How much appreciation does your investment need to break even?

On the fictional Leipzig apartment used across this series, the price has to rise from €240,000 to about €259,400 over ten years, 0.8 per cent a year, just to return every euro the owner put in before tax. After tax at a 42 per cent marginal rate, the figure is about €252,700, or 0.5 per cent a year. If the price stays flat, the owner loses €18,678 before tax. This is the reverse of a projection: it does not say what the flat will sell for, only how much of the plan rests on the sale.

Below: how to reverse-calculate the figure, how it moves with the holding period and ordinary setbacks, and why breaking even is not earning a return. IRR is explained in our IRR guide, the monthly budget in our cash-flow guide.

The break-even sale price is the price at which the net sale proceeds exactly repay all the cash you contributed.

• Cash contributed: the down payment and every purchase cost on day one, plus each year's top-up from your own pocket (net of any surplus years). In the after-tax version, less the tax relief you received and plus any tax you paid.
• Net sale proceeds: the sale price less selling costs, the remaining loan, any early repayment compensation and any tax on the gain.

At that price, the equity multiple is 1.0 and the internal rate of return (IRR) is zero. Principal repayment sits inside each year's loan payment and comes back through the smaller loan repaid at the sale; adding it again as "equity growth" would count it twice. Time value is left out on purpose and handled at the end.

Illustrative example. Fictional figures, not a forecast, offer or valuation. Apartment A with the same inputs as our IRR guide: a two-room flat in Leipzig in a building completed in 1996. Price €240,000; purchase costs €26,568 (11.07 per cent, including €1,200 of notary and land-registry costs for the bank's land charge); loan €216,000 at an assumed 3.7 per cent nominal, fixed for ten years, 2 per cent initial repayment, €1,026 a month. Cold rent €900 a month, rising 1.5 per cent a year, less a vacancy allowance of €20 a month. Owner costs €2,340 a year (non-recoverable service charge, or Hausgeld, €1,440; unit management €420; repair allowance €480), rising 2 per cent a year. Purchase contract notarised Thursday 15 January 2026; benefits and burdens pass on 1 April 2026; years run April to March, with flows counted at each year end. Sale at the end of year 10: contract notarised Tuesday 12 February 2036, benefits and burdens passing 1 April 2036, when the fixed rate ends, so no early repayment compensation. The seller pays an agent 3.57 per cent including VAT; no other selling costs. Tax: an assumed 42 per cent marginal rate on the rental result (for 2026, a single filer's rate from €69,879 of taxable income, § 32a EStG), income tax only, for an owner with enough other income taxed in Germany at that rate. Inflation: 2 per cent a year, the ECB's medium-term target, used as an assumption, not a forecast.

Year-by-year flows and the tax calculation are in the IRR guide. That guide nets year 10's top-up against the sale, so it shows €83,255 paid in before tax; adding year 10's €3,034 gives the €86,290 here.

Every input should be in the projection, the loan offer or the purchase documents.

If the sale contract falls inside the ten-year period, step 6 changes; see the § 23 section below.

The after-tax price is lower because tax relief has already returned €6,447 of the cash.

In nominal terms, the example needs 0.78 per cent a year before tax and 0.52 per cent after tax. At an assumed 2 per cent inflation, that is a real fall of about 1.2 per cent a year: the flat could lose real value every year and still hand back every euro. Those euros arrive ten years later, though, when each buys about 18 per cent less. That is the time-value question, covered last.

A second check uses the price-to-rent ratio rather than a forecast. Today the price is 22.2 times the annual cold rent; the break-even price is 20.7 times the rent assumed for year 11. The next buyer can pay a somewhat lower multiple and you still recover your cash, provided the assumed rent increases happen. Whether a buyer in 2036 pays that multiple is a market question this article does not answer; our market timing guide explains why dated data does not settle it.

With no price growth, the owner recovers €67,612, mostly the €52,180 of principal repaid over the decade, and loses €18,678 before tax, about 22 per cent of the cash put in. The loss is the friction of owning: €35,136 of purchase and selling costs, €70,940 of interest and €25,622 of owner costs, against €113,021 of rent after vacancy. Break-even appreciation is simply the price rise that covers this. A rise of €19,369 leaves €18,678 after commission, because the agent is paid on the higher price too.

Each line changes one assumption from the base case unless stated. Owner costs: all categories rise 4 per cent a year instead of 2. Special levy (Sonderumlage): €6,000 in year 5, assumed spent on repairs that year and deducted then. Vacancy: three empty months in year 6 on top of the monthly allowance, losing €2,909 of cold rent and costing €696 of recoverable charges the owner pays while the flat is empty (€210 a month in today's money). The before-tax columns ignore all income tax, so the § 23 line changes only after tax.

Every extra euro of top-up adds about €1.04 to the required price, because commission is paid on it too. Over ten years, one-off events weigh more than slow drift: the levy raises the bar more than doubling the cost growth. Together, the costs, levy and vacancy lift the required growth from 0.8 to 1.3 per cent a year, 60 per cent more reliance on the sale.

Selling inside ten years: § 23 tax

The last line is the costliest and the easiest to avoid. For a privately held property, a sale is taxable if no more than ten years lie between acquisition and sale (§ 23(1) sentence 1 no. 1 EStG), measured from contract date to contract date, as explained in selling after ten years. The gain is the price less selling costs and the acquisition cost, and the acquisition cost is reduced by the depreciation (Absetzung für Abnutzung, AfA) claimed (§ 23(3) sentences 1 and 4). Here that is €265,368 less €39,805 of AfA. A total gain from private sales below €1,000 in the calendar year is tax-free; from €1,000, all of it is taxed (sentence 5).

Signed two days before the anniversary, a sale at €252,684 would produce a gain of €18,100 and tax of €7,602; covering the tax lifts the required price to €266,276, where the tax is €13,107. To reproduce it, replace step 6: take the step-5 total (€243,663), subtract 42 per cent of the reduced acquisition cost (€225,563), and divide by 0.9643 × 0.58. This applies the law in force on 4 October 2026; a bill to abolish the period for let property was pending at drafting (BT-Drs. 21/6637).

Same inputs. Five years: sale contract notarised Tuesday 11 February 2031, benefits and burdens passing 1 April 2031, inside both the § 23 period and the fixed-rate period. Fifteen years: the €163,820 is refinanced in April 2036 to finish on the loan's original end date, about 220 months later, at an unchanged 3.7 per cent (about €1,026 a month) or at 6 per cent (€1,229 a month), with no refinancing fees; sale contract notarised Tuesday 12 February 2041. Rent and costs keep rising at 1.5 and 2 per cent a year.

The five-year after-tax price includes €8,362 of § 23 tax and excludes early repayment compensation.

Five years needs more than three times the annual growth of ten: transaction costs are spread over half the time, the loan has barely fallen, and the gain is taxed. The fixed rate also runs to 2036, so repaying in 2031 can oblige you to compensate the lender (Vorfälligkeitsentschädigung, § 490(2) BGB). Its size depends on rates at the time; each €1,000 adds about €1,037 to the required price, before or after tax, as on a taxable sale it counts as a selling cost (BFH, IX R 42/13). If an early sale is plausible, ask the lender how the figure is calculated.

Fifteen years at an unchanged rate recovers the cash even at a slightly lower price: principal repayment (about €6,863 a year in years 11 to 15) outpaces the top-ups (about €2,660), and rents are assumed to keep rising. At 6 per cent, €12,171 of extra top-ups adds €18,514 to the required price. A longer hold lowers the bar but ties up more cash for longer: €99,589 against €86,290.

Breaking even means an IRR of 0 per cent: every euro back, nothing earned, much of it years after you paid it. Our IRR guide explains the rate. The table asks what price delivers a given IRR on the same ten-year cash flows.

Each row discounts every dated flow at the stated rate, so time value is counted exactly once. Three shortcuts double count:

• Adding inflation to a nominal target. A 4 per cent nominal IRR already includes compensation for 2 per cent inflation. Asking for 4 per cent plus 2 per cent is asking for 6 per cent: €313,391, or 2.7 per cent a year. Use nominal flows with a nominal target, or real flows with a real one, never a mix.
• Adding the target to the break-even rate. The growth needed for a 4 per cent IRR is 2.0 per cent a year, not 0.78 plus 4.
• Counting principal or tax relief twice. Principal is already in the top-ups and the smaller loan; tax relief is already netted in the after-tax contributions.

• What sale price does the projection assume, after how many years, and what annual growth does that imply?
• Does it deduct the selling commission and the remaining loan from the lender's schedule?
• What happens at zero growth: how much of your cash is lost?
• What growth is needed if you have to sell after five years, including § 23 tax and early repayment compensation?
• What refinancing rate is assumed if you hold beyond the fixed-rate period?
• Is the target return nominal or real, and is the required growth above or below inflation?

Alpha Minoris's Buyer's Agent service can work through these questions with you at its readiness stage, before any search, against your budget, borrowing capacity and reserves; waiting can be the outcome. When reviewing specific properties in Berlin, Dresden or Leipzig, it tests each proposal's exit assumptions the same way, and you need not live there. It tests assumptions: it does not value property, predict prices or guarantee a resale price, and the tax lines belong with your tax adviser (Steuerberater).

If a proposal shows a sale price, bring it with the loan offer and work out the price at which you would simply get your money back. Discuss your first rental property with Alpha Minoris.