Apartment blocks soaring: why investors should look twice now
Apartment buildings remain the foundation of many professional property strategies. Even though financing costs have risen since the years of low interest rates, the new pricing in many cities ensures attractive entry-level yields - especially for solid B and C category locations. Anyone buying a property today Buying an apartment block The key to success is precise scrutiny: cash flow, energy efficiency, CapEx planning and tenant structure are more decisive than ever for returns.
Market dynamics 2025: price discovery instead of a rally
Current transactions show: Sellers are once again accepting realistic Factors, while buyers factor higher interest rates into their calculations. This results in target yields of around 4-5.5 per cent gross (depending on the property and location) in many submarkets. Assumption: Competition remains high in prime locations, but price discounts are possible in up-and-coming neighbourhoods with good micro-locations - especially if energy-efficient refurbishment is required.
What is driving demand?
Apartment blocks offer robust income, scalability and value appreciation through plannable measures. Especially in regions with a continuing influx of new residents and a shortage of new construction potential, existing properties can take on the role of stable cash flow drivers.
- Risk diversification: Multiple flats reduce the risk of vacancy compared to single-tenant properties.
- Economies of scale: Maintenance, administration and modernisation can be efficiently bundled.
- Increase in value: Through energy-efficient refurbishment, floor plan optimisation and rents in line with the market.
- Financing dialogue: Banks honour comprehensible management concepts and CapEx reserves.
The new investment check: what to look out for twice now
Location quality in detail: It's not just the neighbourhood that counts, but the micro level: walking distance to public transport, local amenities, sources of noise, parking situation. A house in a quiet side street with good connections often performs better than a main street location in the same neighbourhood.
Rental income vs. customary rent: How are the existing rents relative to the rent index? Is there potential for moderate, legally compliant adjustments (e.g. following modernisation)? Beware of unrealistic leverage assumptions.
Energy and technology status: Year of construction, insulation standard, windows, heating, pipes. A low final energy requirement reduces ancillary costs, increases rentability and stabilises returns. Check refurbishment schedules and potential subsidies (assumptions depend on property and region).
CapEx and maintenance: Plan the next 10 years. Roof, façade, building services, pipework - what is due when, with what budget? A clear CapEx plan is crucial for purchasing today.
Calculation check (simplified example)
Purchase price: € 2,400,000 | Annual rent: € 132,000 → Gross yield: 5.5 %
Management: € 20/m² p.a., maintenance: € 12/m² p.a. (assumed), vacancy/collection: 2 %
Net before interest/repayment ≈ €132,000 - €30,000 costs - €2,640 risk = €99,360
Financing: 70 % borrowed capital, 4.1 % interest, 2.0 % amortisation ⇒ annuity on FC ≈ 6.1 % of €1,680,000 = €102,480
Result: Slightly negative cash flow without rental or efficiency leverage. With 5-7 % rental potential after moderate modernisation or 10 % reduction in energy costs, the property can turn positive. Conclusion: No deal without a CapEx and rental strategy.
Typical mistakes - and how professionals avoid them
Mistake 1: Only looking at the factor - Solution: Always calculate net cash flow and CapEx plan in parallel.
Mistake 2: Underestimating energy requirements - Solution: Check energy performance certificate, heating cost history and refurbishment schedule; calculate scenarios.
Mistake 3: Ignoring the tenant structure - Solution: Analyse credit rating mix, terms, scales, indexation (if available), vacancy history.
Mistake 4: Favourable cost calculations - Solution: Realistic management rates, regional benchmarks, safety margins.
ESG and technology: energy efficiency as a yield driver
An energy-poor portfolio can become a yield booster - if the measures are properly planned. Examples: Insulation of the roof and basement ceiling, window replacement, hydraulic equalisation, high-efficiency pumps, heating replacement if necessary. Assumption: Subsidies can significantly shorten amortisation; at the same time, rentability and marketability increase. A prioritised roadmap is important: What will bring the greatest reduction in consumption per euro first?
Ensure coordination with tenants: implement measures with minimal disruption (e.g. basement insulation) first, then plan major interventions. Documentation and transparent communication contribute to lower fluctuation.
Deal structuring: How to keep the financing viable
Fixed interest rate and amortisation: Longer fixed interest periods create planning security, while flexible repayments provide room for manoeuvre. Today, banks are increasingly assessing the debt service coverage ratio (DSCR). Objective: conservative assumptions and sufficient liquidity reserves.
Equity and reserves: In addition to incidental acquisition costs, a Maintenance reserve of €10-20/m² p.a. should be priced in (depending on the property). A start-up reserve of 3-6 months' rent acts as a buffer for vacancies and CapEx.
Business plan: A clear 24-36 month plan with milestones (modernisation, rent adjustment, new tenancy) facilitates discussions with the bank and creates internal discipline. If you implement the first 12 months properly, you will stabilise your cash flow in the long term.
Quick check before making a purchase decision
- Test cash flow scenarios with 0.5-1.0 % point interest rate stress.
- Identify energy quick wins (top 3 measures, costs/benefits).
- Document rent index and market rent comparison.
- Create CapEx plan with priorities and timeline.
Conclusion: If you test smart, you buy better
Multi-family homes continue to be a strong investment - but the difference between good and excellent today lies in the details: location on a small scale, energy and cost expertise, realistic rental and financing assumptions. If you look twice, you protect your cash flow, realise potential and buy on sustainable parameters.
Are you planning to buy or sell an apartment block? We analyse returns, energy, rents and financing in an integrated manner and provide a clear basis for decision-making. Book your initial consultation now: Open contact form
