A rental apartment is still many people's idea of a safe investment. But at today's property prices and interest rates, the net yield often doesn't even beat a savings account. Let's do the maths.
How to calculate rental yield
Gross yield = annual rent ÷ purchase price × 100. From the gross yield you still need to subtract:
- maintenance fund and insurance,
- property tax and income tax on rent,
- vacancy (budget for 1 month per year),
- repairs and replacing furnishings.
A 4.5% gross yield therefore often leaves only 3–3.5% net — and that's before counting your own time spent managing the property.
When a buy-to-let makes sense
- You're buying well below market price (auction, renovation project).
- You're betting on long-term price growth in an attractive location.
- You want leverage — a mortgage lets you control a large asset with little capital.
Hassle-free alternatives
Real estate funds and REITs (real estate investment trusts traded on exchanges) give you property exposure from just a few dollars, with no tenants and no repairs. Returns are comparable and liquidity is incomparably better.
Real estate is a great portfolio addition — but it shouldn't be the only thing you own.