Analysis
Income Value Calculator (Ertragswertverfahren)
Determine the income value of a rented property using the simplified German income approach — from rental income, land value and capitalization rate.
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- Editorially reviewed
Inputs
Results
- Income value (Ertragswert)
- €327.307
- Land value
- €240.000
- Annual net operating income
- €11.900
- Multiplier (Vervielfältiger)
- 24,9
- Building income value
- €87.307
Run the numbers on a real property
With the address, size and price: financing, tax, cash flow and nearby comparable rents in one analysis.
The income approach (Ertragswertverfahren) is one of the three valuation methods of the German valuation ordinance ImmoWertV (§ 6), alongside the comparison and cost approaches. It derives the value from the sustainably achievable rental income. Our calculator implements the method in simplified form and gives a first estimate of what an investment property is economically worth. It is an orientation and does not replace a formal appraisal under the ImmoWertV.
How to use this calculator
The method separates the value of land and building:
- Step 1: Enter the monthly net cold rent; for existing properties, the sustainable market rent.
- Step 2: Enter the annual operating costs not recoverable from tenants (management, maintenance, rent default risk, non-recoverable service charges).
- Step 3: Enter the standard land value (Bodenrichtwert) and plot area. Land values are determined by the local valuation committees, which must publish them (§ 196 BauGB).
- Step 4: Choose the capitalization rate and the building's remaining useful life. Capitalization rates are also determined by the valuation committees (§ 193(5) BauGB).
Understanding the results
The income value is composed of the land value and the capitalized building income:
- Land value: standard land value times plot area. This is the value of the land, which unlike the building is not subject to wear.
- Annual net operating income: annual net cold rent minus non-recoverable operating costs.
- Multiplier: the capitalization factor (present value annuity factor) from the capitalization rate and remaining useful life. The longer the remaining life and the lower the rate, the higher the factor.
- Building income value: net income minus the return on land value (land value times capitalization rate), multiplied by the multiplier.
- Income value: building income value plus land value, the property's total economic value.
What the simplified method does and does not do
For investors, the income value is a useful valuation figure because it is tied directly to income and not to asking prices. If the asking price is well above the calculated income value, the price is betting on future appreciation. If it is below, a closer look may pay off. However, our calculator simplifies the ImmoWertV procedure in several respects: it works with lump-sum operating costs instead of a detailed breakdown, without premiums and discounts for property-specific features (maintenance backlog, heritage protection, leasehold) and without market adjustment. The results are also sensitive to the capitalization rate. Example: with €12,000 net income, €100,000 land value and 50 years of remaining life, 3% gives an income value of about €331,600 and 3.5% about €299,400, almost 10% less. Use regional capitalization rates from the valuation committees and treat the result as a range, not a point value.
Frequently Asked Questions
What is the Ertragswertverfahren?
A valuation method regulated in the ImmoWertV ordinance in which the value is composed of the land value and the capitalized net income of the buildings (§ 28 ImmoWertV). Which of the three methods an appraiser uses depends on the type of property and on common practice in ordinary business dealings (§ 6 ImmoWertV).
What is the Liegenschaftszins?
The rate at which property market values yield on average under normal market conditions (§ 193(5) BauGB). In the calculator it drives both the return on land value and the multiplier. The valuation committees determine regional values.
Which operating costs are deducted?
Operating costs under § 32 ImmoWertV comprise management costs, maintenance costs, the rent default risk and service charges. Only what is not passed on to tenants is deducted. Recoverable service charges such as heating or property tax are borne by the tenant and do not reduce the net income.
Is the calculated income value the market value?
No. The calculator provides a simplified approximation. The market value under ImmoWertV additionally considers property-specific features, detailed operating costs and market adjustment. A formal appraisal is required for that.
These calculations are for informational purposes only. Consult a professional for financial advice.