Does the apartment pay for itself? How to calculate rental property cash flow in Germany

Often not, at least before tax in the early years. At current mortgage rates and typical rents in Berlin, Dresden and Leipzig, many financed apartments need a monthly top-up from the owner. That does not make them poor investments. It does mean you should know the figure before you buy, and it should come from a transparent calculation rather than an advertised yield.

Rental property cash flow is the money left each month after the rent has covered the loan and every cost the owner carries. It is one of three numbers that are often blurred together. The other two are taxable income and equity growth. This guide keeps them apart.

A German lease usually states two amounts:

• Cold rent (Kaltmiete or Nettokaltmiete): the rent for the apartment itself.
• Operating-cost advance (Nebenkostenvorauszahlung): a monthly payment towards heating, water, waste, cleaning and similar costs. Together with the cold rent it forms the warm rent (Warmmiete).

The advance is not income for the owner. It passes through to pay the costs it covers, and it is reconciled each year in the operating-cost statement (Nebenkostenabrechnung).

There are two correct ways to calculate cash flow:

1. Cold-rent method. Start with the cold rent and subtract only the costs you cannot recover from the tenant.
2. All-receipts method. Count the cold rent and the tenant's advance as receipts, then subtract every payment, including the full service charge.

Both must reach the same answer. The common errors are mixing them: starting with cold rent and then subtracting the full service charge understates the result, while starting with warm rent and forgetting the operating costs overstates it.

If you buy an apartment in a building with several owners, you pay a monthly service charge (Hausgeld) to the owners' association (Wohnungseigentümergemeinschaft, or WEG). It is based on the association's annual economic plan (Wirtschaftsplan), and the association must also produce annual accounts (Jahresabrechnung) and an asset report (§ 28 WEG).

Hausgeld contains two kinds of cost:

• Recoverable operating costs. These are listed in the Operating Costs Ordinance and include water, heating, waste disposal, building cleaning, building insurance, caretaker and lift costs (§ 2 BetrKV). They can be passed to the tenant if the lease provides for it.
• Owner-paid costs. Administration fees and maintenance or repair costs are not operating costs (§ 1(2) BetrKV). The WEG administration fee and contributions to the maintenance reserve (Erhaltungsrücklage) therefore stay with the owner.

A listing that shows only the total Hausgeld does not tell you enough. Ask for the current economic plan and the latest annual accounts. Both usually split recoverable (umlagefähig) from non-recoverable (nicht umlagefähig) costs.

A German mortgage payment (Annuität) combines interest and principal repayment (Tilgung). The monthly amount stays the same during the fixed-rate period. Over time, the interest share falls and the principal share rises.

Both parts leave your account, so both belong in cash flow. Principal repayment reduces your debt and builds equity, which matters for your wealth. It does not make a negative cash flow positive.

Management. The WEG administration fee covers management of the building. Management of your specific rented unit, including rent collection, tenant communication and the annual operating-cost statement, is a separate service (Sondereigentumsverwaltung) with a separate fee if you use it. See landlord responsibilities in Germany.

Reserves. The WEG reserve funds the common parts of the building, such as the roof, façade, staircase and shared heating system. Items inside your unit, such as the kitchen, bathroom fittings and floor coverings, are your responsibility. Budget one allowance for the unit's interior. Do not add a second allowance for the building on top of your WEG contribution, or you will count the same roof twice.

The reverse also applies. A low WEG reserve does not mean low future costs. It can mean a special levy (Sonderumlage) later, which is why the owners' meeting minutes matter. See the checks to make before buying.

Vacancy and repairs do not arrive evenly. A monthly allowance for each spreads the expected cost across the year. In the month they happen, the cost arrives in full and is paid from your property reserve. Our example uses about 2 per cent of the cold rent for vacancy, roughly one empty week a year, and €40 a month for repairs inside the unit. Both are planning assumptions.

Base the calculation on the rent in the current lease, not the advertised market rent. Rent increases in an existing tenancy are limited by law (§ 558 BGB), and the lease may specify an index-linked or stepped rent instead. For new lettings, the rent brake (Mietpreisbremse) generally limits the starting rent to 10 per cent above the local comparative rent, with exceptions (§ 556d BGB). It currently applies across Berlin until 31 December 2029 (Berlin Senate) and in Dresden and Leipzig until 30 June 2027 (Saxon State Government).

Inputs

Property tax is assumed to be recovered from the tenant and is left out of both sides.

Monthly cash flow, cold-rent method (first month)

Reconciliation, all-receipts method. Receipts are €900 cold rent plus €210 advance, or €1,110. Payments are €330 Hausgeld, €1,026 loan, €35 management and €60 allowances, or €1,451. The difference is again −€341.

In plain terms: this apartment needs about €341 a month from the owner's other income, or €4,092 in the first year.

The same apartment produces three distinct first-year results.

How the taxable result is reached. Cold rent of €10,800, less first-year interest of €7,918, WEG administration of €360, other non-recoverable Hausgeld of €240, unit management of €420 and building depreciation of €3,999. Depreciation assumes the building accounts for 75 per cent of the €266,568 total cost, written off at 2 per cent a year for a building completed between 1925 and 2022 (§ 7(4) EStG). The tenant's advance and the recoverable costs cancel out.

Three items are excluded. Principal repayment is not a deductible cost. The allowances are budget provisions, and actual repairs are considered when paid. Payments into the maintenance reserve are generally deductible only when the association spends them on maintenance, not when you pay them (BFH, IX R 19/24, 14 January 2025).

The tax effect of about €855 does not refund the €4,092 paid in. After tax, the owner still contributes around €3,237 in the first year, or about €270 a month on average. The detail belongs with a tax adviser; see rental property tax benefits in Germany.

Definitions vary between sources. These are the ones used here.

Advertised yields are usually gross. The gap between 4.5 per cent and a negative cash-on-cash return is the reason to run the full calculation.

The vacant month shows why allowances and reserves differ. The €20 allowance spreads the cost over time. The €1,391 is what actually leaves your account when the apartment is empty. For longer interruptions, see what happens if your tenant stops paying. Refinancing risk at the end of the fixed-rate period is covered in our stress-test guide.

A monthly top-up can be a deliberate choice if it fits your household budget with room to spare, both your property and household reserves are in place, you expect to hold the property for many years, and you accept that equity growth depends on repayments and on a property value that can also fall. Our guide to how much money you need to buy a rental property shows how to test the household side.

It is not reasonable if the plan relies on a tax refund arriving monthly, on raising the rent to an advertised level, or on your entire monthly surplus.

The rent is only the starting point. What matters is what remains after financing, ownership costs and tax.

What is a good cash flow for a rental property in Germany?

There is no universal figure. Many financed purchases are negative before tax in the early years. The useful question is whether the top-up is sustainable for your household in a difficult month, not only in an average one.

Does the tenant pay the Hausgeld?

Partly. Recoverable operating costs can be passed on through the operating-cost advance if the lease provides for it. The WEG administration fee and maintenance reserve contributions stay with the owner.

What is the difference between gross and net rental yield?

Gross yield divides annual cold rent by the purchase price. Net yield deducts the costs the owner carries and divides by the price plus purchase costs. Check which definition an advertised figure uses.

Should principal repayment count in cash flow?

Yes. It leaves your account every month. Show the equity it builds separately, as wealth rather than income.

Can I raise the rent to the market level after buying?

Not automatically. Increases in an existing tenancy are limited by law and by the lease terms, and new lettings in Berlin, Dresden and Leipzig are subject to the rent brake.