Are you facing the decision of whether to sell or rent out your property? This choice has far-reaching financial implications and shouldn't be made on a whim. We will show you how to determine the most profitable option for your asset based on key figures.
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The topic briefly and concisely
The decision between renting and selling should be based on an analysis of rental yield (average 3.83% in major cities), the 10-year speculation period for tax-free sales, and the personal administrative effort involved.
The rental costs (approximately 20-35% of the net rent for maintenance and management) must be weighed against the one-time sales costs (around 5-9% for agent and notary).
The current market forecast for 2025 indicates a slight price increase of 1-3%, which could make selling attractive, while rising rents and tax benefits speak in favour of renting.
A property is more than just a home; it is a significant asset. Whether through inheritance, relocation, or as a pure investment – every owner will eventually face the question: Is renting or selling more worthwhile? There is no one-size-fits-all answer, as the right strategy depends on market data, tax deadlines, and your personal life plans. This article provides you with the crucial facts and benchmarks. We analyze the costs, returns, and risks of both options so you can make an informed, data-driven decision that best supports your financial goals.
In a nutshell: Your decision factors
The decision between renting and selling depends on three core areas. Your financial goals define whether you are seeking short-term liquidity or long-term income. The current market situation, with rental yields averaging 3.83% in major German cities, affects profitability. Your personal effort in managing a rental property is a factor not to be underestimated.
Financial Analysis: Immediate Sale Proceeds versus Long-term Rental Income
Selling a house immediately generates high liquidity for new investments or personal projects. In contrast, renting promises a steady, passive income stream averaging €7.28 per square metre in rent, based on national averages. The gross rental yield is a key indicator for assessing profitability. It is calculated by dividing the annual net rent by the purchase price and multiplying by 100. In cities like Chemnitz, yields of over 5.5% can be achieved, whereas in expensive metropolises, they often fall below 3%. A yield of at least 2 percent is considered attractive compared to other investment forms. For precise calculations, you should use our rental yield calculator. These figures form the basis for weighing up which path is more profitable for you.
The decision largely depends on your individual financial situation. If you need capital immediately, selling is often the better option. If you're looking for a long-term retirement plan, renting, despite the effort, could be the right strategy. The appreciation of your property also plays a crucial role in this decision.
Performance and Forecast: Determining the Right Time
Real Estate Prices 2025: A Slight Upward Trend
After a period of stagnation, real estate prices are once again showing a slight upward trend. Experts forecast a price increase of between 1 and 3 per cent for 2025, particularly for energy-efficient properties in urban locations. The price index for existing properties recently increased by 0.63% within a month. This moderate increase signals a stable market, but no more price booms. The energy condition has become a decisive price factor; properties requiring significant refurbishment may see prices stagnate or even decrease. The question of the best time to sell thus heavily depends on the quality of the property.
Long-term Value Appreciation as a Factor
When renting out, you rely on a long-term appreciation of your property's value. Historically, real estate has gained value, even if there are short-term fluctuations. A rented property can serve as protection against inflation, as rents tend to rise with the general rate of inflation. This secures the real value of your income over the years. Therefore, a well-thought-out strategy for long-term value increase is essential. Analysing costs and risks is the next logical step in your decision-making process.
Costs and Risks: A Realistic Comparison
Hidden Costs of Letting
Letting a property incurs ongoing costs that are often underestimated. These non-recoverable management costs can amount to 20 to 35 percent of the net cold rent. An overview of the key items:
Maintenance Costs: For properties older than 32 years, it is advisable to set aside approximately €11.50 per square metre annually.
Management Fees: An external property management service costs between €200 and €500 per residential unit per year, depending on size.
Risk of Rental Loss: As a landlord, you bear the risk of payment defaults or vacancies between tenancies.
Legal Disputes: Disagreements with tenants can become expensive and often require legal assistance.
These factors significantly reduce your net yield and must be considered when determining how to set the rental price.
Costs and Obligations When Selling
Selling is a one-time process, but it also involves costs. Plan for the following expenses:
Estate Agent's Fee: Typically, the buyer and seller share the costs, with up to 3.57% of the sale price falling to you.
Notary and Land Registry Costs: These amount to about 1.5 to 2.0% of the notarised purchase price.
Energy Performance Certificate: A valid energy performance certificate is legally required for sale and must be commissioned by you.
Valuation: A professional valuation of the property provides a solid basis for negotiation and maximises your proceeds.
The biggest financial pitfall when selling, however, can be capital gains tax. This directly leads to tax considerations, which often tip the balance.
Tax optimisation: Speculation period and advertising expenses as key
The tax treatment is often the decisive factor in determining whether renting or selling is more profitable. The legislature sets clear deadlines and rules. A wrong assessment can cost you tens of thousands of euros.
If you sell a property that you have not lived in yourself within ten years of purchase, the so-called speculation tax on the profit will apply. The amount is based on your personal income tax rate and can be up to 45%. After the ten-year period, the sales profit is completely tax-free. An exception applies to owner-occupied properties: If you have lived in the property in the year of sale and the two preceding years, the tax is also waived. In the case of selling a rented house, this period is therefore particularly critical.
When renting out, you must pay tax on the rental income. However, you can deduct a variety of costs as advertising expenses and thus reduce your tax burden. These include interest on financing, maintenance costs, and the linear depreciation (AfA) of 2% per annum on the building value. These tax benefits for renting can significantly improve the return after taxes. Your personal situation and financial horizon are, therefore, the last pieces of the decision-making puzzle.
Your personal situation: effort, risk, and life planning
Apart from all the numbers, your personal capacities and life planning are crucial. Renting out a property is not purely passive income. It requires active management, from finding tenants to handling service charge billing, and organising repairs. This time commitment is often underestimated, and can quickly reach several hours per month. If you lack the time or patience for tenant communications, selling may be a less stressful solution.
Your risk tolerance also plays a significant role. As a landlord, you bear the risk of rent defaults, vandalism, or costly unforeseen repairs. Selling, on the other hand, offers a clear conclusion and financial planning security. Consider these financial decisions carefully. If you are uncertain, a neutral, data-driven analysis can help. The ImmoGPT chat by Auctoa can answer initial questions and provide a preliminary assessment around the clock.
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The question "Rent or sell?" can only be answered individually. Selling offers quick liquidity and a clear closure, but is only optimal tax-wise after a 10-year period has elapsed. Renting promises long-term income and value appreciation, but requires constant management effort and involves financial risks. Your best strategy arises from the intersection of market data, tax conditions, and your personal life situation. Use tools like the comparison calculator for selling or renting to objectively evaluate your options. An informed decision secures your wealth for the future.
Additional useful links
Statistisches Bundesamt provides comprehensive information on construction prices and the property price index in Germany.
Statistisches Bundesamt offers detailed tables on house and building land prices.
Statistisches Bundesamt delivers basic data on the consumer price index.
Deutsche Bundesbank presents its indicator system for the residential property market.
Deutsche Bundesbank offers an article on the development of residential property prices and rental pressure in 2023.
ifo Institut provides a press release on new housing construction in Europe.
Institut der deutschen Wirtschaft Köln (IW Köln) offers a topic page on the real estate sector.
IW Köln presents a study on the housing market in 2025 and its development.
BVR publishes a study on the forecast of property price development.
FAQ
Is it more worthwhile to sell or rent an inherited house?
It depends on the community of heirs and the condition of the house. A sale offers a quick and clean distribution of proceeds. Renting can secure long-term income, but requires agreement and commitment in management. It is also crucial when the testator acquired the property, as this period is adopted for the speculative tax.
How does the condition of the property influence the decision?
A property in need of renovation requires significant initial investments for renting. These costs can make the sale more attractive, as the buyer takes on the renovation. On the other hand, a property in top condition is easier to rent at a good price and generates immediate income.
Can I change the decision later?
Yes, but with limitations. If you choose to rent, you can still sell later. Keep in mind that when selling to the tenant, their right of first refusal may apply and notice periods for personal use can be very long. A sale is final.
What role does the location of the property play?
The location is crucial. In growing regions with high demand, both a good rental yield and a significant increase in value are likely, making renting attractive. In structurally weak regions with vacancies, a quick sale might be the better option to minimize risks.
What is the three-object limit?
If you buy and sell more than three properties within five years, the tax office may classify you as a commercial real estate dealer. This means that not only income tax but also trade tax will apply to your profits. It is essential to consider this when planning your real estate strategy.
How can Auctoa help me with the decision?
Auctoa offers a fast, AI-powered, and neutral property valuation. We provide you with the current market value of your property and the potentially achievable rent. This data-driven basis allows you to objectively compare the financial attractiveness of selling and renting, enabling you to make the most profitable decision for you.
