Copy Property Details
Import property and financing from mortgage calculator
Click to learn about rental metrics, tax benefits, and calculation formulas
What is Investment Property Analysis?
Investment property analysis evaluates the financial viability of purchasing real estate for rental income. It considers rental income, operating costs, financing expenses, and tax implications to determine cash flow and returns. In Germany, rental properties offer unique tax advantages through depreciation (AfA) that can offset rental income and even other taxable income.
Key Investment Metrics
Gross Rental Yield
The simplest return metric: annual rent divided by purchase price. A quick comparison tool, but ignores all costs and financing. Typical German market yields range from 3-6%.
Net Yield (Cap Rate)
Net Operating Income (NOI) divided by purchase price. Shows return after operating costs but before financing. More useful for comparing properties than gross yield.
Cash-on-Cash Return
Annual cash flow divided by your total cash invested (down payment + closing costs). The most relevant metric for investors using leverage, as it measures return on your actual money.
German Tax Considerations
Depreciation (AfA)
Buildings depreciate over 50 years (2% annually for buildings after 1924). This non-cash expense reduces taxable income without affecting cash flow. Only the building portion (not land) can be depreciated.
Deductible Expenses
All operating costs, mortgage interest, and depreciation are deductible from rental income. If total deductions exceed rental income, the loss can offset your other income (negative income allocation).
Key Formulas
Gross Yield = (Annual Rent ÷ Purchase Price) × 100NOI = Effective Rent − Operating CostsCash Flow = NOI − Mortgage Payment − TaxAfA = (Purchase Price × Building %) ÷ 50 yearsCoC = Cash Flow ÷ Total Cash Invested × 100Important Considerations
- • Past returns don't guarantee future performance. Property values and rents can decline.
- • Vacancy, rent defaults, and problem tenants can significantly impact returns.
- • Unexpected repairs and maintenance can exceed budgeted amounts.