Real Estate Investment Calculator
Use our return calculator to find out how much your investment could make!
Estimate your investment returns confidently
One of the most challenging aspects of investment is determining whether a purchase makes sound financial sense. Many of the most common KPIs, such as purchase price/rent, are too simple and not truly representative. Most importantly, they do not take price growth into account, which is the most interesting metric. In order to make it much more comprehensive for you, we have developed a return calculator to help you make these estimations, breaking your investment down to the smallest detail, and using complex financial modelling to give you unparalleled transparency and analysis. All projections are estimated for a period of 10 years, after which period no capital gains tax is due on the resale of the property. Here we explain the different sections of the real estate investment calculator.
Calculate Your Return on Investment
Comprehensive
Real income figures, taken directly from your property.
Detailed
Operating and management costs are taken into account.
Innovative
Calculations include market growth and trends.
Return calculator
Projected financial performance
1. Apartment
This section contains the financial details for the apartment you are currently looking at, including the purchase price of the property, the rental income per month from the current tenants, the maintenance retainer per month due to the property management, and other, non-transferable costs related to the upkeep of the property. All of these parameters are pre-filled according to the most recent data we have regarding the property, taken directly from the contract and official documentation. Rental income, maintenance retainer, and non-transferable costs are all likely to increase in future years, and this is dealt with further on.
These figures will give you the initial gross rental yield, which is the annual rent as a percentage of the purchase price of the property, and indicates the initial cash flow you may be able to expect from the property.
2. Financing
Unless you are purchasing the property outright, you will likely need to take out some kind of loan, typically a mortgage, to finance the purchase. This section deals with the details of the purchase financing, showing the equity share, or the percentage of the purchase price you are paying in cash, and the interest rate on the mortgage you have taken out to fund the remainder of the purchase price. Depending on which type of mortgage you take out, you can also specify how long the term is, or how much of the principal should be repaid initially.
Non-residents of Germany can typically borrow approximately 60% of the purchase price, meaning your share of the equity will be around 40%. Additionally, your mortgage payments cannot exceed 35% of your monthly income. However, mortgage interest rates in Germany are amongst the lowest in the world, with current average rates around 1.24% p.a.*
3. Market
This section is where we use our knowledge and insights into the local property markets to make assumptions about its future performance. Growth rates of property value in cities such as Berlin and Leipzig have been relatively high in recent years, and the 5% entered here is a modest assumption (average growth in Berlin has been 9% p.a.** in the past 6 years). Rental income growth is here set at 4.7% p.a., which is the maximum legally allowed annual growth (unless the apartment receives considerable renovation or refurbishment). The costs associated with the apartment, such as the maintenance retainer and other, non-transferable costs, are estimated to grow at 1.2% p.a.
These calculations will give you the growth in the property value, showing you how much your property will be worth after 10 years.
4. Transaction
When buying a property in Germany, you can expect to pay most of the costs associated with the purchase. EverEstate does not charge sales commission on many of our investment properties (which is typically around 3.5% of the purchase price), so this is here set at 0%. The purchase contract must be certified by a notary, the fees for which are typically around 2% of the purchase price. Real Estate Transfer Tax varies state-to-state in Germany; in Berlin it is set at 6% of the purchase price; in Leipzig, 3.5%. Finally, legal advice is often necessary for non-residents purchasing property, for example authorising a solicitor to act as your legal representative through a Power of Attorney. Fees for this vary depending on the services required, and are here estimated at 1% of the purchase price.
All of these add up to the transaction costs, which must be taken into account for the final price of the property purchase.
5. Summary
Finally, understanding all of the figures and estimations gone into the calculator, you can see the projected financial performance for your investment. On the left-hand side, visible throughout, are the 3 most important figures: the Return on Equity (the net income received as a percentage of your equity, shown per year for the 10-year duration of the investment); the down payment (your initial cash payment, including your equity in the purchase price, and the closing costs); and the monthly balance (how much money is left over once the loan payments and rental costs have been paid from the rental income).
These figures are more thoroughly broken down here; you can see exactly how the calculations have been arrived at, and you can see how profitable your investment is likely to be. The return on equity is the most obvious indicator of profitability; a return of 8-9% can be considered good, and higher than that is particularly good.
The key to a successful investment is information, and with this Return Calculator, we have tried to provide you with as much financial information as possible. Try adjusting the parameters to see how that affects your investment, and see which property makes the most financial sense for you.
*Source: Statistca: Mortgage interest rate in Germany from 1st quarter 2013 to 3rd quarter 2020
**Source: Berlin Senate Department for Urban Development and the Environment
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