Do you know if you are really making money with your rental? I’ll show you how to calculate it
Many “investors” believe that to know the residential rental yield, you only have to subtract the mortgage from the monthly rent. If you also do the math this way, you are missing a beat (or two). Investing in bricks and mortar is not just collecting a check; it’s managing a business where hidden expenses are the ones that sink your ship.
To calculate real estate ROI for real, you have to get your hands dirty and stop kidding yourself. We are not here to “believe” that we make money, we are here to know it.
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𝗥𝗲𝗮𝗹 𝗘𝘀𝘁𝗮𝘁𝗲 𝗥𝗢𝗖𝗘 𝗲𝘅𝗽𝗹𝗮𝗶𝗻𝗲𝗱 𝘀𝗼 𝘆𝗼𝘂 𝗰𝗮𝗻 𝘂𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱 𝗶𝘁 🧠 🧠
Let’s go with a real example. Imagine a €62,000 apartment that you rent for €440 a month. Do you make €5,280 a year? Not a chance. If you don’t include the rental income tax, HOA fees, insurance, and maintenance expenses, you are counting fairy tales, not money.
• Real Net Income: After paying property tax (€320), HOA fees (€360), insurance (€260), maintenance, and that month the apartment sits empty (vacancy), you are left with a clean €3,516.
• The real investment: If you use an 80% mortgage, you have only put €12,400 out of pocket (the down payment), plus €8,000 in expenses and €3,000 in renovations. Total: €23,400.
Doing the real estate ROCE math (return on the capital you actually put in), the result is a 15.02% net return. Now that is putting your money to work and not the bank’s.
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𝗨𝘀𝗲 𝗺𝘆 𝗿𝗲𝗻𝘁𝗮𝗹 𝘆𝗶𝗲𝗹𝗱 𝗰𝗮𝗹𝗰𝘂𝗹𝗮𝘁𝗼𝗿 📊
Doing these calculations by hand every time you see a listing is for masochists. That’s why I’ve created this rental yield calculator so you can stop using bar napkins and start using data.
Don’t be fooled by the gross yields they sell you on real estate portals. What matters is what’s left in your pocket after the taxman and special assessments take their cut. Use the tool, plug in your numbers, and see if that “opportunity” still shines as much after subtracting reality.
Do the numbers work out, or are you subsidizing the apartment for your tenant? Stop by the calculator and clear up your doubts once and for all. I’ll wait for you in the comments!
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