Example calculation of real estate as an investment

To calculate the cash flow of a property, in principle only the expenses are only the expenses are subtracted from the income.

  • The collected monthly rent corresponds to the income
  • Expenses include above all financing costs, i.e. interest and repayment.

Here it is interesting to see how your monthly payments to the bank are made up.
The rate is the same every month, but at the beginning it consists mainly of interest payments, while very little of the loan is redeemed (=repaid back).
Year after year, however, the interest decreases, as the interest rate always only applies to the remaining loan amount.

And so, over time, your instalments serve more and more for repayment and less for interest payments.

Example calculation real estate

Real estate as an investment - example calculation of asset accumulation

In addition to interest and repayment, the non-apportionable ancillary costs in the form of maintenance reserves and administration costs must be deducted from the income.
You can find out which administrations are important for you in the article "Which administrations do you need".

The income that opposes the above-mentioned expenses is your rental income. This should cover all of the above costs (financing instalments + non-apportionable costs). You will find an exemplary calculation below.

The surplus generated must be declared as part of the income tax return.
After deduction of the tax, the cash flow of your rented property then results for you.

But now we would like to explain this to you with a concrete numerical example.

Concrete calculation example

Let's assume that you want to buy an apartment in Nuremberg for a purchase price ofe would like to purchase a flat in Nuremberg at a purchase price of 170,000 euros. The flat has 70 sqm.

The ancillary purchase costs amount to 8,755 euros, consisting of 3.5 % land transfer tax (in Bavaria) and 1.65 % notary and land registry costs. The land transfer tax varies from federal state to federal state, the average is around 5 %.

This means a total investment of 178,755 euros, of which you provide 8,755 euros as equity and finance 170,000 euros through a bank.

The rental income amounts to 7,152.01 euros annually (net annual cold rent).

Rentintakings7,152.01 Euro
less interest on loan (at an interest rate of 1.4 %)2.380,00 Euro
less maintenance reserves 840,00 Euro
less administrative costs650,00 Euro
Surplus before redemption and taxes3,282.01 Euro
less redemption (2 %)3.400,00 Euro
Yield after redemption (per year)
-117,00 Euro
Monthly yield
-9,83 Euro

This is a sample calculation. Of course, most items will vary. The interest rate, for example, is a variable that depends on your credit rating and equity situation. The better your credit rating, the lower the interest rate.

The administration costs may also be different in your case. It depends here on which administration you need or want to make use of.
Not every administration is obligatory.
In our numerical example, we have used our 360° package because it includes all three types of management (WEG, condominium and rental management).

What has not been taken into account in the above calculation are Taxes and a possible change in the value of the property.

This would go beyond the scope of this article. However, you are welcome to Contact personally.

But very briefly: We always calculate cautiously; for this we have four different ways of looking at things.

    1. Is the property losing value?
    2. Does the value remain constant?
    3. What would be an average performance?
    4. When would the performance be very good?

Our credo: A property as an investment must be worthwhile even if the property does not increase in value.
No one can look into the future. That is why we always approach our calculations conservatively, so that there are no negative surprises.

When is an investment property worthwhile?

To keep it short: An investment property is worthwhile when the Rental yield is right.
This is calculated as follows:

Calculate formula rental yield

In the numerical example above, this results in a gross rental yield of 4.2%:

Example Calculate rental yield

This corresponds to a value that can usually already generate a neutral to slightly positive cash flow.

In order to achieve such a rental yield, however, certain conditions must be met.
The location plays a very large role, but also the rentability of the property as well as suitable Credit conditions.

In any case, your goal should always be to achieve a positive or at most slightly negative cash flow.

If you have questions about the calculation of your cash flow, you are welcome to ask them in our community, on Facebook or in a personal conversation. We will then go through the individual items with you step by step and advise you without obligation and free of charge.

Real estate as an investment

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