Question 1

What is the difference between gross yield and net yield?

Accepted Answer

Gross yield is annual rent divided by purchase price. Net yield subtracts all operating costs (maintenance, vacancy, property management, insurance, taxes) from rental income before calculating the yield. Net yield is typically 1.5-2.5 percentage points lower than gross yield and represents your actual return.

Question 2

How much should I budget for property maintenance?

Accepted Answer

Budget 1-1.5% of the property value annually for ongoing maintenance and repairs. Older buildings in cities like Vienna or Paris may require higher budgets. This covers plumbing, electrical, appliances, and common areas. Large capital expenditures like roof replacement or facade renovation are separate costs.

Question 3

What is a REIT and how does it work?

Accepted Answer

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. REITs trade on stock exchanges and must distribute at least 90% of taxable income as dividends. They provide individual investors with access to large-scale real estate portfolios with daily liquidity.

Question 4

What loan-to-value ratio should I target?

Accepted Answer

Most individual investors should target 50-65% LTV for residential properties. This provides leverage to amplify returns while maintaining a safety buffer. European banks typically lend at 60-80% LTV, but conservative investors prefer lower leverage to reduce risk in market downturns.

Question 5

How do I evaluate a real estate fund?

Accepted Answer

Review the fund factsheet for NAV, performance returns (net of fees), portfolio composition, fee structure, leverage (LTV ratio), and interest coverage ratio. Check tenant concentration, occupancy rates, and weighted average lease expiry. Compare returns against appropriate benchmarks like the INREV Index for European funds.

Question 6

Are energy efficiency retrofits worth the investment?

Accepted Answer

Energy efficient buildings command 3-8% rental premiums and 5-15% higher sale prices across European markets. Comprehensive retrofits cost EUR 200-500 per square meter. With tightening EU regulations, the "brown discount" for inefficient buildings is already 10-20% in some markets, making retrofits increasingly necessary.

Question 7

What is debt service coverage ratio (DSCR)?

Accepted Answer

DSCR measures whether rental income can cover debt payments. It equals Net Operating Income divided by Annual Debt Service. A DSCR of 1.0 means income exactly covers payments with zero margin. Most lenders require 1.2-1.3x minimum. Conservative investors target 1.5x or higher for safety.

Question 8

How should I compare apartments vs REITs vs funds?

Accepted Answer

Compare on two dimensions: risk and liquidity. Direct apartments offer control but low liquidity (3-12 months to sell). REITs provide instant liquidity but stock market volatility. Private funds offer diversification with 5-10 year lock-ups. Match each investment type to your time horizon and income needs.

Learn real estate from zero to expert

Foundations of Real Estate Investing

Apartment Investing for Individuals

Beyond Apartments — Exploring Alternatives

Institutional Real Estate (Simplified)

REITs in Europe and the US

Download our guides and tools

Starter Guide

7-Step Framework

Pathways Comparison

Cap Rate vs IRR

Net Yield Calculator

SPV Due Diligence

Frequently Asked Questions