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Calculate Property Rental Yield

Best way to Calculate Property Rental Yield

Is the selected property really suitable for you? The answer to this question depends not only on the location of the property, but also on the return. Especially in recent years, the real estate industry has experienced a big boom. But why is this so? One reason for this is the fear of investing in other plants. People want a stable investment with a high rental yield. A condominium or similar buildings are ideal.
Investors naturally aim for a high rental yield with their own property. Private buyers usually buy real estate for retirement. But even there, self-use and rental with high returns is possible.

Return on rents

Those who decide to invest in real estate should have a look at the rental yield. A suitable property is important to make a profit in addition to the bond for the property. In this case, the investments should eventually bring a high return. That’s where real estate differs from equities and other bonds. On average, the rental yield in Germany is around four percent. Real estate is always needed and is therefore always seen as a lucrative investment. Despite all this, the rental yield depends on various factors. This includes, among other things, the location of the property, the purchase price and the continuous rental income that the investor receives.

What is there to consider?

In order to achieve a high rental yield, an accurate rental price calculation is necessary. Landlords are entitled to increase the rent in certain respects. This is the case if the capping limit is respected. In this case, the tenant may increase the rent to a maximum of 20 percent within three years. On the other hand, the landlord should consider whether he really wants to achieve the maximum rent. Reliable tenants are more important than unreliable ones who pay the maximum rent. In order for the rent to arrive regularly and on time, you can find trusted and reliable tenants. The following points should be taken into account when looking for tenants:

  • Checking the creditworthiness of all prospective tenants
  • Obtaining a rental deposit of at least two months
  • Rental payments by standing order
  • Direct debits for rental payments

Based on these factors, the landlord can already obtain some collateral. Poorly paying tenants can eventually worsen the rental yield.

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

How do I calculate the rental yield correctly?

If you want to buy property, you should also calculate the rental yield. If one wants to calculate the rental yield for a condominium, one speaks of the ratio of the purchase price to the net annual rent. The purchase price of a property refers to all costs. Ancillary costs, such as notary costs, real estate transfer tax and others are also included. In order to be able to calculate the net annual rent, the running costs are important. The running costs of a property include depreciation, reserves and the maintenance of a property. The assumed return should not be the sole focus when buying the desired property. Accurate analysis of the environment, location and general condition is important to achieve a high long-term rental yield. The more maintenance costs you incur, the lower the rental yield.

What should be the rental yield?

A rental yield of four percent was normal for a long time. However, this is the gross return that can be achieved. To calculate the optimal rental yield, multiply the cold rent by a factor of 100 and divide this result by the purchase price of the property. This amount is the gross return. Of course, renting is much more worthwhile if mortgage rates and financing are kept low. These are deducted in the gross return. In principle, a net rental yield of between four and five percent is acceptable. If the rental yield is less than four percent, investing in another investment makes more sense. It’s hard to say how much rent an property will pay. There are many properties that need to be included. The nature of a property, the location and the size of the apartments to be rented play an important role. The better the rental developments in a property, the higher the rental yield.

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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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