Buy an apartment to rent out, or an ETF: what leaves you with more over the long run?

A rental property or an ETF portfolio: the same equity, two very different after-tax outcomes. What the model calculation shows for two investment scenarios.

Do you have €60,000 and you're wondering what does more with it: buying an apartment to rent out, or putting the same amount into an equity ETF? Both routes look appealing on paper. The rental property throws off rental income and builds equity. The ETF portfolio grows with no effort. What leaves you with more over the long run depends on rental yield, interest rates, tax, and one often-underrated factor: your own time.

The figures below are model calculations. Purchase prices, rental yields, and return expectations vary a lot by location and period. The example assumes continuous renting with no vacancy and a borrowing rate fixed over the term. Rent and maintenance rise by 2% a year in the model, and selling costs of 3.57% apply on a sale. Miravel calculates with your actual numbers.

Same starting amount, two different routes

Two investors each have €60,000. Investor A buys an apartment for €200,000 in a mid-sized German city, puts in €60,000 of equity, and finances €140,000 with a loan. Investor B invests €60,000 in a broadly diversified equity ETF and pays off no loan.

The rental property: what really comes up

Purchase price: €200,000, closing costs around 8% (Grunderwerbsteuer (real estate transfer tax), notary, land registry, agent): €16,000. This money builds no equity
Monthly loan instalment on €140,000 at 3.8% interest over 25 years: around €724
Gross rental income at a 4% gross rental yield: around €667 a month at first, rising by 2% a year in the model
Non-recoverable operating costs and maintenance reserve: around €150 a month at first, also rising by 2% a year
Monthly shortfall out of your own pocket: around €207 a month at first. Because the rent rises while the loan instalment stays fixed, the shortfall shrinks to around €85 by the end of the term. In total you top up around €33,000 over the 25 years
Tax relief: interest and building depreciation (AfA, 2% of around €160,000 building share = €3,200/year) are deductible as income-related expenses
After 25 years: loan paid off, the apartment is yours. Value at 2% annual appreciation: around €328,000. On a sale, selling costs of around €12,000 come off that

The ETF portfolio: what really comes up

Starting investment: €60,000 in an accumulating equity ETF
Assumed return: 6% a year (a conservative planning value for global equities, not a guarantee)
Advance lump-sum tax (Vorabpauschale): with accumulating funds, a small tax falls due each year on the notional gain
Capital gains tax (Abgeltungssteuer) on sale: 25% plus the solidarity surcharge on gains, with a 30% partial exemption for equity funds and after deducting the saver's allowance (Sparerpauschbetrag, €1,000/year)
After 25 years at a 6% return: around €258,000 final value before tax
Net after capital gains tax, including the 30% partial exemption: around €228,000
Time spent: minimal, no tenant search, no service-charge statement, no tradesperson

What the model calculation shows

The honest comparison puts both at the same starting effort: the same starting amount and, at first, the same monthly saving. Investor A tops up around €207 a month at the beginning; because the rent rises, that top-up shrinks over the years, around €33,000 in total. If Investor B invests €207 on top of their €60,000 every month throughout, their portfolio comes to around €350,000 after tax; over the term, though, they also put in around €29,000 more than A. Investor A's apartment is then debt-free and worth around €328,000; after deducting around €12,000 of selling costs and the €33,000 topped up, a net wealth of around €283,000 is left. So anyone who keeps up the initial monthly rate throughout is around €67,000 ahead with the ETF portfolio.

It looks different if Investor B doesn't invest the €207 a month but spends it. Then they're left with their one-off €60,000 invested, around €228,000 after tax, and the property is a good €55,800 ahead at around €283,000. So the difference is less a question of bricks versus shares than a question of discipline: the apartment forces the monthly saving, with the ETF you have to do it yourself. Anyone who consistently invests the difference anyway does better with the portfolio. Anyone who would otherwise spend it builds more wealth through the property.

What tips the return

Rental yield: below a 3% gross rental yield, the maths almost always turns less favourable for the rental property
Loan terms: higher interest raises the monthly shortfall, and equity builds more slowly
Vacancy and maintenance: a tenant change with three months of vacancy and €5,000 of renovation changes the annual return considerably
Stock-market return: if the ETF return is only 4% over the long run instead of 6%, the result flips in favour of the property
Property appreciation: in shrinking regions, the property value can stagnate or fall
Concentration risk: the apartment is a single, loan-financed bet on one location and one property. The ETF spreads across thousands of companies worldwide. If the one apartment goes wrong, it hits you in full. With the ETF, individual bad luck averages out.

Miravel simulates both scenarios with your numbers: your equity, your local rental yield, your interest rate, and your tax class. Free, no account, right in your browser.