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