The Four Return Streams (and Why “It’s Cash-Flow Negative” Isn’t an Argument)

Here is the deal we use across this whole track. A 58 m² flat in a 1970s block on the edge of Musterstadt – the flat and the town are invented, the tax and interest rates are not. Kaufpreis €178,000. Kaufnebenkosten in NRW with an agent run about 12% – Grunderwerbsteuer 6.5%, notary and Grundbuch ~2%, Maklerprovision 3.57% – so €21,500, all-in €199,500. You put in €29,500 of cash, borrow €170,000 at 4.2% (a 95% Beleihungsauslauf costs roughly 0.5pp over the 3.70% best 10-year rate quoted in August 2026), 2% initial Tilgung → €878/month. Kaltmiete €600/month.

Year one produces four separate things, only one of which is cash:

(NOI = €7,200 rent − €1,700 non-recoverable owner costs = €5,500. Interest = €7,140.)

So "it's cash-flow negative" is an incomplete objection. Cash flow is one stream of four and the smallest. Pre-tax you are €420/month out of pocket; after the tax shield roughly €258/month; against €283/month of principal repaid. Directionally, you are saving into an illiquid account.

Now the honest half. The table hides three things.

1. €21,500 was destroyed on day one. Real equity in the flat at completion is €178,000 − €170,000 = €8,000, not €29,500. Measure returns on capital deployed, not on equity remaining, or you will book an immediate 12% loss as if it never happened.

2. "The tenant pays off your loan" is false here. NOI is €5,500; debt service is €10,540. The tenant funds 52% of the annuity; your salaries fund the rest. That claim only holds when NOI ≥ debt service, which almost no German city deal achieves in 2026.

3. The biggest stream is the one you don't control. Appreciation is 49% of the headline and it is an assumption. Set it to zero and year one is +€3,710 (12.6%) – and the ten-year exit turns negative.

Certainty runs in almost the exact reverse order of size: Tilgung (contractual) > operating result (contracted rent) > tax shield (your income, the law) > appreciation (a guess).