Property as an Investment: How to Calculate Returns Correctly

Article L-0101 · 08.10.2026 · 6 min. reading time · Joé Christian Ewrard

What does the rental yield really tell you?

The rental yield relates the expected rental income to the capital invested. It helps to make a general comparison between different properties. However, it is not sufficient on its own for a sound purchase decision.

The gross rental yield is often considered first. It is calculated by dividing the annual net rent by the purchase price. This calculation is quick to make, but leaves out important expenses. It does not include ancillary purchase costs, non-recoverable operating costs, management, maintenance or potential loss of rental income.

The net rental yield is more informative. It deducts ongoing non-recoverable costs from the rental income. The capital actually invested, including ancillary purchase costs, should also be taken into account. The more accurate this calculation is, the more clearly it shows whether an offer is financially viable.

Even the net rental yield is no guarantee. It reflects an assumption. If the rent changes, the property is vacant or a major repair becomes necessary, the result changes. Every return calculation should therefore be supplemented by cash flow planning and several scenarios.

Which rent can be included in the calculation?

The starting point should be the net rent that can be achieved sustainably. For a property that is already rented, this is initially the rent agreed in the tenancy agreement. However, it is also important whether it is paid reliably, whether there are any arrears and what provisions the tenancy agreement contains.

A potentially higher market rent should not automatically be treated as guaranteed income. Rent increases are subject to legal requirements. Even when letting a property to a new tenant, not every desired rent can be achieved. Condition, location, energy efficiency, layout and demand determine the amount that suitable tenants will actually accept.

Particular caution is advisable with a vacant property. The target rent stated in the property particulars may be plausible, but this is not necessarily the case. Comparable listings, completed lettings and the specific micro-location provide better indications. A favourable impression of the area is no substitute for assessing demand.

Investors should also distinguish between net rent and advance payments for service charges. Service charges are largely pass-through amounts and do not constitute a return. Not all costs can be passed on to the tenant. For the financial assessment, the key figure is therefore the amount that remains with the owner after non-recoverable expenses.

Which costs are often overlooked?

Ancillary purchase costs are added to the purchase price. These may include costs for the notary, land register, financing, taxes and, where applicable, estate agency services. The specific costs incurred in each case should be fully clarified before the purchase decision is made.

Ongoing costs arise after the purchase. For a condominium, these include in particular the non-recoverable portions of the service charge. Expenses incurred by the owners’ association, contributions to reserves and potential special assessments must also be reviewed. Service charge statements, business plans and minutes of meetings provide important information.

For a single-family or multi-family house, the owner is responsible for the entire building. The roof, façade, heating system, utility lines, outdoor areas and drainage can result in significant expenses. A low purchase price is therefore not automatically a bargain. Sometimes it is merely the visible part of a deferred need for renovation.

There are also costs for account management, insurance, billing, re-letting, minor repairs and administrative work. Your own time also has an economic value. Anyone who ignores these items is not calculating a return, but merely an optimistic interim result.

How can maintenance be budgeted for realistically?

Maintenance costs are rarely incurred evenly. Little may happen over an extended period. Then the heating system, windows or roof may suddenly become a major issue. A quiet month-to-month cost trend therefore says little about long-term capital requirements.

Before purchasing, the technical condition should be assessed systematically. Visible defects are not the only important factor. The age and condition of key building components, work already carried out, available maintenance records and foreseeable modernisation measures should all form part of the assessment. If there is any uncertainty, a building surveyor can help.

For a condominium, the homeowners’ association’s existing maintenance reserve is relevant. However, the mere existence of a reserve is not the only decisive factor. It must be appropriate for the condition of the building and the planned measures. A seemingly comfortable reserve may quickly be committed if major works are approved or being prepared.

It is advisable to include a separate maintenance reserve in the calculation. It is not a dispensable safety buffer, but an integral part of the return calculation. If it is not needed, the money remains with the owner. If it is needed, it prevents a repair from jeopardising the financing or the owner’s personal liquidity.

Why must vacancies also be factored in?

Vacancies do not occur only in areas where demand is generally low. They can also result from a change of tenant, renovation work, an unsuitable floor plan or rent set too high. Even a property that is easy to let is not permanently protected against loss of rental income.

During a vacancy, there is no net rent income. Nevertheless, many costs continue to accrue. There may also be costs for renovation, listings, viewings and professional re-letting. Anyone who calculates only on the basis of fully let months therefore overestimates the available surplus.

Rent arrears must also be included in the risk assessment. Careful tenant selection reduces the risk, but cannot eliminate it. Creditworthiness documents, verifiable income and a properly drafted tenancy agreement are important. For legal questions concerning the tenancy, a specialist lawyer or another qualified legal adviser should be consulted.

A sound calculation should therefore include at least a normal, a favourable and an adverse scenario. In the adverse scenario, for example, a vacancy and a repair occur at the same time. If the financing remains manageable even then, the investment is more robust than a property that works only under ideal conditions.

Manage the property yourself or appoint a property management company?

Self-management initially saves an external management fee. In return, the owner assumes responsibility for communication with tenants, payment monitoring, billing, appointments with tradespeople and documentation. This can work well if the owner lives nearby and has sufficient experience.

However, the actual workload is often underestimated. Damage does not occur according to office hours. Disputes over operating costs, repairs or obligations under the tenancy agreement also require objective and legally sound handling. Anyone who lives further away or owns several units needs reliable local processes.

Property management costs money and reduces the ongoing surplus. At the same time, it can save time, organise processes and serve as a point of contact. Before appointing a property management company, the scope of services, additional costs, availability and powers of attorney should be clearly defined. Not every property management company automatically handles new lettings, property handovers or the management of major damage.

Even with external property management, the owner remains responsible for important decisions. The management service should therefore be included as a regular expense, even if self-management is initially planned. This ensures that the investment remains viable even if the owner's personal circumstances change later.

What is particular to Eifel, Trier and the border region?

The region is not a uniform property market. An apartment in Trier follows different demand patterns from a house in a rural location in the Eifelkreis Bitburg-Prüm or the Vulkaneifel. Even within a city or municipality, accessibility, infrastructure and the residential environment can significantly affect how easy a property is to let.

In Trier, demand may be shaped by universities, employment opportunities and urban infrastructure, among other factors. In the Trier-Saarburg area and along the border with Luxemburg, commuting distances and transport links play an important role for some tenants. In more rural parts of the Eifel, parking spaces, outbuildings, the plot, energy supply and access to everyday amenities may carry greater weight.

Proximity to Luxemburg alone does not automatically make a property a secure investment. What matters is whether the specific location meets the needs of potential tenants. A theoretically short journey may be less attractive in everyday life than expected due to traffic routes, working hours or a lack of alternatives.

For older buildings in the region, particular attention should be paid to energy efficiency, heating, damp, the roof and utility lines. At the same time, solid existing properties with suitable layouts and a clear maintenance history may be attractive in the long term. The assessment must focus on the individual property, not on a generalised view of the region.

When is an investment property financially viable?

A property is not viable simply because the rent covers the loan repayment. The repayment includes financing components, while non-recoverable costs, reserves, management fees and potential losses must also be covered. What matters is the monthly cash flow after all realistic expenses.

In addition to assessing the property, the buyer's personal liquidity must be reviewed. Can the buyer pay for a repair if rental income is unavailable at the same time? Is there still financial flexibility if financing costs, personal expenses or the buyer's employment situation change? An investment property should not depend on everything going perfectly all the time.

Tax implications can affect the outcome. However, depreciation, financing costs and other expenses depend on the property and the buyer's personal circumstances. A tax saving should therefore never be the sole reason for a purchase. A tax adviser is the right person to contact for a reliable assessment.

Before making a decision, the tenancy agreement, land register, building documents, energy-related documents, statements and the structural condition should be reviewed. For apartments in jointly owned buildings, the documents relating to the owners' association must also be reviewed. Legal questions should be referred to a notary or lawyer. The role of reputable property advice is to bring together the relevant information and highlight any outstanding issues.

For a specific property, first gather details of the actual net rent, all acquisition and ongoing costs, any evident maintenance requirements and the letting documents. Then calculate several scenarios, including one with a vacancy and a major repair. For properties in Eifelkreis Bitburg-Prüm, Trier, Trier-Saarburg, Vulkaneifel or on the border with Luxemburg, PRIOCASA can help you assess the property-specific data and regional factors before you enter into a long-term commitment.

Frequently Asked Questions

What is a good return on an investment property?

A single target return is not suitable for every property and every buyer. Location, condition, financing structure, administrative workload and personal risk tolerance must be considered together. A reliable surplus after realistic costs is more important than an eye-catching gross return.

Is it enough if the rent covers the loan repayment?

No. Additional expenses may include operating costs that cannot be passed on to the tenant, management, maintenance, vacancies and taxes. The calculation should show the actual monthly financial burden remaining after all income and expenses.

How do I account for vacancies in the calculation?

Do not assume uninterrupted rental income. You should also examine how a change of tenant, a renovation period or a payment default would affect your liquidity. The specific assumption should be appropriate for the location, property and target group.

Is a rented apartment safer than a vacant property?

An existing tenancy agreement initially provides clarity about the current income. However, it should be reviewed, including the rent, service charges, deposit, arrears and any special agreements. A vacant property offers greater flexibility when finding a new tenant, but it does not generate any rental income until then.

Should I consult a surveyor before buying?

A technical inspection can be very useful for older buildings, visible damage or unclear modernisation work. It helps you assess risks and potential capital requirements more accurately. Regardless of this, legal or tax matters must be clarified with a notary, lawyer or tax adviser.

Topics: property as an investment, rental yield, maintenance, vacancies, property management, investment property Eifel, property Trier, financing

Responsible for this article: Joé Christian Ewrard — Owner & IHK Real Estate Agent, PRIOCASA Immobilien & Finanzservice. As of: 08.10.2026. The draft was created with the assistance of artificial intelligence and was reviewed and approved before publication (AI Transparency). This post does not replace legal or tax advice; for individual questions, please contact a notary, lawyer, or tax advisor.

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