Buying property to let in Germany

📌Where the return actually comes from

Three sources, and monthly cash flow is rarely the largest.

📌What counts as a decent yield

Gross yield is annual cold rent divided by the price. In Munich, Hamburg and central Berlin, flats commonly trade at 2.5 % to 3.5 %. Secondary cities reach 4 % to 5 %, and smaller towns higher still — with correspondingly higher vacancy and resale risk.

Net yield is the honest figure: rent minus the costs you cannot pass on, divided by the total investment including purchase costs. It typically lands a full percentage point below the gross number, and it is the one worth comparing between properties.

💶The costs you cannot pass to a tenant

German law lets you allocate many running costs to the tenant through the service charge. What stays with you is the part that quietly determines whether the investment works.

For an apartment, the owners' association service charge (Hausgeld) splits into allocable and non-allocable parts. Ask for that split before you buy — the non-allocable portion is a permanent cost and is often larger than buyers expect.

🧾Depreciation is the lever most people miss

You write off the building — never the land — against rental income every year. The statutory rates are 2.5 % for buildings completed before 1925, 2.0 % from 1925 to 2022 and 3.0 % from 2023.

Above those, section 7 (4) sentence 2 of the Income Tax Act allows depreciation over the building's actual remaining useful life where a surveyor documents a shorter one. Twenty years remaining means 5 % a year instead of 2 %. The restrictive ministry guidance from 2023 on these reports was withdrawn on 1 December 2025, so the statute and the federal tax court's rulings now govern.

On a typical flat, moving from 2 % to 5 % can shift the monthly result by a few hundred euros. It is worth establishing before you buy whether the building is a plausible candidate.

🏘️Tenant law, honestly

German tenancy law is protective of tenants and you should assume it will apply against you at some point. Terminating an ongoing tenancy requires a statutory reason; owning the flat is not one on its own. Notice periods for the landlord extend up to nine months with the length of the tenancy.

Rent increases are capped by the local reference rent and limited in how fast they may rise, and many cities apply a rent cap on new lettings. A flat let below market rent stays below market rent for a long time, which is why the existing tenancy is part of what you are buying, not a detail to sort out afterwards.

📌Selling: the ten-year rule

Sell a let property more than ten years after buying it and the gain is free of income tax under section 23 of the Income Tax Act. Sell inside that window and the gain is taxed at your personal rate.

Buying and selling several properties in a short period risks being classified as commercial property trading, which changes the tax treatment entirely and adds trade tax. The threshold is a question of the individual pattern rather than a simple count, and it is worth advice before the third transaction rather than after.

📌If you do not live in Germany

Non-residents may own and let German property without restriction. Rental income is taxable in Germany regardless of where you live, and you file a German return for it; a double taxation agreement then determines how your country of residence treats the same income.

Financing is the harder part from abroad. Fewer lenders engage, equity requirements are higher, and having a German account with a payment history helps considerably.