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Rental yield calculator with a mortgage Monthly payment, cash flow and return on the cash you put in

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Result: Positive cash flow, low ROI

3-bed flat · Valencia (with a mortgage)

Positive cash flow, low ROI
Valencia (Comunitat Valenciana) · Provincial capital€140,000 · €2,000/m²70 m² · 3 bedLong-term letRent €1,000 /month · €14.3/m²€931 /month on average, after empty months and arrears

With these figures, the rent covers the mortgage and costs, but the money you put in returns less than 5% a year.

Net monthly cash flow. What you keep each month after paying costs, the mortgage and tax. If it's negative, you top it up from your own pocket.
€169
€2,024 a year, after tax
Gross yield. Annual rent divided by the purchase price, without costs or taxes. Good for quick comparisons, not for deciding.
8.14%
Annual rent / price
Return on equity invested. Cash-on-cash: year-1 net cash flow divided by all the money that comes out of your pocket (deposit, taxes, costs, refurbishment and furniture).
3.6%
€56,850 put in
IRR over 10 years. IRR (internal rate of return): the equivalent annual return of all your cash flows, including the final sale net of costs, taxes and debt.
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Buying with a mortgage

How a mortgage changes the return on a rental

With a mortgage you put in far less money, but you pay the instalment every month. Cash flow drops and the first-year return can come out lower than buying outright; in exchange, the IRR, which counts every year, what you repay on the loan and the appreciation, is usually much higher. This is the leverage effect.

Reviewed on 9 October 2026

The same flat with different financing

Flat at €140,000 let for €1,000 a month, mortgage at 2.9% over 25 years. The IRR covers 10 years with appreciation and the sale. Break-even occupancy: the share of the year it must be let to cover its costs and the mortgage payment.

FinancedYou put inMonthly paymentMonthly cash flowReturn on the cash you put inIRR over 10 yearsBreak-even occupancy
Bought outright€168,850€0€6754.8%6.6%16%
50%€98,850€328€3514.3%8.6%53%
70%€70,850€460€2293.9%10.2%67%
80%€56,850€525€1693.6%11.5%74%
90%€42,850€591€1083.0%13.3%81%

What leverage is

Leverage means buying with the bank's money. If the flat earns more than the loan costs, the difference is yours, and the appreciation is on the whole flat, not just on what you put in. In the example, buying outright you put in €168,850 and the IRR is 6.6%; with 80% financed you put in €56,850 and the IRR rises to 11.5%.

Why does the first year return less? The payment has two parts. The interest is a cost; the rest repays the loan, and that money is not lost: every month you own a little more of the flat outright. The first-year return on the cash you put in only sees the money leaving your pocket; the IRR sees everything.

What happens if interest rates rise

With a 80% mortgage, every point of interest shows in the payment and the cash flow (see the table alongside). For this flat, the mortgage stops paying for itself at an interest rate of 6.8%: above that, you would be topping it up every month.

If your mortgage is variable, try the calculator with the rate one or two points higher. If the flat still pays for itself, you have a margin.

How much a bank will lend on an investment flat

For a home you will not live in, Spanish banks usually lend less than for your main home: typically 60% to 70% of the value (the lower of the valuation and the purchase price), and 80% only with a strong profile or extra guarantees. They also ask that all your debt payments stay below 30–35% of your income.

The deposit and all the purchase costs come from you: in the example, with 80% financed, that is €56,850 between deposit, taxes, notary, land registry, refurbishment and furniture.

The mortgage in rental income tax

Mortgage interest and costs are deducted from your rental income for income tax, together with property tax, service charges, insurance and depreciation. The part of the payment that repays the loan is not deducted. Interest and repairs together cannot exceed the rent collected in the year: the excess can be deducted over the following four years.

The calculator already does this. That is why, with a bigger mortgage, you pay less income tax on the rent.

The risk: how long it can sit empty

More mortgage means less margin. Bought outright, this flat covers its costs even if it is only let 16% of the year; with 80% financed it needs to be let 74% of the year, and with 90%, 81%. Keep a cushion for several months of payments.

Frequently asked questions

Is it better to buy a flat to let with a mortgage or outright?

It depends on your margin and the risk you accept. With a mortgage you put in less money and, if the rent covers the payment, the long-term return (IRR) is higher: in the example, 11.5% against 6.6% buying outright. Buying outright, the cash flow is higher and the flat copes better with empty months.

How much do banks lend to buy an investment flat?

For a home that is not your main residence they usually lend 60% to 70% of the value (the lower of valuation and price), and 80% with a strong profile. The deposit and purchase costs come from you.

Is mortgage interest on a let flat tax-deductible?

Yes: mortgage interest and costs are deducted from your rental income for income tax. The part of the payment that repays the loan is not. Interest and repairs cannot exceed the year's income; the excess is deducted over the following four years.

How do you work out the return on a flat bought with a mortgage?

Divide what you keep in the year (rent minus costs, mortgage payment and tax) by the money out of your pocket (deposit, purchase costs and refurbishment). That is the return on the cash you put in, or cash on cash. To see the effect of the whole mortgage, with appreciation and the sale, look at the IRR.

At what mortgage rate does a rental stop being profitable?

When the cash flow is no longer comfortably positive. For the example flat, up to 6.8%. For yours, enter your figures in the calculator and add one or two points to the interest rate to see whether it holds.

Cash flow/mo€169
ROI on equity3.6%
Gross yield8.14%