Purchasing a property can be a lucrative capital investment. The investment is very safe compared toother forms of investment and promises a long-term return. Nevertheless, many people shy away from buying a property. The fear of making a mistake is too great and their knowledge of the real estate market is often too limited.
Often the issue of financing poses another problem. If you are flirting with buying a flat and renting it out to generate passive income, don't hesitate to call in a professional advisor. You don't have to know all the key figures and make complicated calculations. We can help you! For an initial overview, simply use ouryield calculator and you will already receive valuable information about your investment. Calculating real estate yields is easy with our guide.
Return on real estate: Calculation
However, you can also calculate the yield of your dream flat yourself using a simple formula.
Annual rental income x 100 / purchase price = rental yield
For example, if you purchase a flat at a purchase price of 50,000 euros and want to rent it out for 500 euros per month, the calculation looks like this:
6,000 euros x 100 / 50,000 euros = 12
This results in a rental yield of 12 %.
But beware: These figures are not reliable! A trustworthy calculation needs much more information. This is a very simple and superficial yield calculation. Almost any investment would achieve an attractive rental return here. A closer look is therefore very important.
Real estate yield calculator
You can use the following tool to calculate the property yield - quickly and easily:
Net yield/gross yield on real estate
Calculate property yields: Important differences between gross and net yield.
As already mentioned, the above calculation does not represent an exact calculation. It is the gross rental yield. In your calculation, please always take into account the costs you incur in acquiring, managing and renting out your flat. When calculating the net rental yield the figures look quite different look:
Incidental purchase costs must also be added to the purchase price, including notary and financing costs. Not to mention the tax to be paid. All of this increases your total costs.
The In turn, the rental income is reduced by the ancillary rental costs. These include, above all, the administration costs and the maintenance reserves.
Only when you have deducted these costs from the gross rent do you get
your actual income. Based on these figures, the rental yield is suddenly much lower, but also more realistic.
Again and again, good returns of between 5-6% are advertised. These returns are indeed very attractive, but in many cases they are not based on realistic figures.
In recent years, it has become clear in Germany: A good and realistic returnis 3-4 %. This takes all costs into account. If you keep the important key figures in mind from the start and make your purchase decision carefully and with the help of professionals, you can achieve such a return.We are very proud of the fact that the real estate projects we accompany achieve a net rental yield of over 3.7% on average and in some cases can even offer flats with a rental yield of over 5%.
Average return on real estate
The average rental yield in Germany is below 3 %. This is due, on the one hand, to the fact that many property buyers do not have the necessary knowledge or do not take advantage of professional support. Thedecisive location factor isalso often not taken into account.
For many buyers it is astonishing that the return on investment is higher for properties in economically weak regions. Yet logically this makes sense. The decisive factor is the relationship between the purchase price and rental income. Although higher rents can be charged in conurbations, the purchase price in these areas is also higher than average. Instead, higher yields result when the purchase price is significantly lower.
Since it is often not possible for the average person to obtain affordable properties in economically strong locations, it is worthwhile in several ways to have a partner at your side who has the appropriate offers. In this way, you benefit from both a lower purchase price and higher rental income.
Checklist for property with a "good" rental yield
So what is important if you want to take the first step towards becoming a successful real estate investor and building your wealth?
Find out about the possibilities: In a non-binding initial consultation, we will show you what is in it for you.
Property search: According to your preferences (rental yield, value development, "cardinal direction", personal wishes) we will find your perfect yield property.
Financing: We work with over 300 banks to put together the perfect financing package for you.
Processing: We do not leave you alone. We accompany you to your viewing and notary appointments until everything has been officially processed.
Hand over the management to us: You don't have to bother with dripping taps or drawing up new tenancy agreements. We take care of renovation work, tenant management, etc.
Relax and look ahead to new projects: The first rental income lands in your account and you realise how pleasant it is to generate passive income from your property. Keep it up and plan the next project that will bring you more profits.
The team at Meine-Renditeimmobilie.de will answer all your questions and stand by your side until the deal is successfully closed. Even if you have questions on the topic of "calculating property returns", we will be happy to help you. Request your free initial consultation now and enjoy your first return soon!