Interest rates in Germany have doubled and tripled over the past two years. If you’re holding, buying, or even just thinking about real estate — this matters a lot.
But here’s the twist: interest doesn’t just eat into your cash flow — it can also reduce your taxes. Let’s break down how interest rates really impact your portfolio in Germany and what you can do about it.
Interest Rates = Cash Flow Killer (or Booster)
When you buy a property with financing, your interest payments are often the largest monthly cost. A small change in rates can mean hundreds of euros more — or less — in cash flow every month.
Example:
Loan: €400,000
Term: 25 years
- At 2% interest → Monthly payment ≈ €1,700
- At 4.5% interest → Monthly payment ≈ €2,220
That’s €520/month gone from your profit.
And for many investors, that’s the difference between cash-positive and cash-negative.
But Here’s the Good News: You Can Write It Off
In Germany, loan interest is 100% tax-deductible — as long as the property is rented out.
So while rising rates hurt your cash flow, they also:
- Lower your taxable rental income
- Improve your AfA + interest deductions combo
- Offset income from other properties
💡 Pro tip: The more accurate your data is on interest, loan terms, and property performance, the better your tax position.
What Smart Investors Are Doing Now
- Running cash flow forecasts before signing anything → Immojourney’s Cash Flow Calculator helps you test financing scenarios in seconds.
- Tracking every euro of interest + depreciation (AfA) → Use Immojourney’s Asset Manager to auto-calculate AfA, track loan payments, and consolidate your numbers for tax time.
- Locking in fixed rates when it makes sense → In Germany, interest terms (Zinsbindung) often last 10 years. If you’re negotiating a deal now, your decision today will affect your cash flow for a decade.
- Keeping reserves → When rates rise, repayment jumps. Always budget for the worst-case scenario. Think stress-tested cash flow, not just best-case returns.
Conclusion: Proactive Tracking to Maintain Profitability
Interest rates are a key factor in real estate investing, influencing financing costs, cash flow, and overall profitability.
By understanding their impact, choosing the right financing structure, and using tools like Immojourney to track KPIs,
investors can navigate rate fluctuations with confidence.