tenant total €1,800, including assumed administration costs. We then allow €2,400 for maintenance planning and €900 for lost rent. Deducting these figures from €18,000 leaves €12,900. Dividing that by €360,000 gives a planned net rental yield of approximately 3.58%, before financing and personal tax. The €900 allowance happens to equal 5% of annual basic rent; it is an illustrative assumption, not a standard vacancy forecast.
The maintenance figure is not a statutory reserve requirement either. Build your own estimate from the condition of the roof, heating system, windows and pipes, previous work and any specialist findings. A known large project needs its own budget and payment date. A modest annual allowance cannot fund an imminent bill if no savings already exist. A qualified contractor or building surveyor can help investigate uncertain technical conditions and scope the work.
For an individually owned apartment, split the German Hausgeld payment into recoverable items, costs retained by the owner and contributions to the owners' association's maintenance reserve. Deducting the entire payment and then subtracting those costs again produces double counting. The same issue arises if you count a reserve contribution and a repair paid from that reserve as two costs in a single performance calculation. Keep planning allowances and actual payments clearly identifiable.
Follow the mortgage through to the cash surplus
Give the property and its financing separate lines. Our illustrative annual mortgage schedule contains €5,400 of interest and €3,600 of principal repayments, for total debt service of €9,000. Deducting that amount from the planned €12,900 leaves €3,900 a year, or an average of €325 a month before personal tax. A 5% gross yield plainly does not mean the full €1,500 rent is available to spend each month.
Interest pays for borrowing. Repayment of principal reduces the outstanding loan while consuming cash. It therefore belongs in your household cash calculation even though its economic effect differs from a management invoice. If you want to consider changes in wealth, show debt reduction alongside the cash surplus. Any change in the house's value would be a further uncertain item, not a recurring payment into your bank account.
Take interest and repayment amounts from the actual loan schedule. With an annuity mortgage, the payment may remain unchanged while the balance between interest and principal shifts. Note the end of the fixed interest period, agreed additional repayments and any other borrowing associated with the property. Model refinancing separately using explicit assumptions. Only the lender can assess actual terms; a property-yield calculation does not provide a financing commitment.
Without a mortgage, the same example would produce a planned €12,900 surplus before tax. That demonstrates the loan's cash effect, not an automatic recommendation to repay it early. An additional repayment uses money that is then unavailable as a reserve. Assess how much accessible cash would remain for property costs and your own household after such a payment. The timing of a bill can matter as much as the annual total.
Turn vacancy and repairs into concrete scenarios
A general allowance smooths the plan but does not establish whether you could pay for a difficult year. Start with a specific change of tenant. Two months without rent would remove €3,000 from the example. That loss replaces the existing €900 rental-loss allowance; it should not be added in full on top of it. Also assume €400 of additional operating costs borne by the owner during the vacancy.
The planned €3,900 surplus then falls by the extra €2,100 rental loss and €400 additional costs, leaving €1,400 before tax. Mortgage payments continue during the empty period. Plot the missing rent against payment dates rather than relying only on an annual average. A positive balance later in the year cannot meet an earlier loan payment unless accessible reserves bridge the gap.
Now assume actual maintenance costs €6,000 in that same year. For this scenario, the actual expense replaces the €2,400 maintenance allowance. The extra €3,600 turns the €1,400 surplus into a €2,200 deficit. The direct calculation is €15,000 rent received, less €1,800 owner costs, €400 vacancy costs, €6,000 repairs and €9,000 debt service. Existing savings could fund the deficit, but withdrawing them would not improve the property's result for that year.
Use these scenarios to judge the cash buffer you need. Consider known building issues, funds actually available and a plausible reletting period. Repair work can itself delay the next tenancy. A well-prepared process for finding tenants supports letting but cannot remove payment risk. The tenant's deposit is not your emergency reserve: under section 551 BGB, a cash deposit must be held separately from the landlord's own assets.
Keep taxable income separate from cash available
German income tax applies its own rules to letting. Relevant starting points include section 21 EStG and the rules for income-related expenses in section 9 EStG. EStG is the German Income Tax Act. Interest economically connected with the letting can qualify for deduction, while paying back the borrowed principal is different. A small cash surplus and a larger taxable result can therefore exist together.
Building depreciation can work in the opposite direction: it may reduce taxable income without requiring a new payment that year. Section 7 EStG provides the statutory framework. The applicable basis and depreciation treatment depend on the facts. The current market value used for our yield calculation is not automatically the tax depreciation basis. Inherited property and a move from personal occupation to letting require attention to the acquisition and use history.
Reserve transfers also need careful treatment. Moving money into your own repair savings account is not the same as paying for completed work. Contributions to a German apartment owners' association's maintenance reserve do not, by themselves, create an immediate deduction from rental income either. The Federal Fiscal Court confirmed this in case IX R 19/24, decided on 14 January 2025. Actual use of the money and classification of the work determine the relevant treatment.
Ask a tax adviser to prepare a separate forecast using the real documents. Bring the resulting additional tax payments and their expected dates into the cash plan. Do not simply multiply the example's €3,900 by your tax rate: it includes principal repayments and planning allowances with different tax treatment. If your personal circumstances cross national borders, obtain appropriate specialist advice for that situation while retaining German property rules in the underlying calculation.
Use the results to make a practical ownership decision
Bring the calculation onto one page: property value, supported basic rent, owner costs, maintenance plan, mortgage payments, tax assumptions and accessible reserves. Place the ordinary year alongside the stress scenarios. Add your own time commitment. Managing the house yourself may avoid a management invoice, but it still consumes working time and attention. Employing a manager can reduce tasks without automatically transferring the financial risks of ownership.
For a sale comparison, use the amount you could actually retain: a realistic price less loan settlement, actual selling costs and any applicable tax. The tax treatment of a private sale depends particularly on acquisition and use under section 23 EStG. If a sale may follow a period of letting, have that change of use considered before relying on assumed tax exemption. Selling price and money available afterwards are distinct figures.
Letting can be a sound choice when earnings, workload and reserves fit your objectives. A modest cash contribution may suit an owner deliberately holding property over the long term and able to absorb difficult periods. Someone relying on rental money for everyday living needs to give cash reliability more weight. Deferred repairs or insufficient savings remain practical problems even when the gross yield looks attractive on paper.
If the main uncertainties are achievable rent and preparation for letting, describe the property through our landlord enquiry form. Include its location, type, approximate size, condition, current use and intended start date. These details make the letting discussion concrete. Take loan terms to the lender, the tax forecast to a tax adviser and legal complications to a suitably qualified lawyer. Clear responsibilities and sound inputs make the calculation useful beyond the first month's rent.
