Cash Flow Calculator: calculate the cash flow of investment property in Germany

Cash flow is the key metric for every property investor. It describes the actual flow of money left over after deducting all costs from the rental income. Specifically: cash flow = net cold rent (Kaltmiete) minus loan payment (interest + repayment) minus non-recoverable operating costs minus maintenance reserve minus management costs minus tax on the rental income.

A positive cash flow means the property pays for itself and puts money into your account every month. A negative cash flow means you have to top it up each month (a so-called contribution). Both scenarios can make sense, depending on your investment strategy and personal situation. A positive cash flow offers financial security and flexibility. A negative cash flow can be acceptable if you are counting on value appreciation and on building wealth through repayment.

Why is cash flow more important than the gross rental yield? The gross rental yield accounts for neither financing costs nor taxes, nor ongoing operating costs. It is a superficial indicator. Cash flow, by contrast, shows the real monthly burden or the real monthly return. Only with the cash flow do you know whether your investment costs you money or makes you money. Especially for investors holding several properties, the overall cash flow is decisive: it determines whether you can finance further properties or whether your liquidity is reaching its limits.

It pays to distinguish between cash flow before tax and cash flow after tax. The tax effect can change the cash flow dramatically: depreciation (AfA, Absetzung für Abnutzung) and the deduction of mortgage interest as income-related expenses reduce the tax burden. In many cases a negative cash flow before tax becomes a much smaller shortfall, or even a surplus, after tax thanks to the tax saving.

In practice, various return metrics are used. They differ considerably in how meaningful they are. The following table compares the three most important metrics and the price-to-rent factor.

The equity return (Eigenkapitalrendite, EKR) measures how much return your actually invested capital earns. It is the most important metric for assessing your personal investment performance. The formula is:

ER = (cash flow after tax + repayment + value appreciation) / invested equity × 100

The leverage effect is the reason real estate is so popular as an investment. By using borrowed capital, the equity return can be considerably higher than the total return on capital. You finance most of the property with a bank loan but benefit from the entire value appreciation and the entire repayment. Put simply: you invest €60,000 but control assets worth €250,000.

Worked example: An apartment costs €250,000. You contribute €60,000 of equity (closing costs plus a share of the purchase price). The property appreciates by 2% per year (€5,000), the cash flow after tax is €600 per year and the repayment is €3,800 per year. Your equity return: (600 + 3,800 + 5,000) / 60,000 × 100 = around 15.7%. For comparison: the total return on the purchase price is only 3.8%.

But beware: leverage works in both directions. If interest rates rise, rents fall or unexpected costs arise, the negative leverage effect can kick in. The borrowed capital then amplifies the losses instead of the gains. The higher the share of borrowed capital, the greater the risk.

In addition to the equity return, many investors use the cash-on-cash return. It measures only the annual cash flow relative to the invested equity, without repayment and value appreciation. It therefore shows how much liquid return your investment generates, that is, real money in your account. A cash-on-cash return of 3 to 5% is considered solid by many investors. If it is below 0%, you have to top it up every month. Together, both metrics (equity return and cash-on-cash return) give you a complete picture of your investment performance: the equity return shows the overall wealth build-up, while the cash-on-cash return shows the actual liquidity effect.

Depreciation (AfA, Absetzung für Abnutzung) is one of the biggest tax advantages of rented property. Under § 7 (4) of the German Income Tax Act (EStG), you may depreciate the building share of your property on a straight-line basis over its useful life. The depreciation rates depend on the year of construction:

• Built before 1925: 2.5% per year over 40 years
• Built 1925 to 2022: 2.0% per year over 50 years
• Built from 2023: 3.0% per year over 33⅓ years

What matters is the depreciation base: only the building share is depreciated, not the land share. In practice the land share is often set at 20 to 30%. You can determine the actual land share via the standard land value (Bodenrichtwert) and the plot size. Alternatively, a tax advisor can determine the allocation ratio using the German Federal Ministry of Finance's guidance tool. A higher building share means more depreciation and therefore a bigger tax saving.

Worked example: Purchase price €250,000, building share 75% (= €187,500), built in 2020 (depreciation rate 2.0%). The annual depreciation is: €187,500 × 2.0% = €3,750 per year. At a personal tax rate of 42% you save €1,575 in tax per year.

In addition to depreciation, mortgage interest is fully deductible as income-related expenses. On a loan of €200,000 at an interest rate of 3.5%, that is around €7,000 of deductible interest in the first year. Together with depreciation, the deductible expenses can exceed the rental income. In that case a tax loss from renting and leasing arises, which can be offset against other income (e.g. salary). This loss offsetting (Verlustverrechnung) lowers your overall tax burden and improves your cash flow after tax.

A common misconception: repayment is not tax-deductible. Repayment is a reallocation of assets (debt becomes equity), not an expense. Only the interest portion of the loan payment reduces the tax burden. Because the interest portion decreases over the term while the repayment portion increases, the tax advantage shrinks year by year. This effect means the cash flow after tax worsens over time, even if the rent stays constant. At the same time, the rising repayment builds equity faster, which improves your overall return.

Besides depreciation and interest deduction there are further deductible items: travel costs to the property, account fees for the rental account, costs for property management, legal protection and tax advice. In total, these items can considerably reduce the taxable surplus. Our calculator accounts for the most important items automatically.

A fully worked example shows how cash flow, taxes and equity return interact. Assumptions: a 50 m² apartment in München, purchase price €250,000, built in 2018, monthly cold rent €850. The closing costs in Bayern come to around 9% (3.5% transfer tax, 2% notary and land registry, 3.57% agent).

Financing and costs: Equity €60,000 (closing costs €22,500 plus €37,500 own share). Loan €212,500, interest rate 3.8%, repayment 2.0%. Monthly loan payment: €1,028. Non-recoverable costs: €120/month (maintenance, management, vacancy risk).

Cash flow before tax: €850 (rent) − €1,028 (loan payment) − €120 (NRC) = −€298 per month. Before tax, the apartment therefore costs you just under €300 a month.

Tax saving: Annual rental income €10,200. Deductions: interest €8,075 (in the first year), depreciation €3,750 (€250,000 × 75% × 2%), NRC €1,440. Tax loss: 10,200 − 8,075 − 3,750 − 1,440 = −€3,065. At a 42% tax rate, that gives a tax refund of around €1,287 per year, or €107 per month.

Cash flow after tax: −€298 + €107 = −€191 per month. The actual monthly burden is reduced considerably by the tax saving.

Equity return: Despite the negative cash flow, the equity return is positive. Repayment in the first year: around €4,250. Value appreciation (2%): €5,000. Cash flow after tax: −€2,292. ER = (−2,292 + 4,250 + 5,000) / 60,000 × 100 = around 11.6%.

Conclusion: A negative cash flow is not automatically a bad investment. What matters is the overall picture of cash flow, repayment (= wealth build-up), value appreciation and tax saving. Many successful investors deliberately accept a moderate negative cash flow when the equity return and the long-term outlook are right. The important thing is that the monthly contribution remains affordable within your budget and that you keep enough reserves for unexpected costs (special levies, vacancy, repairs).

The conditions for property investments have changed fundamentally since 2022. At the start of 2026 the interest level is between 3.5 and 4.0% for ten-year mortgages. At the same time, purchase prices have stabilised in many regions and rents continue to rise by 2 to 3% per year. For investors this produces a more nuanced picture than in the low-interest era. The question cannot be answered across the board: it depends on the concrete figures.

When an investment can be worthwhile: The price-to-rent factor is below 25, the net rental yield exceeds 3.5%, and the location offers stable rent growth and low vacancy risks. B and C locations in particular (medium-sized cities, university towns, economically strong regions) currently offer attractive entry prices with solid rental yields. Here, price-to-rent factors of 15 to 22 are not unusual, which makes a positive cash flow realistic.

When you should look more closely: The price-to-rent factor is above 30, the investment is based purely on hoped-for value appreciation (speculation), or the monthly contribution exceeds your comfort zone. Prime locations in the top 7 cities, with their high price-to-rent factors (often above 30), are currently harder to make cash-flow positive. Without substantial equity, a positive cash flow is barely achievable in these markets.

The most important rule of thumb: calculate conservatively. Do not set the rent too optimistically, factor in maintenance costs and plan a buffer for vacancy. Anyone who calculates with realistic figures and still achieves a positive result has found a solid investment. Our cash flow calculator helps you run the concrete figures for your target property. That way you can see immediately whether a property is worthwhile for you at the current conditions.

When selling a rented property, the holding period is decisive. Under § 23 of the German Income Tax Act (EStG): anyone who sells a property that they have not occupied themselves within 10 years of buying it must tax the capital gain at their personal income tax rate. On a gain of €100,000 at a tax rate of 42% that would be €42,000 in tax. The capital gains tax can therefore eat up a considerable part of the gain.

Once the 10-year period has expired, the gain is completely tax-free. That is a significant advantage over shares and ETFs, where the flat-rate withholding tax of 26.375% (including the solidarity surcharge) applies to every gain, regardless of the holding period. With a long-term investment strategy, property investors therefore benefit from a clear tax advantage on sale.

For calculating the 10-year period, the date of the notarized purchase contract counts, not the entry in the land register. Anyone planning to sell their investment at some point should keep a close eye on this date. There is an exception for owner-occupation: if you have lived in the property yourself in the year of sale and the two preceding years, no capital gains tax is due even within the 10-year period. For rented investment properties, however, this exception is not relevant.

In the context of the cash flow calculator, the capital gains tax does not feed into the ongoing monthly calculation. It is, however, an important factor for the overall return over the holding period. Ideally, therefore, plan for a holding period of at least 10 years to realise the full tax advantage on sale.

The cash flow calculator gives you the full economic analysis of your investment. For individual aspects, further specialised calculators are available. Use them in combination to get a complete picture of your investment:

• Quick yield check: Rental yield calculator for a quick assessment of gross and net rental yield
• Plan the financing: Repayment calculator for the detailed repayment schedule of your mortgage
• Calculate the closing costs: Closing costs calculator for transfer tax (Grunderwerbsteuer), notary, land registry and agent
• Notary and land registry: Notary costs calculator for the exact breakdown of all fees
• Buy or rent: Rent-or-buy calculator for comparing both scenarios over any time period
• Check renovation needs: Energy efficiency quick check for a quick assessment of the energy condition

Tip: start with the rental yield calculator for a quick overview, then use the cash flow calculator for the detailed analysis including financing and taxes.