Key figures real estate investment - David was 32 years old when he inherited a large sum of money from his grandmother. He had been toying with the idea of investing his money wisely for a long time - and the idea of investing in a residential property was not only lucrative for him, but also made sense in the long term. But how do you actually know whether a property is a good investment? David decided to take a close look at the Key figures for real estate investments and this blog article takes you on his journey.
The gross return: the first look at profitability
David first came across the Gross return. This key figure shows what percentage of the purchase price is recouped through the annual net rent. The formula is simple:
Gross yield = (annual net rent / purchase price) x 100
A value of 4-6 % is considered solid for residential real estate in many regions, whereby location and condition are decisive. In prime locations such as Vienna, however, gross yields can also be well below 3 %.
Tip: The gross yield is well suited for an initial comparison between properties. However, it says nothing about running costs or financing.
The net return: reality check after deductions
Once David had calculated the gross return, he wanted to know what was really left over at the end. The Net return takes into account operating costs, administration, vacancy and maintenance:
Net yield = ((annual net rent - annual costs) / purchase price) x 100
This key figure is much more meaningful and shows whether the investment is worthwhile even after deducting all running costs. Please note: Tax effects, depreciation and allowances are not included in this calculation. not considered. (cf. immobilienverkauf24.de - Yield)
Cash flow: positive month after month
For David, it was particularly important that there was something left over at the end of the month. That's why he calculated the monthly cash flow:
Cash flow = rental income - current expenses - loan installment
A positive cash flow means that the property pays for itself - or even generates a profit. In the early days, a slightly negative cash flow is possible, especially with annuity loans with a high interest component.
Note: A slightly negative cash flow can be acceptable if strong value growth is expected. However, it should become positive after a few years at the latest.
The factor: purchase price valuation at a glance
The so-called Factor is particularly popular among professionals. It indicates how often the annual rent is included in the purchase price:
Factor = purchase price / annual net rent
A factor of 20 means that the property will pay for itself in 20 years through rental income. The lower, the better. In Vienna, the factor is often above 30 in good locations and below 20 in peripheral locations (cf. Volksbank - Factor)
The return on equity: leverage through financing
David had no intention of investing his entire inheritance. He wanted to finance part of it - which is why the Return on equity particularly interesting:
Return on equity = (annual profit / equity employed) x 100
This key figure can be significantly higher than the net return due to debt financing. Prerequisite: The interest rate is low and the cash flow is positive.
Tip: If you calculate carefully, you can generate a high return with little equity. Well thought-out financing is crucial. Taxes and depreciation are not yet included in the calculation.
Checklist: David should keep an eye on these figures
| Key figure | Formula & Meaning | Ideal value for residential real estate |
| Gross return | (rent/purchase price)x100 | 4-6 % - regionally variable |
| Net return | (rent - costs)/purchase price x100 | over 2 % |
| Cash flow | Income - expenditure - loan installment | Positive or soon balanced |
| Factor | Purchase price / annual rent | under 25 - depending on location |
| Return on equity | Profit / equity x100 | significantly above savings interest |
Key takeaways - Key figures for real estate investment
- Gross return is good for quickly comparing objects.
- Net return takes realistic costs into account.
- Cash flow shows whether a plus remains each month.
- Factor helps with the purchase price valuation.
- Return on equity is particularly important for financing.
- Change in value (total return) rounds off the long-term view.
Conclusion: David now knows what's important
Thanks to his intensive research, David now knows the most important key figures for real estate investments. He feels more confident and can make well-founded comparisons between different properties. Whether you want to invest or are already a landlord: It's always worth taking a look at these figures.
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Sample calculation: David's first investment
After weeks of research, David has found his first apartment: a 50 m² 2-room apartment in Salzburg for 190,000 euros. The net monthly rent is 720 euros. Operating costs and administration amount to around 1,800 euros per year. David brings in 70,000 euros of equity and finances the rest with an annuity loan with 3.5 % interest and 2 % repayment.
His key figures at a glance:
- Net annual rent: 720 € x 12 = 8.640 €
- Gross return: (8.640 / 190.000) x 100 = 4,55 %
- Annual costs: 1.800 €
- Net return: ((8.640 - 1.800) / 190.000) x 100 = 3,6 %
- Loan installment (annuity over 25 years): approx. 640 €/month (interest portion in the first year ~420 €)
- Cash flow: 720 € - 150 € (monthly costs) - 640 € = -70 €
- Factor: 190.000 / 8.640 = 22
- Return on equity: ((8,640 - 1,800 - 5,040 interest portion) / 70,000) x 100 = 2,6 % (before taxes)
Conclusion: Even if the cash flow is negative in the first year, David has found a solid investment with development potential. Thanks to a realistic assessment of the key figures, he can make a conscious decision and plan for the long term.
Frequently asked questions about real estate investment key figures (FAQ)
What is a good gross yield for residential real estate?
A gross yield of between 4-6 % is considered good. In prime locations it can be lower, in peripheral locations higher.
How do you calculate the factor for a property?
Factor = purchase price / annual net rent. A factor below 25 is usually considered attractive, depending on the region.
Why is return on equity important?
It shows how efficiently the capital invested is working. It can be significantly higher than the total return, particularly in the case of partial financing.
What is a good cash flow in real estate?
Positive cash flow means that the rental income still generates a surplus after deducting all costs and the loan installment - ideal for long-term security.
How does the net yield help me with my investment decision?
It provides realistic information about the effective yield, as it includes all running costs.
