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Calculate rental yield for an inherited apartment
You have inherited a flat and are wondering: rent it out or sell it? The answer doesn't lie in intuition, but in sound calculations. This guide shows you how to calculate the actual rental yield of your inherited flat in four steps, enabling you to fully exploit its financial potential.
With access to Google, BORIS, and Deep Research.
The calculation of the rental yield for an inherited apartment must always be based on the current market value, not on old purchase prices or appraisal values from the certificate of inheritance.
The net rental yield is crucial and is often significantly lower than the gross yield once non-recoverable costs such as management and maintenance (approximately 15-25% of the basic rent) are deducted.
Realistic calculations must necessarily take into account risks such as vacancy (on average 2-5%) and personal tax liability on rental income (up to 45%).
Inheriting a property presents many with a complex decision. Often, the emotional value is highly regarded, but the financial success of renting it out depends on hard numbers. A superficial estimate is not sufficient, as non-recoverable costs, taxes, and risks can quickly halve an apparently attractive gross yield. To make an informed decision, you need to accurately determine the net rental yield. We guide you through the entire process – from the correct assessment of the property to the final yield figure after deducting all relevant items. This way, you establish a reliable foundation for your strategy.
The most common mistake when calculating the rental yield of an inherited apartment is using an incorrect starting value. Neither the original purchase price nor the value stated in the certificate of inheritance is relevant. The only correct basis is the current market value of the property, that is, the price you would achieve if you were to sell it today. This value acts as your hypothetical purchase price. A professional appraisal can provide up to 20% more accuracy than pure online estimates. Only with this realistic value can you determine a meaningful yield. What an inherited property is worth depends on dozens of factors that only an expert can accurately weigh. This solid data foundation is the essential first step for all further calculations.
The gross rental yield provides a first, quick orientation. The formula for this is simple: (annual net cold rent / current market value) x 100. Suppose the market value of your inherited apartment is €350,000 and you can achieve a monthly rent of €1,050, which amounts to €12,600 per year. The gross yield is thus (12,600 € / 350,000 €) x 100 = 3.6%. This value is a good starting point, but caution: it paints an incomplete picture since it ignores essential costs. To set the rent, you should determine current rental prices online and check any regulations such as the rent price cap. The gross yield only serves as an initial comparison value before the crucial deductions are made.
The true profitability only becomes apparent with the net rental return. To calculate this, deduct all costs that you, as a landlord, must bear and cannot pass on to the tenant from the annual net rent. These non-apportionable ancillary costs often account for 15% to 25% of the net rent. Many heirs massively underestimate these ongoing expenses.
The most important non-apportionable costs include:
Administrative costs: Fees for a property management company, which often range between €20 and €30 per month and unit.
Maintenance reserve: A must for unexpected repairs to communal property. Experts advise setting aside about €8 to €11.50 per square metre annually.
Repair costs for individual property: Costs for repairs within the flat that do not concern the community.
Bank charges: Account maintenance fees for the rental account.
Rental loss risk: A calculated buffer for vacancies or insolvent tenants, often set at 2-4% of the annual rent.
When we deduct these costs from our example, a new picture emerges that brings us closer to the final yield.
In the final step, you need to consider risks and your personal tax burden. The greatest risk is vacancy, with rates in Germany varying significantly by region, but averaging around 4.5%, while values below 3% are common in metropolitan areas. Furthermore, your rental income, after deducting all advertising expenses (such as interest, depreciation, and maintenance), is subject to your personal income tax rate, which can be as high as 45%. For inherited properties, you can continue the depreciation (AfA) of the previous owner, which reduces your tax burden. The straight-line depreciation (AfA) for buildings constructed after 1924 is 2% per year on the building value. Don't forget the one-time burden of inheritance tax, which varies according to the degree of kinship and allowances (e.g., €400,000 for children). Only after accounting for these factors do you obtain the actual return on equity.
Let's compile all factors into a final example calculation to determine the actual rental yield for an inherited apartment. This illustrates how significantly the net yield differs from the gross yield.
Initial situation:
Market value of the apartment: €350,000
Annual net cold rent: €12,600 (€1,050 / month)
Building value share (for depreciation): €280,000 (Assumption: 80%)
Annual costs and deductions:
Maintenance reserve (80 m² x €10): - €800
Administration costs (€25 x 12): - €300
Calculatory vacancy risk (3%): - €378
Depreciation (2% of €280,000): - €5,600
Taxable income: €12,600 - €800 - €300 - €378 - €5,600 = €5,522
Income tax (Assumption 30%): - €1,656.60
Net rental income after tax: €12,600 - €800 - €300 - €378 - €1,656.60 = €9,465.40
Final net yield: (€9,465.40 / €350,000) x 100 = 2.70%
This result shows that the real yield is significantly lower than the initial gross yield of 3.6%. Such data-driven analysis is essential. If you are uncertain in assessment or calculation, our ImmoGPT-Chat can provide a first, quick evaluation.
A return of 2.70% is a solid figure, but it must be put into context. Compare this return with alternative investment options. A broadly diversified stock ETF portfolio has historically provided an average return of about 7% per year. Even less risky investments like fixed deposits currently offer interest rates of 3% to 4%. Of course, a property also offers the opportunity for value appreciation, which is not included in this return calculation. This decision – rent or sell – ultimately depends on your personal risk tolerance and overall financial strategy. However, a precise return calculation is the foundation for making a meaningful comparison in the first place.
The correct calculation of the rental yield for an inherited apartment is a multi-step process that goes far beyond a simple gross calculation. The crucial factor is the consistency with which all non-chargeable costs, maintenance reserves, tax aspects such as depreciation, and personal risks are taken into account. Only in this way can an initial estimate of 3-4% be realistically derived into a net yield that is often less than 3%. This figure is the only true measure to objectively assess the profitability of the rental and weigh it against a potential sale proceeds. Your decision for the future of your inheritance should be based on this solid, data-driven foundation.
Statistisches Bundesamt (Destatis) offers a table on rents and net household income in Germany.
Statistisches Bundesamt (Destatis) provides general information on the subject of housing.
The Bundesfinanzministerium provides information on inheritance and gift tax.
A statement from the Bundesfinanzministerium explains the adaptation of the inheritance and gift tax laws.
Statistisches Bundesamt (Destatis) offers information on construction prices and the property price index.
The Deutsche Bundesbank provides an indicator system on the housing market.
The Deutsche Städtetag publishes a position paper on the housing construction crisis.
The VDP (Association of German Pfandbrief Banks) offers its property price index.
What value is used to calculate the rental yield on an inheritance?
For a realistic yield calculation, always use the current market value of the property at the time of consideration (rental vs. sale). This value represents your hypothetical acquisition costs.
What are non-apportionable additional costs that reduce my yield?
This includes all costs that you cannot pass on to the tenant through the service charge statement. The most important ones are costs for property management, bank fees, repair costs, and contributions to the maintenance reserve for communal property.
How does depreciation (AfA) affect an inherited property?
As an heir, you step into the legal position of the deceased and continue their depreciation ('footstep theory'). If the deceased owned a building (constructed after 1924), you can continue to deduct 2% of the original building value annually from rental income as advertising costs.
Do I have to consider the rent control for an inherited apartment?
Yes, if the apartment is in an area with a tight housing market, you must observe the rent control for new rentals. The rent can then be at most 10% above the local comparable rent, unless an exception applies (e.g., higher previous rent).
What is the difference between gross and net rental yield?
The gross rental yield (annual cold rent / purchase price) is a quick but inaccurate indicator. The net rental yield is more meaningful as it deducts all non-apportionable management costs from the income, thereby showing the actual profitability before taxes.
Is renting an inherited apartment always worthwhile?
Not necessarily. It depends on the net yield, the condition of the property, the administrative effort, and alternative investment opportunities. A low yield of under 2.5% with significant refurbishment requirements might make selling more sensible.
