Buy-to-Let in Germany as an Expat: Rental Yields, the Mietpreisbremse, and What You Actually Earn

Germany consistently attracts expat investors looking for stable, long-term real estate returns in a well-regulated market. The pitch is credible: strong tenant demand, severe housing shortages in major cities, and a legal system that protects property rights. But the headline gross yield numbers — often cited at 3–4% for major cities — do not tell the full story.

Here is what buy-to-let actually looks like for a foreign investor in Germany in 2025/2026.

Gross Rental Yields Across German Cities

Based on current market data, gross rental yields in Germany's major cities are as follows:

These are gross figures before any costs. Net yields after property management, maintenance, Hausgeld non-apportionable costs, and tax obligations are typically 1.5–2.5 percentage points lower depending on the property type and management structure.

The Mietpreisbremse: How the Rent Cap Affects You

The Mietpreisbremse (literally "rent brake") is a federal regulation that applies to rental housing in areas designated as angespannte Wohnungsmärkte — tightly constrained housing markets. Most major German cities and many suburban areas have this designation.

Under the Mietpreisbremse, when a new tenancy begins, the starting rent cannot exceed the local reference rent (Ortsübliche Vergleichsmiete or Mietspiegel) by more than 10%.

What this means in practice:

• You cannot simply set market-rate rent when a new tenant moves in — your opening rent is capped relative to the local benchmark
• If you buy a property where the previous owner charged below-market rent, you may be able to raise it slightly when the current tenancy ends, but there is a ceiling
• Properties with existing tenants who pay below-market rent may take years to reach market rates, even after re-letting

Certain exceptions exist: new construction (Neubau) built after October 2014 is generally exempt from the Mietpreisbremse. Extensively modernized properties (umfassend modernisiert) may also qualify for an exemption, but the criteria are specific and worth verifying with a German lawyer.

The Hausgeld: What You Cannot Pass to Tenants

If you buy an apartment in a building with a Wohnungseigentümergemeinschaft (WEG — owners' association), you pay monthly Hausgeld. This fee covers building management.

The critical distinction for buy-to-let investors: not all Hausgeld costs are apportionable (umlagefähig) to tenants via operating cost settlements. The costs you can pass to tenants include:

• Water, refuse collection, building cleaning
• Building insurance
• Common area electricity
• Janitor services

The costs you cannot pass to tenants include:

• Property management company fees
• WEG bank charges
• Contributions to the maintenance reserve (Instandhaltungsrücklage)

The Instandhaltungsrücklage contribution is particularly significant. In well-managed buildings this can be €150–€300 per month for a medium-sized apartment. This is money that builds up in the building's collective account to fund future repairs — it reduces your effective rental income and cannot be recovered from tenants.

For a complete guide to running the numbers on a German buy-to-let investment — including how to model net yield, tax obligations, and financing costs — see the Buying Property in Germany — Expat Guide.

Tax on Rental Income for Non-Resident Landlords

If you are a non-resident landlord in Germany, you are subject to beschränkte Steuerpflicht — limited tax liability — on German-source rental income. Your taxable income is gross rent minus allowable deductions.

Key deductible items:

• Mortgage interest payments (note: principal repayments are not deductible, only interest)
• Depreciation (AfA): Typically 2% per year of the building value (excluding land). For an apartment where the building value is estimated at €280,000, that is €5,600 per year in deductible depreciation
• Property management fees
• Building insurance (non-apportionable share)
• Non-apportionable Hausgeld costs
• Repairs and maintenance

The resulting taxable profit is then taxed at your personal German income tax rate on the German-source income. Non-residents must file a German income tax return by July 31 of the following year (extended to the second February if using a Steuerberater).

The Spekulationssteuer Exit Constraint

Buying an investment property in Germany means accepting a 10-year holding period if you want to sell without paying capital gains tax. Under § 23 EStG, if you sell a non-owner-occupied property within 10 years of purchase, the gain is taxed at your full personal income tax rate (up to 45%).

For expat investors with income elsewhere, this can be a significant consideration. A property that appreciates well but needs to be sold in year 7 due to career relocation or life circumstances will generate a large taxable gain.

The owner-occupied exception does not help investors: it only applies if you lived in the property yourself in the year of sale and the two preceding calendar years.

Is German Buy-to-Let Worth It for Expats?

The honest answer depends entirely on your investment thesis. If you are buying for capital preservation and long-term appreciation in a stable European market, Germany makes sense — particularly if you plan to hold for 10+ years. The housing deficit is structural, tenant demand is strong, and the legal system protects ownership rights reliably.

If you are expecting meaningful income returns in the near term, the numbers in major cities do not support it. Gross yields of 2.6–3.5%, net yields of 1.5–2.5% after costs and management, combined with the Mietpreisbremse and Hausgeld non-apportionable costs, make Germany a poor choice for investors who need their rental property to generate positive monthly cash flow from day one.

The most successful expat buy-to-let strategy in Germany tends to be: buy in a location where you would happily live, rent it out while living elsewhere, manage the property for long-term appreciation, and sell after 10 years with no capital gains tax liability.

See more Germany guides →