Calculating the yield of a let flat correctly
Exposés often state a gross yield. That is not sufficient for an investment decision, because purchase costs, non-recoverable costs and vacancy are missing. This article shows how to recalculate it – without any forecast of future value development.
Gross rental yield and purchase price factor
Gross rental yield = annual net cold rent ÷ purchase price × 100. The purchase price factor (Kaufpreisfaktor) is the inverse: purchase price ÷ annual net cold rent. Both figures are suitable for quickly comparing similar properties, but say nothing about the actual costs.
Use the net cold rent actually agreed in the tenancy agreement, not a hoped-for market rent. In Berlin, the rent cap (Mietpreisbremse) limits the potential for increases on new lettings, and the capping limit (Kappungsgrenze) does so during an ongoing tenancy.
Net rental yield: what must be deducted
On the cost side, the purchase costs (property transfer tax (Grunderwerbsteuer), notary, land register, estate agent) form part of the investment. On the income side, all costs that the landlord cannot pass on to the tenant must be deducted.
Under the Operating Costs Ordinance (Betriebskostenverordnung), non-recoverable costs include in particular management costs (WEG management, where applicable rental management) and maintenance and repairs. Added to these are contributions to the association's maintenance reserve, your own repairs in the flat and an allowance for loss of rent (vacancy when tenants change, payment defaults).
Net rental yield = (annual net cold rent − non-recoverable costs) ÷ (purchase price + purchase costs) × 100.
Example calculation (assumptions, not an offer)
Flat in Berlin, 60 m², purchase price 250,000 €, let at 700 € net cold per month (8,400 € per year). Purchase costs: property transfer tax (Grunderwerbsteuer) 6 % = 15,000 €, notary and land register 1.5 % = 3,750 €, estate agent's commission 3.57 % = 8,925 €; total investment 277,675 €.
Gross rental yield: 8,400 ÷ 250,000 = 3.36 %; purchase price factor 29.8.
Non-recoverable costs per year (assumptions): WEG property manager's fee 360 €, contribution to the maintenance reserve 720 €, maintenance of the separate ownership 480 €, rent loss risk 2 % = 168 €; total 1,728 €.
Net rental yield: (8,400 − 1,728) ÷ 277,675 = 2.40 % before financing and taxes.
Financing and taxes
If the loan interest rate is higher than the net rental yield – in October 2026, ten-year mortgage loans cost around 4.1 to 4.5 % effective, depending on the source – every financed euro lowers the ongoing return on equity (negative leverage). The result then depends more heavily on rent increases and value development, which no one can guarantee.
For tax purposes, depreciation, loan interest and income-related expenses reduce the taxable result. How much of this remains economically depends on your personal tax rate in Germany and in your country of residence; have this calculated by a tax adviser.
Risks
Regulatory risk: the rent cap (Mietpreisbremse), capping limit (Kappungsgrenze), milieu protection (Milieuschutz) and protection against termination limit rent increases and changes of use.
Cost risk: special levies for the roof, façade or heating, rising management and energy costs, the landlord's share of CO₂ costs.
Tenant risk: payment default and lengthy eviction proceedings; vacancy when tenants change.
Market and interest-rate risk: prices may fall, follow-up financing may become more expensive. Liquidity risk: a flat cannot be sold at short notice at a particular price. Currency risk for income outside the euro area.
How sensitive the calculation is
If the flat in the example is vacant for three months when tenants change, 2,100 € is lost instead of the 168 € allowed for. The non-recoverable costs rise to 3,660 €, and the net rental yield for that year falls to (8,400 − 3,660) ÷ 277,675 = 1.71 %.
If the owners' association resolves a special levy (Sonderumlage) of 5,000 € for the flat, this corresponds to around three quarters of a year's net income in the base case. Conversely, a permissible rent increase of 10 % raises the net rental yield in the example to around 2.70 %.
Therefore always calculate several scenarios and keep a liquidity reserve for vacancy and special levies.
Sources
- https://www.gesetze-im-internet.de/betrkv/__1.html
- https://www.gesetze-im-internet.de/betrkv/__2.html
- https://www.haufe.de/id/beitrag/grunderwerbsteuersaetze-der-bundeslaender-uebersicht-HI3037525.html
- https://www.vr.de/privatkunden/themenwelten/wohnen-immobilien/bauen-kaufen/notarkosten-hauskauf.html
- https://www.gesetze-im-internet.de/bgb/__556d.html
- https://www.gesetze-im-internet.de/bgb/__558.html
- https://www.drklein.de/aktuelle-bauzinsen.html
- https://www.baufi24.de/presse/pressemitteilungen/zinskommentar-102026/
- https://www.gesetze-im-internet.de/estg/__7.html
Frequently asked questions
What is a good rental yield?
There is no universally applicable figure. Higher yields usually come with higher risks, for example in regions with vacancies or where renovation is needed.
Is the maintenance reserve part of the costs?
For liquidity, yes. For tax purposes, according to the practice of the tax authorities, it is only deductible once the association actually spends the money.
Why allow for the risk of rent loss?
Because even well-let flats stand empty when tenants change, or tenants may be unable to pay. A flat-rate allowance makes calculations comparable.
General information, as at October 2026. It does not replace advice from a tax adviser, solicitor or notary.
