Rental Yield (Mietrendite)
Annual rental income as a percentage of property value
Rental yield (Mietrendite) measures how much annual rent a property generates relative to its purchase price. It's the fundamental metric for evaluating whether a property generates sufficient income.
The Basic Formula
Rental Yield = (Annual Rent / Purchase Price) × 100
Also called gross yield (Bruttomietrendite) because it doesn't account for expenses.
Real Example
€450,000 Property Analysis:
- Purchase price:€450,000
- Monthly rent:€1,800
- Annual rent:€21,600
- Rental Yield:4.8%
Calculation: (€21,600 / €450,000) × 100 = 4.8%
What's a "Good" Rental Yield in Germany?
- 3-4%: Major cities (Munich, Hamburg, Berlin) — low yield but high appreciation potential
- 4-5%: Mid-sized cities — balanced investment
- 5-6%+: Smaller cities or secondary locations — higher cashflow, lower appreciation
Gross vs. Net Rental Yield
Net rental yield is more accurate
Net rental yield accounts for operating costs (management, maintenance, vacancy) and gives a realistic picture of income. Gross yield is useful for quick comparison, but always check net yield before investing.
The Yield vs. Appreciation Trade-off
In real estate, you typically choose between:
- High yield, lower appreciation: Generate cashflow now but slower value growth
- Low yield, higher appreciation: Accept negative cashflow for faster equity building
Related Terms
Cashflow
Cashflow is the net amount of money flowing in and out of your property investment. Positive cashflow means rental income exceeds all expenses; negative cashflow means you pay out of pocket monthly.
ROI(Return on Investment)
ROI (Return on Investment) measures how much profit you make relative to your initial investment. In real estate, it accounts for rental income, tax savings, and appreciation.