A rented property for retirement

A rented flat as retirement provision, that sounds solid, like concrete gold. But it is the way with the most moving parts. Here I explain honestly how it works, why it costs money while you work and only brings income in retirement, and where the real catches lie.

How it works

You buy a flat, usually with a loan, and rent it out. The rent brings income, from which running costs, interest and principal repayment come off. For tax you can deduct quite a bit, above all the building depreciation (AfA) and the loan interest, which lowers the tax on the rent. After a 10-year holding period a sale gain is tax-free.

The point many underestimate: as long as the loan is running, you often top it up every month. Only once the loan is largely paid off does the minus turn into real income, usually just in time for retirement.

Lena and Thomas buy a flat

Both buy a small rental flat with a loan (Lena 300,000 €, Thomas 240,000 €, each with some equity). Look at what comes out in retirement. All with the app's formulas, in the realistic scenario and in today's purchasing power.

Lena, 30

During her working years the flat costs her around 309 € a month on average, so she has to help finance the loan. In retirement, when the loan is almost gone, it brings around 725 € net.

Thomas, 50

For Thomas the monthly minus before retirement is smaller (around 97 €), but the loan is not quite paid off at retirement. In retirement the flat brings around 338 € on average.

The honest limits

A real property is much more than this one number. A model cannot capture everything. What you should keep in mind:

• Minus first, plus later: as long as the loan runs, you have to be able to top it up each month. That needs a stable income.
• Concentration risk: a large part of your wealth sits in a single object in a single place.
• Effort and tenant risk: vacancy, repairs, a difficult tenant, all of that can change the calculation.
• Big renovations: roof, heating, windows come irregularly and can get expensive.
• Interest-rate risk: if the fixed-rate period ends before the loan is gone, refinancing can get more expensive.
• Not very flexible: selling takes time and costs money, you cannot reach the cash quickly.

That is why the property here is a way for scenarios, not a guarantee of return. Use the numbers as orientation, not as a promise.

Realistic scenario, buying costs, AfA, loan interest and running costs with the app's formulas. Examples for illustration, not a forecast and not advice. The ways are not added on top of each other.

Run it for your own situation

Purchase price, rent, equity, interest, holding period, all of that changes the result strongly. In the app you can run your own flat, including tax, costs and the value after the holding period, entirely local and without tracking.