Is Buying a Rental Property Worth It? The Small Landlord Math
“Should I buy a place and rent it out?” — the debate that never ends, at dinner tables and in forums alike. One side says “rent rises every year and the property appreciates”. The other starts with “if you put that money into…” Both are right about their own example, because this question has no general answer — it has an answer computed from your numbers. This post shows how to get that number. (It’s a method guide, not investment advice.)
The math everyone does, and what it misses
The common calculation: “The unit costs 300k, rents for 1,500 a month. That’s 18k a year, 6% return.” That’s gross yield, and it flatters reality. What it skips:
- Vacancy: Every empty month between tenants costs ~8% of the year’s income. Even one month every two years visibly drags the average down.
- HOA dues, insurance, property tax: They run whether the unit is occupied or not.
- Maintenance reserve: Boiler, paint, plumbing — set the money aside even in years nothing breaks.
- Transaction costs: Closing costs, agent fees, make-ready expenses. They belong in your cost basis.
- Your time: Finding tenants, chasing rent, repair calls. As I wrote in rent it out or sell: being a landlord isn’t passive income, it’s a part-time job.
The right math: net yield
Annual net = monthly rent × (12 − vacant months) − (dues + insurance + tax + maintenance reserve)
Divide that by your total cost basis (price + closing costs + make-ready). That ratio is your net yield. Put your numbers into the rental income calculator and you’ll see it in seconds — free, no sign-up.
Then set that number next to your own alternatives: where else your money could sit, at what risk, with what liquidity. Compare with your two numbers, not someone else’s anecdote.
Two truths the ratio doesn’t capture
- Appreciation: The property itself may gain value, but that’s an expectation that varies by market and decade, not a guarantee. Net yield is what you hold today; appreciation is what you hope for. Don’t put them on the same side of the scale.
- Liquidity: A savings account unwinds in a day; a property can take months to sell. If there’s any chance you’ll need the money fast, that difference can matter more than the yield.
The honest payback: a year is not 12 months
The biggest lie in “price divided by annual rent” sits in the denominator: annual rent is not 12 months of rent. The honest denominator is built like this:
- Count 11 months, not 12 — turnover years, vacant weeks and uncollected periods average out to about a month over the long run.
- Subtract the costs: service charges, property tax, insurance, an annual maintenance share, turnover costs (paint, cleaning, listing). A meaningful slice of gross rent goes to operations — the slice varies by property, so run your own numbers.
- Remember tax: rental income is declarable, and the net figure should be read after it. Rates and exemptions change — the precise picture belongs to your accountant.
A property that looks like “18 years to payback” on naive division can come out at 25 on the honest calculation, and the worth-it verdict usually changes hands somewhere between those two numbers.
Comparing against the alternative: the money’s other table
Payback alone isn’t enough; without asking what the same money earns elsewhere, the decision is incomplete. Three lines: this property’s honest net yield, the same money’s return in a safe option, and whether the gap pays for the property’s extra load — effort, locked-up cash, all eggs in one asset.
Don’t forget the property’s two hidden pluses in that check. One is price growth — on top of the rent yield, with no promise at all. The other is rent that rises with prices — a shield most fixed-income tools lack. And its two hidden minuses: property is illiquid — selling takes months — and it’s money at one address: a single bad tenant, one flood, or one neighbourhood decline hits the entire investment at once.
⚠️ This isn’t investment advice; it’s a decision frame. Numbers, rates and taxes change — for a purchase this size, an accountant and, where needed, an independent valuation are the final, non-skippable step.
With a mortgage, the maths changes
Bought in cash, net yield reads straight off. Bought with a loan, the payment joins the math and two questions split apart. Does the rent cover the payment? That’s the cash-flow question. And where does payback land once the full cost of the loan is added? That’s the yield question. A setup where rent doesn’t cover the instalment makes the property an asset you feed every month — which can be a deliberate bet on appreciation, but should be made under that name. Rate, term and deposit rewrite this maths entirely; decide from your own table, not a rule of thumb.
After the decision: the first 90 days
If the purchase goes ahead, the period that sets your yield is the first 90 days — everything done while the flat is empty is cheaper and faster than with a tenant in it. The order: put the meters in your name, clear the safety and plumbing items, run prep costs through the payback test, then write the listing and pick the first tenant with the application-form discipline. Every vacant week eats the “11 months” assumption — if you were honest in the purchase maths, the operating period deserves the same discipline. And re-run the three lines once a year at the close. The keep-or-sell call then gets made on purpose every year, instead of a souring bet drifting unseen for years.
Which property: yield comes before address
If you’re still at the buying stage, fix the order of questions: not “which neighbourhood” first, but “which type of home finds a tenant.” Where rental demand concentrates varies by area — small flats near a university, three bedrooms in a family district. The wrong type waits empty even on the best street. Half a day of simple fieldwork before buying says a lot: check how many days local rental listings take to close, ask a local agent “which type is most wanted, which type sits”, and read the listings themselves. A small win in the purchase negotiation never pays back the empty months of the wrong type.
Buying second-hand? Ask for the building’s expense history too. An upcoming roof or lift renewal can wipe out the first year’s net yield in one line item.
Decision signals
- Net yield is meaningful and the unit is manageable (location, demand, condition) → a rental can make sense for your profile.
- The ratio hovers near break-even and the only upside is “it’ll appreciate anyway” → you’re not buying an investment, you’re buying a bet that needs maintenance.
- You’re down to details like furnished vs not → continue with the depreciation math in furnished vs unfurnished.
If you buy: run it like a system from day one
What makes the return isn’t just the purchase. It’s the operating years: the right tenant (screening criteria), documented handovers, and consistent records. RentMind is built for exactly that: rent, tenant, lease and expenses under each property on one screen, reminders before rent day and renewals, and each unit’s true net in front of you. Free to start — you did the math to buy; keep doing it while you own.
📊 Current market data: Turkey rental market statistics — rent and house price indices with the gap calculation.
Frequently Asked Questions
Is buying with a mortgage worth it? Same method, one addition: the payment enters the net-yield math as an expense. If rent doesn’t cover the payment, the gap is a monthly subscription you’re paying — decide knowingly, and compare against your own cost of borrowing.
What’s the fastest way to raise the yield? Cut vacancy. Raising rent 10% is hard; eliminating one vacant month a year is usually easier and has nearly the same effect — good listings, fast turnarounds, good tenant relationships.
Do small units or large units return more? The general pattern: small units yield proportionally more but turn over faster; large units are steadier at lower ratios. Check actual rent-to-price ratios for both types in your own market before generalizing.