Anyone who rents out a property expects not only a stable investment, but also the best possible financial return. However, not every property type brings the same profit. Whether student apartment, penthouse, or multi-family house: The type of property and its location significantly determine how high the rental income is in relation to the purchase price.
This article compares various property types – based on current data, examples, and concrete recommendations for private landlords.
1. City Apartment or Country House: Where's the Advantage?
City apartments with one to three rooms in good to medium locations are in high demand. They rent easily, achieve stable rents, and show low vacancy rates. The capital return here ranges between 3.0 and 5.0 percent depending on the city.
Rural properties appear more attractive at first glance, as purchase prices are often significantly lower. The capital return sometimes exceeds 5 percent. However, there is a higher risk of vacancy, and resale values often rise slowly.
📊 Example
- City apartment in Nuremberg: Purchase price €220,000, annual rent €9,900 → Capital return: 4.5 percent
- Country house: Purchase price €160,000, annual rent €9,600 → Capital return: 6 percent (with higher risk)
2. Small or Large Apartments?
Small apartments (30 to 50 square meters) in university cities or urban centers are particularly profitable:
- Higher rent per square meter
- Faster rental
- Often rentable short-term or furnished
Larger apartments over 90 square meters are particularly suitable for families. They often have lower rent per square meter but offer longer-term rental relationships.
3. Single-Family House for Rental: Solid, but Weaker in Return
The classic detached single-family house is excellent for owner-occupation but less attractive as a rental investment:
- High purchase price due to large lot
- Only one tenant → Risk with vacancy
- Higher maintenance costs
The capital return is usually between 2.5 and 3.5 percent. For purely return-oriented landlords, this property type is therefore often less suitable.
4. Multi-Family Houses: Stability Through Multiple Units
Multi-family houses with at least three residential units are among the highest-yielding property forms:
- Lower management costs per unit
- Rental default risks spread across multiple parties
- Scalable investment form
In medium-sized cities like Leipzig, Kassel, or Saarbrücken, the return rate on purchase price often lies between 4.5 and 6 percent. Even calculated conservatively, this leaves more than with individual apartments.
5. Special Case: Mixed-Use Properties
Properties with a share of commercial space (for example, a shop on the ground floor, apartments above) can be very profitable. At the same time, there are some challenges:
- Higher vacancy risk for commercial units
- Fluctuating demand
- More complex contract design and management
This form is more suitable for experienced landlords with higher risk tolerance.
💡 Recommendations for Best Possible Return on Invested Capital
- Location is crucial: An average property in a good location is often more profitable than a high-quality object in a remote area.
- Start small: Small apartments or houses with two units offer an easy entry into rental.
- Use renovation: Targeted modernization can increase rent and enhance value.
- Consider tenant structure: The target group – students, singles, families, or older people – influences turnover and stability.
- Think net: Ongoing costs like management, maintenance, and reserves should be included in every calculation.
Conclusion
Those who rely on sustainable income from rental should not only look at seemingly cheap properties. The choice of the right property type directly affects long-term profitability. Multi-family houses and small city apartments generally offer the best chances for stable income, while single-family houses are more for long-term value appreciation. A balanced combination can be the right path for many private landlords.