How much is an investment property worth paying?

The asking price is the seller's opinion. The buyer's job is to calculate their own ceiling — the price above which the property no longer meets their yield requirement. Here is the calculation step by step.

Turn the calculation around

The common mistake is to calculate the yield from the asking price: "this would give a 5.2 % gross yield". At that point the seller has already set the outcome and the buyer merely notes it.

Reverse the order: decide first what you require, and only then work out what you can pay.

If the property leaves €6,000 a year after maintenance costs and your requirement is 6 %, the ceiling is €100,000. The same property at 8 % gives €75,000. The yield requirement is not a technical detail — it is the single most consequential choice in the whole calculation.

Where does the yield requirement come from?

Risk sets it, not wishful thinking. In practice it is raised by:

• Location — in an area losing population you require more, because resale is uncertain.
• Age and condition — the closer the major renovations, the higher the requirement.
• Lettability — a small flat in a growth centre is easier to let than a large one in a declining area.
• Cost of finance — the yield must exceed the loan rate by a sufficient margin, otherwise leverage works against you.

Deduct the repair backlog before offering

This is the step most often forgotten — and it is usually the largest single item.

If a pipe renovation lies ahead in the housing company, its cost is your expense from the moment you buy, even if the work is done only five years later. It must therefore be deducted from your maximum price.

Your share is normally calculated as the flat's square metres relative to the company's total. A 55 m² flat in a 2,200 m² company carries about 2.5 % of the cost — of a €900,000 pipe renovation that is roughly 22 500 €.

Note the order too: the debt-free price includes the share of the company loan, but not a renovation that has not yet been decided. These are different things, and the latter appears as a figure in no document at all.

Where to find the information

• The property manager's certificate — the company loan, the charges, and works completed and decided.
• The maintenance needs assessment — the board's estimate of the needs of the next five years. It is the single most important document for judging future costs.
• The financial statements — show whether the company has a buffer or covers everything with borrowing.
• The energy certificate — gives an indication of heating costs.

Two checks before you offer

1. Local price level. Compare €/m² with actual transaction prices in the area. If you are paying clearly above them, you must be able to justify why — condition, position on the plot or rent level.

2. Stress test. Recalculate the cash flow on two assumptions: the interest rate two percentage points higher and the flat empty for two months a year. If the property survives both, the price is in safe territory.