Yield calculator: Calculate property investment return

This is how you calculate your return!

How do you Calculate property investment return and how profitable are investments? Buying a property can be worthwhile both for tax and in terms of retirement provision. Those who rent out their properties will be able to make additional profits. 

Depending on the location and nature of the property, it makes more or less sense to invest in real estate. The advantage: Everyone can calculate their future return by means of a return calculator and precise comparisons. And thus, at the same time, see how worthwhile this investment is worthwhile. And even without a broker!

What is the return on a property?

When we talk about returns, we usually mean a return or a future profit. This results if otherwise own capital is invested in advance. That is why we are talking about an investment and the purchase of real estate is one of them. The total annual amount of an investment must first be calculated. The return is the annual return generated by the investment. 

More specifically, it is an investment rather than an investment. These two terms like to intertwine in colloquial terms. However, investments come mainly from the operating milieu. Nevertheless, success after the decision for a plant is on the agenda. And in order for this to be done, precise planning is required.

The return is the most important measure of the success of an investment. It is expressed as a percentage and can be calculated accurately later. Normally, the return always refers to the full year, even if the period of the investment is shorter than 12 months. Of course, returns are not only generated by real estate. Savings investments, securities, bonds or equities also pursue this objective. Others rely on the Monetary Fund or invest in gold and precious metals. 

Depending on the willingness to take risks and the expected profit, the Germans are very interested in profitable investments. It is not for nothing that the real estate market is very strong compared to other countries.

In such cases, the investor receives his return in the form of distributions from interest income, dividend payments or price gains. The terms around the return are wide-ranging. At the end of the day, it is a question of increasing the capital it has contributed, which is to play a role in the future. Of course, the form of the investment is crucial for calculating the return.

The role of the investment form in the return

Yield calculators are now even available online and provide a rough overview of whether the investment might be useful or not. However, it is important to distinguish between the types of investment. Thus, the return on investments with a constant interest rate is different from rising or variable interest rates. It also matters whether there are additional bonus estalism or bonus payments. Returns from life insurance can also be put together differently. If you know the details and the facts about your investment, the return is quite good to calculate.

Long-time experienced real estate agents wanted for existing customer support!

How can the return on a property be calculated?

Every property buyer wants to know their expected return before buying. Especially if the property is to be rented out later. Luckily, this is also possible without much effort, so that everyone can find out quite easily whether the investment is worthwhile. Real estate investment can not only be lucrative and profitable, but can also bring many investors to their knees.

The biggest advantage of investing in real estate is the constant increase in value. Of course, this can only be the case if the object is judged honestly. In general, the location and nature of the object plays into it. A distinction must always be made between gross return and net return. The net return is much more meaningful than the gross return.

First of all, information about the object must be listed for each return calculator. The most important factors are the actual purchase price of the property and the additional purchase costs. Additional purchase costs are always incurred and correspond to about 10 of the purchase price. These include real estate transfer tax, renovation costs or notary fees. In addition to the property details, the annual net cold rent and perhaps any other rental income should now be listed.

Without expenditure, there is no revenue. This means that administrative costs, maintenance costs and other expenditure must now be compared with revenue. This includes, for example, the interest accrued if a loan had to be taken out for the purchase of the property.

Yield calculator for real estate

Calculating the possible return is relatively simple. The yield value of the property is compared with the income from rent and lease. The earned value represents the purchase price of the plant, plus renovations, repair costs and administrative expenses. The pre-calculated income from rent must be calculated over a certain period of time. This is the only way to assess the advantages of the tax.

Gross and net return on real estate

The annual income of the investment is reproduced as a percentage. However, other factors are important for the calculation. The gross rental yield is strictly differentiated from the net rental yield. The former will be easier to calculate, as essential aspects will simply be overlooked. The net rental return takes into account ancillary costs, administrative and maintenance costs.

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Calculate gross rental yield - that's how it works!

Below is a formula that you can use to calculate your gross rental return:

100 x Annual net cold rent : Purchase price property = gross rental yield (indication in )

To illustrate this formula, a practical calculation example:

If the property costs 300,000 euros, the incidental costs are 10 of the purchase amount, i.e. 30,000 euros. In this case, the net cold rent per year amounts to 15,000 euros. The 15,000 euros are now to be expected divided by 330,000 euros, multiplied by 100. The gross rental yield in this case is 4.54.

Calculate net rental yield - this is how it works:

  1. Calculate the purchase price and incidental costs (10) together.
  2. Deduct the annual management and maintenance costs from the net cold rent and calculate the annual yield.
  3. You now divide the annual income by the investment costs.

The purchase price and additional purchase costs amount to 330,000 euros as calculated above. The net cold rent is 15,000 euros. We deduct 600 euros in administrative costs and 700 euros in maintenance costs. The annual income thus amounts to 13,700 euros. You therefore divide this by the investment costs and multiply again by the factor 100. The net rental yield is 4.15.

Investing in a secure future

The E1 Investments concept offers a proven system for the solid development of a business as a broker and owner of a real estate business. E1 Real Estate has the infrastructure and operating systems that enable us to offer first-class services with a team of brokers. You are investing in the market of the future.

Beware of calculation examples!

The task of brokers is to sell you an object and make it as tasty as possible. They often advertise with a high return, which is ultimately the reason for the purchase. Statements such as: “Top investment object with 12 returns and more!” sound nice at first, but do not always correspond to reality.

Do not allow a calculation to be made solely with the hot rent, but pull the cold rent into the bill. Ancillary costs play a role in profit. Brokers like to leave them out of the conversation. Don’t forget to factor in the house money as well. This information is also usually only available on direct request. Brokers also do not always have the additional purchase costs in their calculation. However, depending on the circumstance, these may amount to up to 15 of the purchase price. The higher the total cost of the property, the lower the return. 15 make a difference here.

Bonus tip!

Simply calculate the return yourself and use brokers mainly as a door opener for viewing and the visible facts. Ask questions about renovations and additional costs.

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Real estate prices analysis for 80 locations throughout Germany

Location analysis

E1 Holding offers location analysis for real estate for almost 100 cities nationwide in all federal states. Our well-trained experts for real estate and investments as well as off-market real estate in various locations and sizes take a professional and authentic look at the real estate market at the respective location. In doing so, we determine realistic and continuously updated real estate prices depending on the market situation as well as a corresponding real estate forecast. We are constantly expanding the list of alphabetically ordered locations and intensively expanding the data base for more and more cities. In addition to investors and investors with budgets of all sizes, our nationwide location analyses are also valuable for housebuilders when deciding on a location. Click here

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