The rental yield is one of the best-known key figures in the real estate sector and is used by many newcomers as the most important basis for decision-making. At first glance, this also sounds plausible: the higher the yield, the better the investment.
However, it is precisely this error in thinking that often leads to lucrative properties being overlooked in the long term, while supposedly "strong" deals in the short term disappoint in the long term. In this article, you will find out why the rental yield is only a small part of the truth, what it doesn't show you and which key figures you should focus on instead.
The rental yield describes the relationship between the purchase price and the annual rental income of a property. To be more precise:
Gross rental yield = (annual cold rent / purchase price incl. ancillary costs) × 100
Example:
Purchase price: € 250,000
Annual rental income: € 10,000
➡️ Gross rental yield: 4 %
It provides you with an initial assessment of whether a property "pays off". But this is precisely where the catch lies: the rental yield is a static snapshot. It only looks at a single figure, without the context.
The rental yield reflects only a fraction of reality. It is a snapshot and ignores decisive factors:
In short, the rental yield is a simple comparative figure - but not a basis for decision-making for real investors.
Successful real estate investors think in time frames of 10, 15 or 20 years - not in snapshots. This means that they consciously accept a lower initial rental yield if, in return, they recognize long-term potential for value appreciation, rental momentum or tax leverage.
Today you are buying with a net yield of 3.2 % in a fast-growing suburb of Munich, Leipzig or Frankfurt.
What you have actually bought is not just a property, but a development.
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Another point that many people underestimate: The tax component can massively increase the real return on a property - especially in the initial phase.
These effects are not reflected in the rental yield, but they significantly improve your actual cash flow.
If you only look at the rental yield, you risk overlooking the really worthwhile investments. Professionals evaluate a property holistically:
So the next time you read a real estate ad, don't just ask yourself:
"What's the rental yield?"
But rather:
"What can this property give me in ten years' time?"
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