Difference: purchase price factor and rental yield

For the calculation of both results, the same factors are used. The annual rental income and the investment costs. The difference lies only in the preparation of the calculation and thus in the result.

Both give an indication of profitability.

Rental yield: result says…. Definition

Result for rental yield calculation:

Rental yield > How much surplus remains each month to cover repayments, interest and reserves for repairs or capital accumulation?

Purchase price factor: result tells… Definition

Result for purchase price factor calculation:

Purchase price factor > In how many years will the investment costs be paid off by the annual rental income?

Simplified, the formulas you’re about to learn look like this:

• X / Y = Z1
• Y / X = Z2

Z = Profitability

My recommendation for beginners: rental yield

As a real estate beginner, you’ll need ongoing income quickly because most of your equity is probably in your first property. For beginners, it therefore makes sense to compare properties on the basis of rental yields. This way, you immediately know what monthly surplus an individual property can generate (for you).

The purchase price factor is more interesting for longer-term investments (target: appreciation and 10, 20, 30 years; before that you pay monthly), where short-term cash flow is not important.

• Tip. Read more about the difference here, on my new project, specifically for real estate buyers! The subtleties between yield & investment real estate – external

Either way, both calculations aim to help them compare different property listings and do it quickly!

Rental yield: Example

Let’s look at both forms of profitability calculation again in detail, with examples.

Once again, briefly the definition: If you calculate the gross rental yield, the result tells you what surplus remains monthly and forms your cash flow. For the repayment and interest (financing of the bank), as well as reserves for maintenance, or everything that then remains for your own, additional asset accumulation.

Formula and comparison

Rental yield = annual net income / investment * 100

Purchase price is 100,000, annual rent 3,200. Calculation looks like this:

• 3,2 = 3.200 / 100.000 * 100
• Result: 3.2

Calculate rental yield: Offer comparison (example)

The result of this calculation is always a percentage. This tells you how much surplus remains to cover the costs (repayment, interest, reserves for maintenance) and ideally a further surplus remains for you as an investor in the property.

With the current interest rate situation, you can expect approx:

• 2 % redemption
• 2% interest
• 2 % Management and maintenance reserves

reckon. Accordingly, properties with a yield of over 6% are interesting for you as a buyer.

• Yield therefore 6% + X

Just like the purchase price factor, you compare different offers in a quick way, based on two factors, the purchase price and the achievable annual rent.

• Object A: Rental yield 6.8%
• Object B: Rental yield 5.3%
• Object C: Rental yield 7.5%
• Property D: Rental yield 4.2%
• …

Accordingly, you would choose to look more closely at Property C, with a 7.5% yield (+1.5% over target of 6%). So the tenant pays off your property and you would have additional monthly income. Also, property A, with still 6.8% yield.

For object B, with 5.3%, you could check later, with your own experience and even more knowledge, whether there are any optimization possibilities, e.g. rent increase, if no adjustments are made by the landlord for a long time.

Learn even more about the return on investment!

At Real Estate-Experience.com, I’ll show you even more about rental yield and ways to make quick valuations, including looking at property location. Learn all about the here:

• Rental yield

Purchase price factor: Example

Again, as a reminder, the definition: if you calculate the purchase price factor as a result, it tells them in how many years the rental income, the investment costs covered.

Calculate purchase price factor: Offer comparison

The purchase price factor is typically between 10 and 40, depending on the region and location of the property, condition and so on. In Berlin the value is between 30 and 38, in cities like Düsseldorf it is between 18 and 24.

Formula and comparison

Purchase price factor = investment / annual net income

Purchase price is 100,000, annual rent 3,200. Calculation looks like this:

• 31,25 = 100.000 / 3.200
• Result: 31.25, so ~ 31

Accordingly, your comparison of real estate listings will look something like this:

• Object A: Purchase price factor 18
• Object B: Purchase price factor 21
• Object C: Purchase price factor 19
• Object D: Purchase price factor 17

So property D is the most profitable, because the financing would be paid by the rent within 17 years. Property A would be paid off within 18 years, property C within 19 years and property B, would need 21 years to pay off the entire financing, through the rental income.

Therefore this tip for you!

Tip. Calculate annual rent

How can you actually calculate the possible annual rent? You are probably looking for your property on a real estate portal, such as ImmobilienScout24, Immonet or another provider. Simply change your search filter from buy to rent. You can already see what rental prices are being charged for comparable properties in the same area or, even better, neighbourhood (1 km radius search). From this, you can forecast the possible annual rent that can be achieved for your property.

Of course, independent of the rent optimization just mentioned, if the previous owner has not made any rent adjustments for a long time, in addition there are upgrading possibilities and expansion possibilities, depending on the type of property.

Conclusion: Purchase price factor and rental yield simply explained

I hope you have found here the simplest explanation there is for purchase price factor and rental yield! If you want to learn even more on the subject of buying a property, whether owner-occupation or investment, numerous articles, guides and checklists, all free and available 24 hours online, with us!

Apartment, house, apartment building, everything for real estate beginners!

Now new on Immobilien-Erfahrung.de:

• Buying real estate: learn – external

In addition, for all beginners, still this tip:

• First property purchase

Living in Oberkassel

Oberkassel is a very popular district in Düsseldorf and is located west of the city centre. The urban area borders the Rhine on the eastern side and Niederkassel and Heerdt in other directions.

Welcome to Düsseldorf

The capital of NRW is located in the heart of NRW between the Ruhr area and the city of Cologne. The Rhine flows through the middle of the city.

Oberkassel: Map & Location

Oberkassel is where Düsseldorf’s high society congregates, attracted by the breathtaking architecture, upscale atmosphere and good connections to Düsseldorf’s city centre. The many schools, which also guarantee the best educational options for the younger residents, make Oberkassel one of the most attractive residential areas in Cologne. Also for goods of the everyday need is provided in the form of short ways to supermarkets and also the famous Königsallee as a popular shopping street is not far away.

Sights: Rheinallee, Rheinkniebrücke & Festwiese

Düsseldorf Oberkassel is ideal as a residential area and therefore includes a variety of residential areas with detached houses, apartments, villas and more. Despite this, you can also find some sights here and especially a suitable range of leisure activities. In Oberkassel one finds at the southeastern side the Festwiese or Rheinwiese. Here you can meet perfectly and spend some nice hours at the water. You will also find the Julia Stoschek Collection, the Rheinallee as well as the Rheinkniebrücke in Oberkassel.

• Fairground (Rhine meadows)
• Julia Stoschek Collection / Foundation
• Rheinallee
• Rheinkniebrücke

Sightseeing: A tour of Oberkassel

Oberkassel has a lot to offer and is considered a wonderful place to live for couples, families or even seniors. Those who live here live near the water and close to Düsseldorf city centre. One is very well connected and can quickly cross the Rhine with the help of the two bridges in Oberkassel. The range of green spaces and recreational areas also speaks for this district of Düsseldorf. Take a look at more of Oberkassel here and explore the surrounding area in a virtual way.

Oberkassel is also home to some of the most exclusive streets in the city! Learn more here: Most expensive streets in Düsseldorf

Rhein Promenade: Living with a view of the Rhine

Residential area in Oberkassel: safe and quiet

Rheinkniebrücke: From Oberkassel to Düsseldorf city centre

Real estate & prices per square metre in Oberkassel

The proximity to the banks of the Rhine not only ensures fresh air, maritime flair and a fabulous view, but also the quality of life here is one of the highest in Germany. Privacy and discretion are writ large in Oberkassel. So it’s no wonder that the prime location and prominent neighbours have driven up the price per square metre in Düsseldorf in recent years. Whether it’s an elegant villa, an exclusive apartment in an old building or a luxurious semi-detached house – real estate is ideal as an investment and you should also take a look at the real estate on offer in Oberkassel. Here you can find the different prices per square metre when buying an apartment or a house in Düsseldorf Oberkassel.

• Buy a house (new construction): 4.100€/ sqm
• Buy a house (existing): 7.063€/ sqm
• Buy an apartment (new building): 8.432€/ sqm
• Buy apartment (existing): 7.156€/ sqm

Conclusion: Living in Oberkassel

Those looking for pure luxury will find it in Oberkassel. From properties on the Rhine promenade, you can overlook the beautiful old town and are also quickly across the river, either with the help of the underground or by car. Thanks to two bridges connecting Oberkassel with the other side of the Rhine, the distances are short and manageable. Exclusive apartments with historic charm attract mainly wealthy Düsseldorfers.Our tip: Contact the real estate agent you trust! An experienced real estate agent will not only support you during the purchase process, but will also advise you on the topics of taxes and financing.

Düsseldorf: Real estate in the metropolis on the Rhine

Düsseldorf has a fascinating attraction. Although the Rhine metropolis Cologne is only a few minutes away, you can find the big luxury boutiques, international companies, advertising agencies and many other interesting industries here. The fashion industry in particular has made Düsseldorf a very international, stylish location. If you are looking for beautiful real estate here, maybe even luxury real estate, you will find it.

Real estate in Düsseldorf

Düsseldorf stands for luxury, shopping and an internationally positioned local economy. High-fashion companies have their headquarters here, but also the state government of NRW. The Düsseldorf real estate market is therefore highly sought after. The city is located in the heart of the state of North Rhine-Westphalia. The state capital is divided into several districts and is very popular with property buyers due to its charming location on the Rhine.

• Real estate Düsseldorf

Living in Düsseldorf: Popular districts & residential areas

With just under 640,000, Düsseldorf is one of the largest cities in the Rhineland and home to Germany’s third largest airport, after Munich and Frankfurt. With its authentic charm, the city attracts businesses from all over the world. This international audience not only demands places to go out and work, but is also always on the lookout for the right apartments. Whether it’s the Old Town, Oberkassel or Golzheim – everything about the city’s most popular residential areas and the most expensive streets in Düsseldorf, including tips on location, property prices in Düsseldorf & Co. To the overview: Living in Düsseldorf.

• Old Town
• Oberkassel
• Golzheim

House, apartment and land for sale in Düsseldorf

Diverse shopping opportunities, a wide range of restaurants and the modern infrastructure make Düsseldorf a permanently sought-after city for real estate buyers. Would you like to sell your apartment, your property or your apartment building here? Whether historic Old Town, luxurious Pempelfort, exclusive Carlstadt, magnificent Oberkassel or sought-after Golzheim – with our guides to the sales process, property valuation and the most important documents, you are very well prepared for your property sale. To the overview: Selling real estate in Düsseldorf.

• Carlstadt
• Golzheim
• Pempelfort
• Oberkassel

Discount at a glance

• Reduces the initial interest rate on the purchase of a property
• A portion of the loan is retained and serves as an interest prepayment: discount
• Low normal interest rate -> low monthly instalment burden

Back to the wiki: Real Estate

Marketing Concept: Constellation and Attention

In the marketing part you have to explain exactly how your product is / will be positioned and how you get attention for it. The first step is to refine the offer, in particular you have to clarify two questions for the optimization of your idea with the new findings from target group (need, benefit) and competition (USP)

1. What benefits does your offer have for potential customers?
2. What’s better than the competition’s offer?

After your idea has been clearly defined and your offer has been written in key points, the price strategy continues. In which price segment do you want to be on the move with your business idea? Low-priced offers or the high-priced offer, with the risk of a small clientele.

Price Strategy in Marketing Concept

The price strategy at the first moment does not depend on your personal feeling, but on the market. The competition in particular plays a major role when it comes to finding the right price for one’s own product. Not only the competition, but also potential customers play a role in pricing.

At what price will you end up selling your product? The assessment depends not only on factors that can be clearly quantified and evaluated, of course the psychological price also plays an important role in the assessment.

1. What price strategy do you pursue and why?
2. At what price do you want to offer your product / service?
3. What calculation is this price based on?
4. Acceptable
5. Introduction
6. Competition
7. Psychological Price
8. Price Differentiation
9. Conditions

Psychological price

What role does the psychological price play exactly if you are really active in the market? You can determine the price for a product completely freely. You can produce cars for a reasonable price but also cars in the luxury segment. Depending on which applications and which extensions you offer customers, the higher the product value. The more individual and unique your product is, the more individual and unique the price will be. Supply and demand are the main basis for pricing. The principle is quite simple. The higher the demand in relation to supply, the more likely it is that the price will rise, whether the product is low-priced or high-priced, and whether there is much or little supply. If demand tends to outstrip supply, it is a good market for new business ideas.

Here again a little reality check about High Pricing vs Low Pricing, Which strategy do you want for your product?

• High Pricing: Exclusivity vs. smaller clientele

• Low Pricing: Mass Market vs Costs

• Middle: Less effect (psychological) vs Stability

Sales in Marketing Concept

The organization of sales ultimately plays the central role in the sales figures. Because without a profit, your business idea will never make it to the top league. Accordingly, sales must be well organized. Ideally, you have a good network and good contacts to quickly start selling your products or services. The less sales structure there is at the beginning of a business idea, the more difficult it becomes to establish it in the market.

Sales methods: telephone sales to fulfillment

There are numerous possibilities for distribution. Above all, the new digital methods are worth mentioning. E.g. Fulfillment (like Amazon FBA). As a retailer, you can outsource the entire logistics process, from the storage of products to dispatch and return. If you purchase your products via platforms such as Alibaba or produce them yourself, you can have them delivered directly from warehouse to warehouse. All you (at least) need is a notebook. So you can focus on marketing and sales as managing director and owner. Sales, in the FBA example you have Amazon as the largest trading platform in the world behind you! This gives you public access to new products and direct market access to millions of users every day. Sales, however, is not only handled by external service providers, but of course also by our own employees. From the Facebook advertising campaign your social media managers to the classic telephone sales.

The business plan then deals with the rough goals. How big will your sales be by your chosen distribution methods, especially periodically distributed over the months? In which area will you be able to offer your products? What are the costs of new logistical extensions such as sales partners? Of course, your media portfolio in marketing will always be diversified. In the business plan you focus on the most important sales channels. Those who make the decisive sales. The central questions for your business plan and your later pitch:

1. What heel sizes do you control in which periods?
2. Which destinations are you heading for?
3. Which distributors will you use?
4. What are the costs of distribution?

Guideline: Setting up your own business & business plan

You want to start your own business as a real estate agent or with another business idea? We support you with tips on your business plan and concept. Whether self-employed full-time or part-time self-employed: If you want to set up your own company, you have to think about a lot, in advance and in the operative business. From the right idea to health insurance – what needs to be considered if you want to become self-employed?

There is no training or further education for entrepreneurs. Managing director is you or not. Your own ambition is always important, because this is the only way to improve, every day.

The topics at a glance: