Buying a flat to rent out in Germany: what the rent really leaves you

Investment flats are sold on their gross yield: a year's rent divided by the price. What reaches your account is smaller. The tenant does not pay every cost, flats stand empty between lets, the rent is taxed, and in many cities the law caps what you may charge. All of it is predictable; little of it is in the brochure.

1. Why people buy to let, and the risks

People buy a flat to let in Germany mostly for the tax: the interest and the building's wear count against the rent, and a sale after ten years is generally tax-free. It also takes work, and money you can reach.

1. The case is mostly tax

   The rent you receive is treated like ordinary income, but most of what letting costs you offsets it: the interest on the loan, maintenance and depreciation.

   Interest counts; repayment doesn't. The loan's interest is a cost against the rent.

   What counts is what the loan paid for: the flat you let, not the home you live in (§ 9 EStG).

   Depreciation. The building's wear, written off every year.

   2 to 3 % of the building's cost a year, more for a new build, though you spend nothing on it (§ 7 EStG). The land isn't written off. Old or new shows what each allows.

   A loss counts against your salary. On paper, with real tax saved.

   Interest and depreciation often come to more than the rent in the first years. That loss generally lowers the tax on your other income: at a 42 % rate, each €1,000 of it saves about €420.

   Tax-free after ten years. A private sale's gain, generally.

   Sold within ten years of buying, the gain is taxed at your rate, and the depreciation you've claimed makes it larger. After them, it's generally tax-free (§ 23 EStG).

   The higher your tax rate, the stronger the case.

2. Borrowed money does most of the work

   Your own money pays the purchase costs and part of the price; the rent pays most of the loan, and the part it repays stays yours. It works both ways: if the interest costs more than the flat earns, the gap comes from your pocket every month.

3. Dealing with tenants

   Finding tenants, the rent, repairs and disputes are yours, unless a property manager does it for a monthly fee, which counts against the rent.

   Finding a tenant. Viewings, checks, the deposit and the move-in.

   Show the energy certificate at the viewing (§ 80 GModG, formerly the GEG; how to read it: the energy certificate guide). Landlords usually ask for a self-disclosure (Mieterselbstauskunft), payslips and a SCHUFA credit report. The deposit is at most three months' net cold rent, payable in three parts and kept apart from your own money (§ 551 BGB). You confirm the move-in in writing for the tenant's registration (§ 19 BMG).

   A defect lowers the rent. By law, until it's fixed.

   You have to keep the flat fit to live in (§ 535 BGB). Once the tenant reports a defect, such as heating that fails or mould, the rent drops by law to match while it limits their use, until it's fixed (§§ 536, 536c BGB).

   Redecorating. Often yours.

   Many lease clauses that put the redecorating on the tenant don't hold: one doesn't if the flat was let unrenovated without anything in return (BGH, VIII ZR 185/14). Then it's yours when the tenant moves out.

   Rent that isn't paid. Notice is possible; getting the flat back takes longer.

   Rent, or a large part of it, unpaid on two due dates in a row, or two months' rent unpaid over a longer time, allows notice without a notice period (§ 543 BGB). If the tenant doesn't leave, getting the flat back takes a court, which can take months.

4. Empty months and repairs

   There will be weeks between tenants, and repairs. The calculator allows for both, and you can change them.

   Empty months. Between tenants, and while you look.

   The calculator allows 2 % of the rent, as valuers do (ImmoWertV).

   Maintenance. The flat is yours; the building is shared.

   The kitchen, the bathroom and the floors are yours to renew: about €0.30 to €0.50 per m² a month is a common guide, more for an older flat. The building's repairs come through the Hausgeld and its reserve, and a bigger one the owners decide on can mean a special levy (Sonderumlage) on top.

   Renovations. How much decides how they count for tax.

   Ordinary repairs count in the year you pay them, and large ones can be spread over two to five years. Old or new has the detail.

5. The risks to weigh

   None of these is a reason not to buy. Each is a reason to run the numbers on your own figures, with a reserve.

   The monthly top-up. Paid from your salary, whatever happens to it.

   The rent rarely covers the whole loan payment at first. The top-up goes on through a job change or parental leave. People keep a reserve for it: the calculator shows how long yours would last.

   The rate when the fixed period ends. On a larger loan, if you repay little.

   What's still owed gets the rates of the day. People set the fixed period against when they might sell.

   The price. It can fall as well as rise.

   Buying costs roughly 10 % or more on top of the price, and selling costs more again, so a flat whose price doesn't move leaves less than went in. The calculator lets you set the price change yourself.

   One large asset. You can't sell part of it.

   Selling takes months and a notary, and the rent caps limit what the rent can do (section 7).

   Run your numbers →

2. Gross yield and net yield

The gross yield (Bruttomietrendite) is the annual cold rent (Kaltmiete, before heating and service charges) divided by the purchase price. Listings often give the inverse, a price multiple (Kaufpreisfaktor): 25 times the annual rent is a 4% gross yield.

The net yield (Nettomietrendite) divides the rent left after the costs you cannot pass on by everything you paid: the price plus the purchase costs — real estate transfer tax (Grunderwerbsteuer) of 3.5% (§ 11 GrEStG) to 6.5% depending on the state, notary and land registry fees, and any agent's commission.

An illustration, not a benchmark: a flat bought for €250,000 and let for €10,000 a year yields 4% gross. Add €25,000 of purchase costs, allow €2,500 a year for costs the tenant does not pay and the odd empty month, and the net yield is €7,500 on €275,000 — about 2.7%.

3. The costs landlords underestimate

• Hausgeld. A flat comes with a monthly charge (Hausgeld) to the owners' association (Wohnungseigentümergemeinschaft). Water, heating, cleaning and building insurance can be passed to the tenant as operating costs (Betriebskosten) if the lease provides for it (§ 2 BetrKV). The administrator's fee and repairs cannot: by law, management and maintenance are not operating costs (§ 1(2) BetrKV).
• The reserve. Part of the Hausgeld goes into the building's maintenance reserve (Erhaltungsrücklage, § 19(2) WEG). If it is too thin for a new roof or heating system, the owners' meeting can vote a special levy (Sonderumlage), which falls on you, not the tenant. The administrator's annual reserve report (Vermögensbericht, § 28(4) WEG) and recent meeting minutes show what is funded and what is planned. Fittings inside the flat — kitchen, bathroom, floor coverings — are generally yours to renew on top.
• Vacancy and re-letting. A change of tenant can mean an empty month or two, redecoration and an agent's fee: under the "whoever instructs pays" rule (Bestellerprinzip), a letting agent you instruct is paid by you (§ 2(1a) WoVermittG).
• Management. The building's administrator looks after the common parts only. Finding tenants, collecting rent and arranging repairs are your work, or an extra fee.
• A sitting tenant. Buy a flat that is already let and the lease passes to you as it stands (§ 566 BGB), current rent included.

Model calculations from sellers and lenders often allow little or nothing for upkeep.

4. How rental income is taxed

Rent is income from letting (Einkünfte aus Vermietung und Verpachtung, § 21 EStG). It is added to your other income (§ 2 EStG), taxed at your personal income tax rate, and declared on the rental schedule (Anlage V) of your tax return.

Tax falls on the surplus after deductible costs (Werbungskosten, § 9 EStG): mortgage interest — but not loan repayments — non-recoverable Hausgeld, repairs, management, what it costs to find a tenant, such as adverts or a letting agent, and depreciation (section 5). The notary and land registry fees for the bank's land charge (Grundschuld) are financing costs and count in the year you pay them (Income Tax Guidelines, H 21.2); those for the purchase itself join the price. A loss can generally be set against other income, such as salary (§ 2(3) EStG). For a flat let long-term, the tax office assumes you mean to make a profit, even through years of losses. Only on particular signs — selling or moving in within about five years with nothing but losses, say, or a rent between half and two thirds of the local level — does it ask for a long-term forecast, and it disallows the losses if that shows no eventual surplus. Below half the local rent, the letting counts as partly free and only the costs of the paid part are deductible (§ 21(2) EStG) (Federal Ministry of Finance, 8 October 2004).

Three timing rules catch new landlords out:

• Reserve payments count only when the association spends them on maintenance, not when you pay them in, as the Federal Fiscal Court (Bundesfinanzhof) confirmed in 2025 (IX R 19/24).
• Early renovation — within three years of buying, whose cost before VAT passes 15% of what the building cost you (its share of the price and purchase costs) — is not deducted at once but written off with the building (§ 6 Abs. 1 Nr. 1a EStG). Routine yearly upkeep doesn't count towards the 15%.
• An empty flat — before the first tenant, or between lets — still has deductible costs, as long as you are seriously trying to let it (Federal Ministry of Finance). Keep the adverts and a note of the viewings: the tax office can ask.

For a voluntary member of public health insurance, rental profit also counts towards contributions, up to the ceiling (§ 240 SGB V) — see our guide to health insurance for freelancers. And if you leave Germany and keep the flat, the rent and a sale within ten years stay taxable in Germany (§ 49 EStG).

5. Depreciation: what you can write off

Buildings wear out; land does not. Only the building's share of the price and purchase costs is written off through depreciation (Absetzung für Abnutzung, AfA). The split can be set out in the purchase contract, and the tax office checks it against a calculation tool from the Federal Ministry of Finance.

What you can write off depends on the flat. An existing flat, let or empty, goes by the year its building was completed. A new build can write off faster. And a large renovation in the first three years is added to the building's cost and written off with it (section 4).

The standard straight-line rates depend on when the building was completed (§ 7 Abs. 4 EStG):

• Completed in 2023 or later: 3% a year.
• Completed from 1925 to 2022: 2% a year.
• Completed before 1925: 2.5% a year.

Some new builds qualify for more. A declining-balance rate of 5% a year is available where construction began, or the purchase contract was signed, between 1 October 2023 and 30 September 2029, for flats bought by the end of their year of completion (§ 7 Abs. 5a EStG). New rental flats that meet a high energy standard and a building-cost cap, and are then let for ten years, can add a special allowance of up to 5% a year for four years (§ 7b EStG). Neither raises the total you can write off; both bring it forward.

6. Selling: the ten-year rule

A property sold within ten years of buying it is a private sale (privates Veräußerungsgeschäft, § 23 EStG), and the gain is taxed at your personal rate. After ten years it is generally tax-free. The period runs between the two notarised contracts — purchase and sale — not from the handover or the land register entry (Income Tax Guidelines, H 23).

Two details raise the bill. Depreciation already claimed is deducted from the purchase cost, so more of the price counts as profit. And the exemption for homes the owner has lived in — throughout, or in the year of sale and the two years before — does not cover a flat that was let.

7. Rent control: the Mietpreisbremse

In areas a state government has designated as tight housing markets, the rent agreed at the start of a tenancy may not exceed the local comparative rent (ortsübliche Vergleichsmiete, usually shown in the local rent index, Mietspiegel) by more than 10% (§ 556d BGB). This rent brake (Mietpreisbremse) now runs to the end of 2029 (extended in July 2025), and each state decides which towns it covers.

The exceptions: a flat first used and let after 1 October 2014, the first letting after a comprehensive modernisation (§ 556f BGB), a previous tenant's higher rent, which may be kept, and the cost of a modernisation in the three years before the letting, which may be added on top (§ 556e BGB). A landlord relying on one must tell the tenant in text form — an email will do — before they sign; told later, it counts only two years after the tenant is told (§ 556g(1a) BGB). A tenant who complains in text form within 30 months of the start, while the tenancy runs, can reclaim everything overpaid since the start; later, only what falls due after the complaint (§ 556g BGB).

Existing tenancies have their own cap: the rent can rise towards the local comparative rent, but by no more than 20% in three years, or 15% in designated areas (§ 558 BGB). A government bill that would cap furnishing surcharges and index-rent rises in tight markets and limit short lets to six months is before the Bundestag: first reading 9 July 2026, committee hearing 14 October 2026. It is not law yet. A yield worked out on a rent the law does not allow is not a yield.

8. Already let, empty or new

Already let. A sale doesn't end a lease. Buy a flat that is let and you step into the tenancy as it stands: the rent, the terms and the deposit (§ 566 and § 566a BGB). Moving in yourself takes a notice for your own use, which needs a legitimate interest, such as needing the flat for yourself or your family, and months of notice (§ 573 and § 573c BGB). A flat that was let before it became an owned flat can't be claimed that way for three years from its first sale as an owned flat, and up to ten where the state has named the area (§ 577a BGB).

Empty. You choose the tenant and set the rent, within the rent brake (section 7). The costs count for tax while you look (section 4), and a renovation before the first tenant counts at once unless it passes the 15% line.

New. The rent brake doesn't cover a flat first used and let after 1 October 2014 (§ 556f BGB), and a new build can be written off faster (section 5).

In more detail: old or new, and the rent you can charge, and a flat that's already let.

9. Financing a rental versus a home

Interest on a loan for a flat you let is a deductible cost; interest on a loan for the home you live in is not, because that home produces no taxable income. What counts is what the borrowed money actually paid for, not which property secures it (Income Tax Guidelines, H 21.2).

Borrowing magnifies the result in both directions. If the interest rate is above the flat's net yield, each borrowed euro costs more than it earns, and the gap comes out of your own pocket every month — including months when the flat is empty or the tenant does not pay.

Landlords often repay as little as lenders allow, commonly 1% a year: the interest counts for tax and the repayment does not. Some plan to sell after ten years, when the gain is generally tax-free, and clear the loan from the sale. More is then still owed when the fixed rate ends.

Timing matters more than for a home. If the fixed-rate period (Zinsbindung) ends before you expect to sell, the follow-on rate is unknown today; our guide to a fixed rate ending explains that moment. The purchase itself follows the steps in our guide to buying a home, and our guide to mortgages for foreigners covers borrowing on a residence permit.

10. Your year as a landlord

Each year the tax return gets the rental schedule (Anlage V): the rent received, and each deductible cost from section 4. A tax adviser (Steuerberater) can file it and set up the depreciation from the first year; Klarbooks, our sister service, finds one who works in English.

• The service-charge statement. Once a year, the tenant gets a statement of the service charges they paid in advance. It has to reach them within twelve months of the end of the period it covers, or you can't claim more (§ 556 Abs. 3 BGB). It is built on the administrator's yearly Hausgeld statement.
• The deposit. At most three months' net cold rent, kept apart from your own money in a savings account, with the interest the tenant's (§ 551 BGB).
• Who looks after what. The owners' administrator looks after the common parts only. The flat itself, the tenant and the repairs inside are yours, or a property manager's for a monthly fee, which counts against the rent.

The short version

A rental is judged on its net yield: the tenant does not pay the administrator, the reserve or the repairs, and empty months cost money. Rent is taxed at your personal rate after interest, costs and depreciation — 2% a year for most existing flats, 3% for those completed since 2023, and faster for some new builds — and a sale within ten years is taxed too. A let flat comes with its tenant; an empty or new one you let yourself. In designated areas, new rents are capped at 10% above the local comparative rent until the end of 2029, and the loan has to be serviced whether or not the rent arrives.

Primary sources checked on 26 October 2026: the statutes and official pages linked above.