Buying a flat to let: yield calculation, financing, taxes and risks
Since interest rates fell again in 2024, many clients have been asking us whether they should buy a flat to let: as an investment for an inheritance, as a supplement to their pension fund or as a first step into property. The answer depends on a calculation that fits on one page but has to be honest. This guide shows how gross yield, net yield and return on equity are calculated, which costs investors regularly forget, how banks finance a let flat, what taxes do to the yield and which risks remain. With a fully worked example from Liestal, a checklist for choosing a property and a comparison with an apartment building.
In brief
- Gross yield = annual net rent ÷ purchase price; for condominiums in the Baselbiet it is between 3 and 4 % in 2026. Below 3 % the investment barely pays for itself, above 4.5 % caution is advisable
- Net yield deducts maintenance, management, the renovation fund, insurance and a vacancy risk, together 20 to 30 % of the rent; realistically, 2.2 to 3 % remains
- Return on equity: with 25 to 35 % equity and a mortgage rate below the net yield, the return on the money invested rises to 4 to 6 %, but so does the risk
- Banks finance buy-to-let flats up to a maximum of 75 %, require more equity than for an owner-occupied home, calculate with a notional interest rate of 4.5 to 5 % and do not allow pension assets
- Taxes: rental income counts as income, debt interest and maintenance are deductible, the flat counts as part of your assets; on sale, property gains tax is due
Gross yield, net yield and return on equity: the three figures
Listings quote the gross yield because it looks best. The other two are what matter.
Gross yield: annual net rent excluding ancillary costs divided by the purchase price including incidental purchase costs. Example from Liestal: 3.5-room flat, 85 m², built in 2008, purchase price CHF 720,000, property transfer tax (half share, 1.25 %) and notary around CHF 12,000, total investment CHF 732,000. Net rent CHF 1,950 per month, CHF 23,400 per year. Gross yield 3.2 %.
Net yield: the following are deducted from the rent: contribution to the renovation fund of the condominium owners’ association (CHF 1,800 per year in the example), non-recoverable operating costs and management of the association (CHF 900), maintenance inside the flat and replacement of appliances (provision of 0.5 % of the flat’s value, CHF 3,600), management of the letting, if outsourced (CHF 1,200), vacancy and rent loss risk (2 % of the rent, CHF 470). Total CHF 7,970, which is 34 % of the rent, more than the frequently quoted 20 %, because with condominium ownership the association carries costs that go unnoticed when you live in the flat yourself. Net income CHF 15,430, net yield 2.1 %.
Return on equity: financed with 30 % equity (CHF 219,600) and a mortgage of CHF 512,400 at 1.5 % (interest CHF 7,686 per year), CHF 7,744 of cash flow before tax remains. Relative to the equity, that is 3.5 %. On top of this comes amortisation, which is not income but wealth accumulation, and any increase in value. If the mortgage rate rises to 2.5 %, the cash flow falls to CHF 2,620 and the return on equity to 1.2 %; at 3 % the cash flow is zero. Leverage works in both directions.
The rule of thumb: anyone who buys a flat with a mortgage and lets it needs a net yield well above the long-term mortgage rate, otherwise they are working for the bank. At 1.5 % interest, a net yield of 2.1 % is tight but positive; with a purchase price of CHF 650,000 instead of 720,000 it would be 2.4 % and the return on equity almost 5 %. The purchase price matters more than anything else, and it is decided on the day you buy. How to set the rent in line with the market and on a sound legal footing is explained in the guide Setting the rent.
Financing: how the bank assesses a buy-to-let flat
For the bank, a let flat is an investment property, even if it is only one. The rules differ from those for an owner-occupied home.
Loan-to-value: a maximum of 75 % of the market value, 70 % at many banks; so at least 25 to 30 % equity, which for CHF 720,000 means CHF 180,000 to 216,000, plus incidental purchase costs. If the bank sets the value lower than the purchase price, which often happens with buy-to-let flats, the equity requirement rises accordingly.
No pension assets: pension fund and pillar 3a assets may only be withdrawn or pledged for owner-occupied property. The equity has to come from free funds, an inheritance, an advance on inheritance or an increase in the mortgage on your own house. The latter is common and attractive for tax purposes, because the debt interest is deductible, but it increases the overall risk.
Affordability: the bank calculates with a notional interest rate of 4.5 to 5 % on the entire mortgage, 1 % amortisation on the portion above two thirds and maintenance of 1 %. Rental income is taken into account, but usually only at 70 to 80 %, and for a single flat many banks also check whether the buyer could carry the flat from their own income if it stood empty. How affordability is calculated is explained in the guide Calculating affordability.
Amortisation: the portion of the mortgage above two thirds of the value must be amortised within 15 years. For investment properties, banks sometimes require faster repayment, and indirect amortisation via pillar 3a is not possible.
Interest rate term: the yield depends on the interest rate. Anyone who fixes the mortgage for ten years knows their cash flow; anyone who chooses Saron benefits when rates fall and bears the risk when they rise. A mix of tranches is common. Note: anyone who wants to sell the flat during the term pays an early repayment penalty; see the guide Calculating the early repayment penalty.
Taxes: what is left of the yield after tax
Taxes can make an investment flat better or worse than the gross calculation suggests. It depends on your other income and the financing.
Income tax: the net rent is taxable income, in the canton and municipality where the flat is located and at federal level. The following are deductible: mortgage interest, value-preserving maintenance (actual costs or a flat rate of 10 or 20 % of the rent depending on the age of the property), contributions to the renovation fund (deductible in the Baselbiet if the fund is used only for maintenance), management costs, insurance and non-recoverable operating costs. In the example: rent CHF 23,400, deductions of CHF 7,686 interest plus CHF 4,680 flat-rate maintenance plus CHF 1,800 fund plus CHF 2,100 management and operation = CHF 16,266, leaving CHF 7,134 taxable. At a marginal tax rate of 30 % that is CHF 2,140 in tax; the cash flow after tax falls from CHF 7,744 to CHF 5,600 and the return on equity after tax to 2.6 %.
Those in a high tax bracket benefit: the higher the marginal tax rate, the more the deductions are worth. For investors with a high income, a flat with a large mortgage can be more attractive after tax than for retirees on a low income, who prefer to buy with a lot of equity. How maintenance deductions and the imputed rental value work for owner-occupied property is explained in the guide Imputed rental value and maintenance deductions; for let flats there is no imputed rental value: the actual rent takes its place.
Wealth tax: the flat counts as part of your assets at its tax value (in the Baselbiet well below the market value), and the mortgage is deducted. With a high level of debt financing the effect is small; with full equity financing, wealth tax in the Baselbiet costs 0.3 to 0.5 % of the tax value per year depending on the municipality, which comes off the yield.
Sale: the profit on a later sale is subject to property gains tax, with a surcharge for a holding period of less than five years and a reduction for a long holding period. Anyone who sells a buy-to-let flat at a profit after three years hands over a large part of it in the Baselbiet; details in the guide Property gains tax Basel-Landschaft. There is no replacement purchase with tax deferral for let flats.
Several flats: anyone who buys and sells regularly risks being classified as a professional property dealer, with income tax and AHV social security contributions on the profits. One or two flats held for the long term are far from that.
Risks and what they cost
A flat is not a bond. The yield is a forecast, and any of these assumptions can break down.
Vacancy: in the Baselbiet the vacancy rate was around 1 % in 2025, higher in some municipalities. One month of vacancy per year costs CHF 1,950 in the example and reduces the net yield by 0.3 points. Location, layout and price decide whether a flat is let in two weeks or in four months.
Rent law: the rent cannot be set freely: under existing leases, increases are only possible if the reference interest rate rises, or on account of inflation, cost increases or value-enhancing investments; if the reference interest rate falls, tenants can request a reduction. When the tenant changes, the new tenant can challenge the initial rent if it exceeds the previous rent by more than 10 %. Legally sound adjustments are explained in the guide Calculating a rent increase.
Rent default and disputes: a tenant who does not pay costs three to six months’ rent until eviction, plus a lawyer. Careful tenant selection with a debt collection register extract, references and proof of income is the best insurance; letting through a managing agent costs 4 to 6 % of the rent and does not take this risk off your hands, only the work.
Condominium owners’ association: renovations to the building are decided by the association, not by you. Replacing the façade or the heating can trigger special levies of CHF 20,000 to 50,000 per flat if the renovation fund is too small. Before buying: read the minutes of the last three owners’ meetings, the balance of the fund, the renovation planning and the regulations.
Interest rates and value: if interest rates rise by one percentage point, the cash flow in the example falls by CHF 5,124 per year, and the value of the flat falls because buyers demand higher yields. Anyone who has to sell at that point loses twice. An investment flat should therefore be one you can hold for at least ten years without being forced to sell.
Ancillary cost statement: as the landlord of a flat, you must prepare an ancillary cost statement every year, even if the association only provides you with an overall statement. Flat rates or forgotten statements lead to repayment claims; how to do it correctly is explained in the guide Ancillary cost statement for landlords.
Which flat is suitable for letting
The flat you would like to live in yourself is not necessarily the one that lets best. Investors buy with a calculator.
- Size: 2.5- to 3.5-room flats of 55 to 85 m² have the broadest demand (singles, couples, retirees) and the highest yield per franc. Large 5.5-room flats achieve less rent per square metre and stay empty for longer.
- Location: being within walking distance of the station or tram, shops and schools counts for more than a view. Liestal, Pratteln, Muttenz, Münchenstein, Sissach, Laufen: central locations with a rail connection let reliably. Remote locations bring lower purchase prices and higher gross yields, but longer vacancies.
- Year of construction and condition: flats built from 2000 onwards need little renovation over the next ten years; for buildings from the 1960s to the 1980s, check the renovation fund and the renovation planning. A new build has the lowest gross yield but the fewest surprises; what to bear in mind when letting for the first time is explained in the guide First letting of a new build.
- Features: washer-dryer in the flat, balcony, lift, parking space or garage: everything the target group expects, nothing it will not pay for. Luxury kitchens do not pay off in rental flats.
- Owners’ association: regulations (is letting permitted without restriction?), renovation fund (at least 0.5 % of the building insurance value paid in per year), minutes, pending disputes, proportion of let flats.
- Price: calculate the capitalised earnings value instead of looking at comparable prices. A flat worth CHF 720,000 as an owner-occupied home is worth only CHF 650,000 as an investment at a rent of CHF 1,950. Anyone who pays the owner-occupier price is subsidising the tenant. How we value flats is explained in the guide Having your house or flat valued.
Flat or apartment building: from an investment amount of around CHF 1 million in equity, a small apartment building is usually the better investment: higher yield, no owners’ association, risk spread across several tenants, decisions in your own hands. On the other hand, more work and less liquidity when selling. What applies when buying and selling an apartment building is explained in the guide Selling an apartment building; for the comparison between selling and holding, see the guide Sell or let.
Questions on this topic.
What yield is realistic for a let condominium?
In the Baselbiet in 2026, a gross yield of 3 to 4 % and a net yield of 2.2 to 3 % after maintenance, fund, management and vacancy risk. With 30 % equity and a mortgage rate of around 1.5 %, this gives a return on equity of 3 to 5 % before tax.
How much equity do I need for a buy-to-let flat?
At least 25 to 30 % of the purchase price plus incidental purchase costs, and from free funds: pension fund and pillar 3a assets may not be used for let flats. For CHF 720,000 that is around CHF 200,000 to 230,000.
Do I have to pay tax on the rental income?
Yes, the net rent is income. Mortgage interest, maintenance (actual or flat rate), contributions to the renovation fund, management and insurance are deductible. The flat counts as taxable assets, and the mortgage is deducted.
Can I set the rent freely?
Largely, when the lease is first concluded, but the tenant can challenge an initial rent that exceeds the previous rent by more than 10 %. During the tenancy, increases are only possible on the basis of the reference interest rate, inflation, cost increases or value-enhancing investments.
What are the biggest risks with an investment flat?
Vacancy, rent loss, rising interest rates, special levies from the condominium owners’ association for renovations and a purchase price that is too high. The purchase price is the biggest risk because it cannot be corrected afterwards.
Is a flat or an apartment building the better investment?
With equity of up to around CHF 1 million, usually the flat, because an apartment building cannot be financed. Above that, a small apartment building offers a higher yield, risk spread across several tenants and decisions without an owners’ association, at the cost of more work.
Buying a flat as an investment?
We calculate the capitalised earnings value, net yield and return on equity for specific properties, check the regulations and renovation fund and find flats in the Baselbiet that are suitable for letting.
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