Should I Buy a Rented Property? Investment Calculator Germany
Thinking about buying a rented investment property in Germany and not sure if it's a good deal for you? Our calculator will show you!Published on Apr 27, 2023 . Updated 14 days ago

In Germany you can buy many properties at a discount, but then they turn out to be rented. Does it make sense to buy such property? What is a reasonable price, and how is it impacted by the different risks, like the tenant not leaving in a very long time. Our calculator will tell you!
Let's calculate the return on your investment property
The return and appreciation of your investment property
Your results in 6 years:
The value of the property after the tenant moves out is 477.621 € | By buying the rented property, you gain
| On your equity investment, you will receive an annual return of 13,24 % |
The effect of buying a rental property at a discount on your net wealth:
You can see from the figure above that the occupied property jumps in value after the tenant leaves. The increase in value at that time is due to the possibility of selling the property at a market price of 477.621 €, and you no longer have to pay capital gains tax if you sell your house after 10 years.
A breakdown of the detailed results and the critical assumptions in 6 years:
Results/ Assumptions | Rented property | Vacant property |
---|---|---|
Property price increase (net of capital gains tax) | 80.006 € | 26.406 € |
Rent earned/rent saved ¹ | 46.183 € | 62.097 € |
Taxes on rental income | 0 € | 0 € |
Maintenance cost | 13.325 € | 13.325 € |
Interest rate cost ² | 59.637 € | 59.637 € |
Net wealth gain | 53.228 € | 15.541 € |
IRR | 13,24 % | 3,81 % |
¹ We assume that the land is ⅓ the value of the property, that the property was built after 1925 and has a 2 % depreciation allowance, and that you face a marginal tax rate of 33 % –corresponding to a medium income of about 4.200 € per month.
² We assume an interest rate of 3,50 %.
Is the return on your calculations promising? Use our German Mortgage Calculator to determine the optimal financing for your investment property.
Practical tips on how to find the right rented investment property
When searching for a rented investment property, you should be on the lookout for certain keywords in German real estate listings, as it is often not at all obvious that properties are rented or vacant:
“vermietet” (which means rented)
“Kapitalanlage” or “Wertanlage” (which means investment
On the other hand, “Bezugsfrei” or “Mieterfrei” means that it is not rented.
For an overview and wide selection of properties, browse through our Hypofriend Property Radar, where we compile offers from Germany's largest real estate platforms. You can check if you want to see only rented properties!
Be sure to ask for the rent of the offered properties. It is often not mentioned in the expose, and If the rental yield is low, real estate agents tend not to keep it to themselves.
Also, be sure to ask how long tenants have lived in the property. The notice period for own use depends on how long the tenants have occupied; it can normally be up to nine months. However, in some cases where tenants have lived in an apartment building before it was legally partitioned into individual apartments, they have extraordinary cancellation protection of at least three years and, in some cases, 10 years. In addition, in cases of hardship, such as old age, pregnancy, or illness, tenants may stay. Looking to buy a rented apartment for your own use? We explain to you what you need to bear in mind.
If you are interested in an apartment in a multifamily house or a larger complex, if you should also ask to see the minutes of the most recent owners' meetings (called “Protokolle der Eigentümerversammlung” in German) to find out what is currently planned and what additional costs will be incurred by you as the new owner. Also, ask about the amount of the maintenance reserve fund (“Instandhaltungsrücklage”) so that you do not have a rude awakening.
The benefits of buying a rented investment property in Germany
As we have detailed elsewhere, there are many benefits you gain when buying an investment property in Germany and becoming a landlord, such as no capital gains tax after 10 years, a depreciation allowance of 2-2,5% that eliminates tax on rental income in most cases, and standard mortgage conditions, which is quite exceptional in the world.
In addition, when buying a property that is rented, there are some further potential advantages that are not to be underestimated:
Lower price
At first glance, the most appealing advantage of buying an occupied property is that you will pay a lower purchase price than if the property were vacant. This may be because the property is rented at a low price, the landlord has no scope to use it him/herself, or because other potential buyers are wary of occupied properties. In our experience, you can get a 10-40 % discount on a rented property compared to a comparable vacant one. The market is less liquid and transparent, so it does pay to check the numbers (notably rental yield and consider how long tenants may stay) and use the calculator above if the low price compensates adequately for the low rental yield.Established tenant base
Another advantage of buying a rental property is that you will have an established tenant. This means you don't have to worry about finding and attracting tenants or the various demands a new tenant may have.Less upfront investment
Buying a rental property in Germany may require less upfront investment than buying a vacant property, not only because you buy at a discount, but also because you don't have to spend money on renovations or repairs to attract tenants.
Calculate your mortgage options
Use Hypofriend’s mortgage calculator to calculate your mortgage options in Germany.
Potential disadvantages and pitfalls when buying a rented property in Germany
While there are certainly benefits to buying a rented investment property in Germany, it's important to consider the potential disadvantages and pitfalls as well carefully:
While there is a possibility to have the existing tenant vacate the property as you claim it for your own use, you have to consider the social aspects of this and your own conscience. A win-win situation often involves offering tenants compensation to move out. This may allow them to buy a property themselves or move to a place they like better.
Lower cash flow: If the current tenants are paying well below market rent due to an old lease, this can negatively impact your cash flow. This also may reduce the scope for a mortgage: you will have to show that your income can cover any negative cash flow. Some banks will only consider the Mietspiegel--see below--as rental income.
As a new owner, you do not have an automatic right to raise the rent. You must follow the existing rules. For example, you can't raise the rent until at least 15 months after the tenants moved in (or after the last rent increase) and only up to the local comparable rent, called “ortsübliche Vergleichsmiete” in German. You can find the appropriate value for your property in your city's so-called rent index (“Mietspiegel”), which is usually available on municipal websites, for example, here is the rent index for Berlin). The rent increase may not exceed 20 % within three years; in many cities, the limit is even 15 %.
When you buy a property that already has tenants, you take on those tenants — and all the problems that come with them. So, please inquire about your experience with payment and property damage.
In summary, buying a rented property as an investment can be a smart decision. The immediate cash flow, lower vacancy risk, and, above all, the potential for a notable price discount are all strategies to consider. Germany offers great benefits, like normal mortgage conditions, no capital gains tax, and very little tax on rental income.
That said, it's important to find out the key information regarding the rent and the tenants and then create some scenarios using our calculator. Do weigh the potential pros and cons and take steps to minimize any potential risks. With the right approach, buying an occupied property can be a worthwhile investment opportunity.