Frequently asked questions about real estate investment

On this page, you will find answers to common questions that concern real estate investors. The questions have been compiled from the needs of beginners to more experienced investors, and we answer them expertly and practically. We also include current observations and tips to help you avoid pitfalls and make better decisions as a real estate investor.

Getting started and funding

How much of your own money do you need to buy an investment property?

Banks typically require approximately 20–30% self-financingof the debt-free price of an investment property. In other words, if you are considering purchasing an investment property worth €100,000, for example, you should have approximately €20,000–30,000 in savings or other assets that can be used as collateral. The remaining 70–80% of the purchase price is usually financed with a bank loan. If you have additional collateral (such as your own home or other assets), the bank may in some cases finance an even larger portion of the purchase price.

It is worth noting thatthe loan capset by the financial authorities affects the self-financing portion. First-time home buyers are required to have a lower self-financing share (currently 5% of the purchase price), but buyers of investment properties are generally considered to be purchasing a "second home," in which case the loan may not exceed 85–90% of the value of the collateral, depending on the situation. In practice, this means the same minimum cash contribution of ~10–15%, but banks may still require 20–30% to cover risks, depending on their own credit policy.

Tip:Remember that either your cash savingsoradditional collateral are counted as your self-financing share. If you have not yet accumulated enough savings, you can improve your situation by saving regularly or, for example, using your own home as collateral. Also, start discussions with your bank about loan options in good time so that you know exactly how much capital you need.

How do I start loan negotiations with the bank for an investment property?

It is worth preparing carefully for bank negotiations.Before the meeting, it is a good idea to review your financial situation: list your income, expenses, existing loans, and estimate the rental income your planned investment property is likely to generate. The bank wants to see that you have sufficient ability to service the loan – note that in the case of a real estate investor, the bank will take both your salary income and any rental income into account in its overall assessment. It is also advisable to obtaina loan commitmentin advance. A loan commitment is the bank's preliminary commitment to grant you a certain amount of credit, which strengthens your purchasing power when looking for a property.

Feel free to shop around at several banks and openly discuss your plans for the investment property during negotiations. You can mention, for example, the estimated rent level, maintenance fees, and any renovation needs – this shows the bank that you understand the cash flow and risks associated with the property. If possible, show your calculationsof the rental incomeand cash flow from your investment: banks appreciate planning, and concrete figures on rental income and expenses can improve your position in negotiations.

An investment property agent can assist you at this stage by providing you with information on properties for sale, their estimated rental income, and market prices. Our service provides you with pre-analyzed information on apartment prices and rental levels, which helps you justify to the bank why the property you are considering is a profitable investment. Also, remember to compare margins and other loan terms– even small differences in interest rates and costs can have a big impact on your return in the long run.

Do this during bank negotiations:

1. Prepare your documents:Bring proof of your income, tax assessment, list of expenses, and details of any other debts you may have. Also prepare a calculation of the rental income and cash flow for the property.
2. Obtain a loan commitment:Make appointments with 1–2 banks before you find a home. A loan commitment provides certainty and speeds up the transaction when you find a suitable home.
3. Emphasize your systematic approach:Tell the bank about your real estate investment strategy—for example, that you are seeking long-term rental income from a good location. Show your calculations to demonstrate that the rental income covers your expenses and that you have a buffer in case interest rates rise.
4. Compare terms and conditions:Request quotes from several banks. Compare other terms and conditions in addition to margins (e.g., arrangement fees, repayment flexibility, possible interest rate cap). Use the offers as a bargaining chip – if another bank offers a better margin, be open about it when negotiating with the other bank.
5. Utilize experts:If necessary, consult an independent financial advisor, for example. Sijoitusasuntovahti does not grant loans, but we can advise you on the right questions to ask and help you assess whether the expected return on the property is sufficient to cover the loan costs.

In negotiations, attitude is key: be professional, but also dare to ask the bank directly how you could get a better offer. Competition for customers is fierce among banks, and they are willing to tailor good terms especially for financially sound real estate investors.

If you would like to discuss financing with our partner, please contact us and we will help you get started!

Choosing and locating an investment property

What makes a good first investment property?

A good first investment property is typically affordable, easy to rent out, and small in size.Studio apartments and small one-bedroom apartments in popular or stable rental market areas are the choice of many novice investors because the demand for them is consistently high. For example, in student or commuter areas, small apartments often find tenants quickly. The condition of the apartment and the state of the building are also important: for your first investment, it is often wise to avoid apartments that require major renovations. So, choose an apartment in a building where the basics (such as pipes, roof, facade) are in good condition or renovations have already been done, so that you don't immediately incur significant additional costs.

Location:Favor growth centers or their surrounding areas withstrong rental demand. Good transport connections, proximity to educational institutions or employment centers, and everyday services (shops, schools) make an apartment attractive to tenants. For your first investment, it may not be worth going for the most expensive areas, where rental yields can easily be low, but neither should you go for completely remote areas, where finding tenants is more uncertain. A good compromise may be a suburb or a neighboring municipality, where prices are more affordable but the population and services are sufficient to guarantee tenant interest.

Characteristics of a good first home:

• Small and affordable apartment:A studio or small one-bedroom apartment with a reasonable purchase price. There are many good options in the under €100,000 price range in many suburbs. A smaller apartment spreads the risk – if the tenant changes, it is usually easier to find a new one for a small apartment than for a large family apartment.
• Good rental yield in relation to risk:With your first investment, it is important to geta sufficientrental yield(the net rental yield should preferably exceed the housing company's expenses and loan interest by a good margin). A good rental yield ensures that the investment pays for itself financially. On the other hand, too good a return may indicate high risk (e.g., remote location), so strive for balance—often 4–6% annual rental income is a good target for beginners in the current situation.
• Stable outlook and minimal renovation needs:Choose an apartment in a building where major renovations (such as pipe replacement) are not imminent. This will make it more likely that the first few years will pass without any unexpected costs. Examine the company's finances (does it have debt, what are the maintenance charges) and renovation plans. A good first investment apartment is usually in basic condition or has been lightly renovated; if necessary, you can do minor surface updates yourself, but avoid properties that require extensive renovation to be profitable.
• Easy maintenance:With your first investment property, you will be learning the role of a landlord, so it is advantageous if the apartment is "worry-free." For example, a relatively new or well-maintained apartment with no existing tenant-related problems (such as termination of the lease in the middle of the term) will make the start smoother. The distance from your own place of residence can also be a factor – a nearby property is easier to supervise and manage.

Sijoitusasuntovahti helps you find just such properties.For example, if you specify your criteria (price, location, target return) in our service, you will quickly receive information about suitable apartments. We utilize extensive market data to ensure that your first investment is right for you and low-risk.Finding a good property can take time, but we do the searching for you and only show you properties that meet the criteria for a successful first investment.

Is a new development a good investment property?

Newly built properties, i.e., newly completed apartments, have both advantages and disadvantages from a real estate investor's perspective.One advantage is that they are hassle-free:newly built propertiesdo not require any renovations, either in the apartment itself or in the building, so there is less risk of unexpected costs and maintenance is easier. In addition, new developments are modern, well-equipped, and energy-efficient, which makes them attractive to tenants—new apartments are often rented out quickly at a good price, minimizing the risk of months of vacancy. Tenants also appreciate the high-quality materials and modern solutions in new apartments, so tenancies can be long-term and smooth.

The challengewith new developments is often lowerrental incomeas a percentage. The purchase price (debt-free price) of a new apartment is higher than that of older, comparable apartments, and rents are not necessarily proportionally higher. As a result, rental yields on new developments are generally lower – typically around the lower limit of 3%, whereas older apartments can more easily achieve yields of 4–5%. On the other hand, the return on a new property is more stable and predictable: there will be no major renovations for a long time, no unexpected expenses, and it will be easy to rent out. Therefore, new properties are suitable for investors who want to build wealthin the long term with low risk.

Company loan and financing fee:Many new properties are sold with part of the price being a housing company loan (e.g., 50–70% of the debt-free price). For investors, this means two things: 1) you can start investing with less capital, because the sale price (i.e., your own financial contribution) is lower, and 2) your monthly costs will be higher than usual at the beginning due to the financing fee. New developments often have repayment-free periods in the early years, during which only interest is paid on the financing charge – but after the repayment-free period, the charge increases as the loan begins to be repaid.Cash flow in a new development may therefore be negative at first, meaning that the rent does not cover all expenses. This does not automatically mean a bad investment, as long as you have a plan: for example, a sufficient buffer fund to cover the difference and knowledge of when the cash flow will turn positive (e.g., when interest rates fall or rents rise over time). On the positive side,intereston housing company loansand financing charges are tax-deductible from rental incomeif the charges are recognized as income in the housing company's accounts. This improves the tax situation: even if the cash flow is slightly negative, it may reduce your taxes on other rental income while increasing the value of the apartment by reducing the loan.

Market situation:Right now (2025), there are fewer new developments available in Finland than before, as developers have reduced the number of new projects. Construction costs have been rising, which means that new apartments are often sold for less than the current construction price – in other words,you can get a new property at a “discount” compared toa situation where construction is booming. If you find a new property with a reasonable debt-free price and investor-friendly mortgage terms (interest rates, repayment holidays), it could be an excellent store of value or even a source of growth for years to come. The value of new properties does not usually fluctuate as much as that of older apartments, and in the long term, a new apartment purchased in a good location is likely to follow the general market value increase.

Who is a new development suitable for?A new development is a suitable investment for investors who value convenience and are prepared to potentially compromise on cash flow in the early stages. If you already have other investment properties with positive cash flow, a new development can be a sensible addition to your portfolio to balance out renovation risks – a small negative cash flow from a new apartment can even reduce the tax burden on your entire portfolio. As a first investment property, a new development is a safe choice from a technical standpoint (no surprises in terms of condition), but it requires that you have budgeted your expenses carefully. Also, keep in mind a few specific issues related to new developments: land ownership (owned or leased; leased land increases expenses), the interest terms of the housing company loan, and the possibility of rent increases (in many new buildings, the redemption of the leased plot or other factors may affect future costs).

Sijoitusasuntovahti also offers new developments in its service.We have sold several new developments to investors – even less than a day after the property was listed – which shows that new developments sell very quickly at the right price. If you are interested in new developments, join Investment Property Guard and be the first to know when we list new properties for sale. We can also help you interpret the documents related to the new development (such as the terms and conditions of the company loan share) so that you can make your decision with confidence.

Why are suburban apartments good investment properties?

Many successful real estate investors favor so-called "suburban apartments," i.e., ordinary apartment buildings located slightly outside the city center.The main reason for this is the better rental yield in relation to the purchase price. Apartment prices in the suburbs are significantly lower than in the city center, but rents do not fall as sharply – especially if the suburb is located within a growing city, where rents are supported by the same jobs and educational institutions as in the city center. This means thatrental yieldsare often higher in the suburbs. For example, in central Helsinki, you may have to settle for a rental yield of ~2–3% in the hope of an increase in value, whereas in a neighboring municipality or suburb in the same urban area, you can realistically expect a return of 5–7% on the purchase price. The higher return compensates for the investor's risk and provides a buffer for possible empty months or repair costs.

Affordable purchase:Suburban apartments are oftenpriced below €100,000, which lowers the threshold for getting started as an investor. A lower absolute price means less self-financing is required in euros and it is easier to obtain a loan (it is safer for a bank to grant a €70,000 loan than a €300,000 loan if the only collateral is the apartment being purchased). At the same time, diversification is easier: with several affordable suburban apartments, you can spread the risk across different tenants and areas, instead of having everything tied up in one expensive property.

Stable demand for everyday living:Good suburbs offer tenants peaceful and often family-friendly living, good parks, schools, and everyday services. Many tenants – such as low-income families, students and working people who cannot afford or do not need the high prices in the city center – specifically look for apartments in the suburbs. This demand is surprisingly stable. For example, in the capital region or Tampere, neighborhoods outside the city center (such as the suburbs of Espoo, Vantaa, or Tampere) are full of tenants who appreciate lower rents and more spacious apartments in a peaceful environment. The risk of empty monthscan therefore be managed as long as the suburb is within reach of public transport and there are jobs within a reasonable distance. Of course, completely remote or declining areas are a different matter – high rental income on paper alone is of no help if there are no tenants in the area. That is why it is important to research the background of the suburb: is the population growing or declining, what is the reputation of the area, and are there any development projects or signs of decline?

Lower risk of depreciation in percentage terms:Economic fluctuations often have the greatest impact, in percentage terms, on the most expensive homes. For example, if the general price level falls by 10%, the value of a million-euro home in the city center will drop by €100,000, while the value of a €100,000 apartment in the suburbs will only drop by €10,000. Although the potential for value growth in the suburbs is not as explosive as in the trendiest areas,the lower initial capital is partly your security: even in a weaker market, affordable basic homes will find buyers and renters because their purpose (housing) will not disappear and, due to their price, they are the only option for many. In addition, suburbs of growing cities have seen value appreciation in the long term, albeit at a more moderate pace – for example, regional construction programs in large cities (metro expansion, new service centers) can increase the attractiveness of previously modest suburbs over time.

Summary:Suburban apartments offer investors a combination of good rental income and reasonable security. They may not be the most glamorous investment in the media, but they are the bread and butter of real estate investment, helping many people to build steady wealth. When you buy a suburban apartment in a carefully selected neighborhood, you are likely to get a reliable cash flow and sufficient demand. We offer our customers many potential properties, for example in the suburbs of growth centers, where rental yields are significantly higher than in central areas but the rental market remains strong. Through Investment Apartment Guard, you can find carefully selected properties in suburbs – below market price and offering excellent returns right from the start. At its best, a suburban apartment is a carefree and profitable cornerstone for your housing portfolio.

In which areas is it worth buying an investment apartment?

Choosing the location is one of the most important decisions in real estate investment.Generally speaking, it is advisable to buy a property in an area where there iscurrent and future demand for housing. These include growing cities and their surrounding areas. The largest cities (the Helsinki region, Tampere, Turku, Oulu, Jyväskylä, etc.) and their neighboring municipalities are safe choices in the sense that the population and jobs will continue to be concentrated there. In growth centers, it is easier to find tenants, and the value of apartments will develop favorably in the long term as demand increases.

City vs. smaller town:In a large city (e.g., Helsinki), the value of an investment property is more stable and liquid—you can always rent out the apartment and sell it within a reasonable time frame—but the rental income is lower due to the high price. In a smaller town or sparsely populated area, you may get an impressive rental yield in percentage terms, but you will have to accept the increased risk: the value of the apartment may not rise at all and, in the worst case, may fall if the migration loss continues, and it may take time to find a tenant. As a rule of thumb, only invest in places where people will want to live in 5, 10, and 15 years' time. For example, examine city zoning and development plans: are new jobs, campuses, transportation investments, or other attractions coming to the area? Or has the last factory closed down and young people are moving away? These factors have a direct impact on rental demand and the value development of apartments.

Within the city:Even within the city, the choice of location affects returns and strategy. Properties near the city centerusuallyoffera secure value and a queue of tenants (which helps with rentability), but there is a ceiling on the yield.In suburbs and surrounding municipalities, you can buy better cash flow, but you need to make sure that the area remains vibrant. A good sign is, for example, that more people are moving into the area than leaving it, and that the proportion of people living in rented accommodation is sufficiently high (providing a customer base for the rental market). Also, pay attention to transport links: if the area has good public transport connections or motorway links to the city center or major employment centers, this will significantly improve the rental potential.

One strategy is to diversify your location: for example, purchase a few apartments in different cities. This way, you are not at the mercy of economic fluctuations in a single area. However, this is not immediately relevant for beginners – usually, you start by focusing on one city or area that you know best. For example, you can start in your hometown, because you know the areas and price levels there, and then expand elsewhere later.

One concrete way to ensure the functionality of a location isto look at occupancy and price statistics. For example, the Finnish Landlords Association and many market reports indicate that the capital region has the lowest rental income (high prices), but on the other hand, apartments rarely remain vacant. In northern Finland or smaller towns, the income is higher on paper, but the occupancy rate may fluctuate. You can ask yourself:"Does this area have any particular appeal or a specific group of tenants who want to live here?"If the answer is yes (e.g., a university town, a large factory nearby, a tourist destination, etc.), that is a good sign. If you can't think of any reason why someone would want to live there (except for cheap rent), that's a warning sign.

Investment Apartment Guard actively monitors the market throughout Finland.With our service, you can specify the area or city where you are looking for an apartment, and we will notify you as soon as an apartment that meets your criteria becomes available. This way, you won't miss out on any opportunities, for example, on the other side of Finland, just because you are not familiar with the local market. Our team's local knowledge covers a wide range of urban areas in Finland, so you can explore location options more broadly without worry, as we will help you find the best properties.

How do I find a good investment property?

Finding a good investment property requires active monitoring of the market and analytical skills.In practice, you have two options: do the work yourself or use tools and services. If you decide to look for an apartment on your own, be prepared to regularly check sales listings on Oikotie, Etuovi, and even Facebook housing groups. Offers for the best investment properties go quickly—sometimes within hours—so speed is of the essence. It is a good idea to set up search alerts and notifications for areas you are interested in so that you can find out about new properties immediately. When you find a potential apartment, you need to be ableto calculate the return on the property(rental yield%, cash flow) and assess the risks associated with the apartment before making an offer.

Another option is to usethe Investment Property Watch service, which does this for you. The idea behind our service is simple: we monitor properties coming onto the market around the clock and screen them for those that are good investments. We usedata analytics and market knowledgeto identify properties that are, for example, significantly below the market price in the area or offer excellent rental income. When we find such a property, you will immediately receive an email notification containing essential information such as location, price, rental potential, and yield calculations. This gives you access to "gems" that might otherwise slip through your fingers or end up in the hands of another investor.

It is also worth networking: a good investment property can be found in surprising places, such as through your circle of acquaintances before it goes on the market. Tell your friends and family, and even on social media, that you are looking for an investment property – sometimes the seller may take up such a tip. Local real estate agents can also help: once they know your criteria, they can contact you when a suitable property comes up for sale. However, remember that agents mainly serve sellers – it is your job to keep your financial skills sharp and ensure that the property is indeed a good investment.

In summary:Finding a good investment property combinesthe right location, the right price, and the right timing.You need to recognize the value of the property (is the asking price reasonable or preferably below market value), its rental income potential, and the prospects for the area. The tools you need are calculators, market data, and, if necessary, professional help.Sijoitusasunto.fi has been developed precisely to facilitate this process.It saves you time and effort when searching for a profitable investment property. By registering for the service, you specify your criteria (e.g., "studio apartment in Tampere, budget X €, target return at least Y %") and we do the rest. At the same time, you receive support from us – for example, we can go through the key figures and risks of the property we have found together before you make a decision. This way, you will learn along the way what elements make up a good investment property.

In summary:Network, actively follow announcements, or utilize Sijoitusasuntovahti – the most important thing is to be prepared to act quickly when a good opportunity arises. Carefully review the financial figures and trust your instincts: if the property seems too good to be true, investigate further, and if it meets all your criteria, act quickly.*

Revenue and profitability

What is a good rental yield for an investment apartment?

Rental income is a key indicator for real estate investors: it shows how much a property generates in net rental income in relation to its debt-free price. A good rental yield is one that covers all running costs (maintenance charges, land rent, insurance), loan servicing costs, and also generates positive cash flow – or at least keeps the investment self-sufficient. But what kind of rental yield can be considered good?

In general,the rental yield on an investment propertyshould be at least around 4%. At this level, the property is often profitable in the long term and the investor also achieves an increase in value.A rental yield of 6–9%can be considered good and is a desirable level for many investors, especially in Finland's growth centers or their suburbs. A rental yield of over 10%is rare and considered excellent, generating significant cash flow – but such properties often require special circumstances, market knowledge, or a highly competitive purchase price.

Below is a rough breakdown of rental income levels (calculated on a debt-free basis):

• Poor (less than 4%):Rental income may not be sufficient to cover all expenses and loan servicing costs, especially if leverage is used. The investment may still be justified in areas with strong value growth (e.g., central Helsinki), but cash flow will remain subdued.
• Good (4–9%):The return is sufficient to cover expenses and loan servicing and typically generates a reasonable cash flow. This is a common and realistic level of return in Finnish growth centers.
• Very good (over 10%):Excellent return, generating ample cash flow. Such properties are rare in good locations and often require quick reactions, skillful purchase price negotiations, or taking advantage of special circumstances (e.g., an undervalued property).

It is important to notewhether the return is calculated on the debt-free price or on the equity capital– and that all costs are included in the calculation. Higher-yield properties may be riskier in terms of location or rentability, for example, while investors in low-yield properties often rely on appreciation.

Tenant demand also affects the profitability of the investment. The attractiveness of the area, demand for typical apartments, and competition for rental apartments determine the rent level and affect the risk of vacant months. Good rental income is not only based on calculated figures, but also on the actual rentability of the apartment.

How is the rental income of an investment property calculated?

Calculating rental income is easy with a formula. You need information about the apartment's annual income (rent) and expenses, as well as the total purchase price of the apartment.The basic formula for rental income (%)is:

Rental income = (Annual rent – Annual maintenance fees) (Debt-free price + renovations + transfer tax) × 100%.Rental income = (Debt-free price + renovations + transfer tax) (Rent per year – Maintenance fees per year) × 100%.

In practice, first calculatethe annual net income of the apartmentin euros: add up the gross rental income for one year (monthly rent × 12) and deduct the mandatory expenses payable during the year, which usually includethe maintenance charge(i.e., maintenance charges × 12) and any other recurring payments (e.g., water or parking fees payable by the landlord, if these are charged separately to the tenant or paid to the housing company). If you want a more accurate figure, you can also deduct an annual estimate of other expenses such as property tax (for a detached house) or annual maintenance costs, but at its simplest, deducting the maintenance charge is enough to give a good idea.

Next, determinethe total investment, i.e., how much money is tied up in the apartment. This includesthe debt-free purchase price of the apartment, any renovation costs (if you bought the apartment and renovated it before renting it out, these must be included), andthe transfer tax. The transfer tax is 1.5% of the debt-free price of the apartment (we will add more details about this in the example). If the property has a housing company loan, the debt-free price also includes this portion – in practice, you want to know the “real price” of the entire apartment.Note: If you bought the apartment well below market price, it is still worth calculating the debt-free market price so that you can compare the return to a realistic value.

Finally, divide the annual net return by the total investment and multiply by 100 to getthe rental yield percentage. Let's look at a quick example:

• Monthly rent: €600 ⇒ Annual rent = €7,200
• Maintenance fee: €150/month ⇒ Annual fee = €1,800
• Net annual income = €7,200 – €1,800 = €5,400
• Debt-free price of the apartment: €100,000
• Transfer tax: €1,500 (1.5% of €100,000)
• Renovation costs upon purchase: €3,500 (e.g., surface renovation)
• Total investment = €100,000 + €1,500 + €3,500 = €105,000
• Rental yield % = (€5,400 / €105,000) × 100% ≈5.14%

In this example, the rental yield is approximately 5.1%, which is quite good. Please note that the calculation gives thepre-taxreturn. Taxation (see separate question on taxation) affects the net return in that you pay capital gains tax on it, but on the other hand, loan interest and many other expenses are tax deductible, which changes the final return you receive.

Example of an investment apartment with excellent rental yield

The previous example described a typical property generating good rental income. The following example shows the kind of returns that can be achieved when the price and rent level are clearly favorable to the investor.

One good example of excellent rental income is the investment studio apartment in Lahti that was for sale on our website. The details of the property are as follows:

The rental income for the property is calculated as follows (if the property was purchased with cash):
(€500 – €163.3) × 12 / €40,000 × 100 =10.1%

In cash terms, the property therefore generates around 10.1%, which is an excellent level — clearly above average and very attractive to investors if the cash flow and location are right.

By using debt financing, the return can increase to as much as 26.5%.This is due to the leverage effect: when less of your own money is tied up, the rate of return on your own capital increases. At the same time, the risk also increases, which is important to consider when making investment decisions.

Overall, the profitability of the target is very strong, but its suitability for investors always depends on their risk tolerance, cash flow requirements, and investment strategy.

You can find more examples of investment apartments with a rental yield of over 10% here!

It is important to always use thesame formulawhen comparing different properties. This way, you will not be comparing apples and oranges. If one calculation takes renovations into account and the other does not, you may get a false impression. For example, some investors do not include transfer tax in their yield calculation, but this is also money that has been spent on the investment – we recommend taking it into account. Similarly, if a housing company has majorrenovations coming up, consider their impact: even if the renovation costs have not yet been realized, rental income may decrease during the renovation (or you may have to pay renovation fees in the future).

Finally, rental income should be considered in conjunction withcash flow. A percentage figure alone does not reveal loan servicing costs, for example. You can achieve a good rental yield on paper even with an expensive new property (with a large corporate loan), but your cash flow will be negative if the financing costs and loan interest exceed the rent. Therefore, always calculate how the rental income covers any loan servicing costs – more on this in the answer to the cash flow question.

Investment Apartment Guard calculates the rental income for each apartment that comes up for sale.We report it as a percentage and highlight the factors taken into account in the calculation (e.g., rent, maintenance and financing charges). You can trust that the calculations are comparable, as we use the same standardized formula for each property. This allows you to focus on whether the yield percentage meets your goals, instead of spending time crunching numbers.

What is the difference between rental income and return on equity?

Rental income(also known asgross rental incomeornet rental income, depending on the calculation method) measures the return in relation to the total price of the apartment. Return on equity(ROE) measures the return in relation to the capital you invest from your own pocket. The difference between these indicators is emphasized when leverage, i.e., borrowed money, is used in the investment.

If you buy an apartment entirely without a loan,your return on equityis practically the same as your rental income. For example, if you buy an apartment for €100,000 in cash and receive €5,000 in net rental income per year, your rental income is 5% and your return on equity is also 5%. However, if you take out a loan, the situation changes: let's say you put in only €30,000 of your own money and take out a loan of €70,000. The apartment still generates €5,000 per year net before loan expenses. Let's assume that the loan interest and expenses are, say, €2,000 per year. In this case, you are left with €3,000 in "profit" per year before taxes, which is proportional to your €30,000 equity investment. In this simplified example,the return on equitywould be €3,000 / €30,000 = 10%. Thanks to leverage, you got a higher percentage return on your own invested money. This is precisely why loans are used:using debt improves the return on your own capital, because you also earn a return on the borrowed money.

However, it should be noted thatleverage works both ways. If your return expectations are not met (e.g., the tenant is absent for months or you have to pay unexpected expenses), your return on equity will decline more rapidly with a loan. In addition, if the value of the apartment falls, it will have a more severe impact on your equity: in the worst case, a home purchased with leverage may fallbelow the amount of the debt(a situation known as "negative equity"), in which case the return on your equity will be strongly negative – you will effectively lose more than you invested.

It can be said that rental income is the "internal" productivity of a home, while return on equity is the investor's personal rate of return, which reflects the impact of the financing solution.An example to illustrate the difference:

• Option A: No loan, rental income 5%. Return on equity = 5%.
• Target B: 50% loan, rental income 5%, loan interest 2%. Rental income 5% – interest expense 2% = net return 3% on total capital. But since you only financed half (50%) and the bank financed the other half, that 3% on the total capital means a return of about 6% on your own capital (because the return is divided between your 50%).
• Target C: 50% loan-to-value ratio, rental yield 5%, loan interest rate 4%. Net return on total capital = 1%. The return on equity is only about 2% – in other words, the debt took almost all of the profit and the return on equity was very small (even less than inflation).

In practice, investors monitor both rental income and return on equity.Rental income indicates the profitability of the property itself, distinguishing a good deal from a bad one.Return on equityindicates how well you are utilizing your own money and leverage. Many real estate investors set minimum requirements for both: for example, "I will not buy a property that generates less than 4% rental income" and "I want at least a 10% return on my own capital with leverage."

Remember that using a loan increases risk:return on equityis a good servant but a bad master. It is worth calculating different scenarios – for example, what will happen to your return if interest rates rise by a couple of percentage points or rent falls slightly? This will ensure that you do not paint too optimistic a picture. As a rule of thumb,you should only use borrowed money when the interest rate on the loan is significantly lower than the rental income from the property. In addition, when using a loan, it is important to keep your cash flowpositive or at least neutral (see the next question) so that you do not have to keep adding money to your investment.

Summary: Rental income measures the profitability of a property in general, while return on equity measures your profitability as an investor using leverage. Both are important – rental yield ensures that the property is profitable, and a good return on equity ensures that you get the maximum benefit from your investment in relation to the risk.

What does leverage mean in real estate investing?

Leverage(“debt leverage”) in real estate investment means using borrowed money to finance an investment in order to increase the return on invested capital. In practice, when you buy an investment property with, for example, 70% bank loan and 30% of your own money, you get access to 100% of the property's returns even though you only had 30% of its price. It is as if you have used the bank's money as leverage to increase your own investment. With the help of debt leverage, a smaller amount of equity capital "increases" the return on a larger investment– according to the example of return on equity capital presented above, you can get, for example, a 10% return on your own money in a property with a rental yield of 5% when you use a loan moderately.

Leverage works to your advantage as long as the return on your investment exceeds the cost of the loan. If the interest rate on the loan is, say, 2% and the rental income on the property is 5%, the spread is 3%, which translates into a profit for you even with the loan. In this case, leverage “works.”However, if the cost of the debt (interest) is higher than the return on the property, leverage works against you.The investment becomes negative in terms of cash flow, and in practice, the loan eats into the return on your equity. For this reason, it is important for investors using a leveraged strategy to monitor interest rates. As mentioned above, it is advisable to only borrow as much as your cash flow can sustain and to ensure in your calculations that the interest on the debt is clearly belowvuokratuotot.fi.Buffersare also essential: prepare for interest rate rises by calculating in advance how your cash flow would change if interest rates rose from, for example, 1% to 4% or 5%. In this case, you can apply for interest rate protection (interest rate cap or fixed interest rate) in good time or plan additional repayments if you want to reduce your debt leverage.

Risks:In addition to increasing your returns, leverage also increases risk in several ways. First, with a loan, you havea regular expense(principal + interest) that must be paid regardless of whether you have tenants or unexpected expenses arise. This highlights the importance of choosing a good tenant and having a buffer fund – you need to be able to pay your loan installments even in bad times. Second, debt exposes youto market risk: if housing prices fall, the value of your equity will melt away faster. For example, a 20% drop in the price of a €100,000 apartment is €20,000 – if you bought without a loan, you lost €20,000 of your own money (20%). If you bought with €20,000 of your own money and €80,000 in loans, you would lose your entire €20,000 investment (100%). Of course, the opposite is also true: an increase in value will dramatically increase the leverage investor's return on equity: a 20% increase in value will double the value of their investment.

Summary:Leverage is an effective tool for real estate investors when used correctly. It allows you to expand your investment activities and increase your return on equity, but it also comes with the responsibility of managing the risks of borrowing. Start with moderate leverage (e.g., 50–70% loan-to-value ratio) and ensure that the rental income from the property is sufficient.Perform stress tests:calculate your cash flow at different interest rates and the percentage change in the value of your real estate portfolio if prices fall by, say, 10%. This will give you an idea of how much leverage you can comfortably carry.

Sijoitusasuntovahti recommends its members to use leverage wisely: we can help you calculate the returns on different financing options. Our service also shows you the pre-calculated return on your own capital in different scenarios (for example, if you buy 30% with your own funds, what the cash flow will look like). This allows you to confidently take advantage of leverage, because you know exactly where the limits are.

What does positive cash flow mean and why is it important?

Cash flowsimply refers to the flow of money that moves into or out of your account each month as a result of owning an investment property.Positive cash flowmeans that each month, you have extra money left over from your rental income after expenses. Negative cash flow, on the other hand, means that expenses (such as maintenance charges and loan repayments with interest) exceed rental income, and you have to put your own money into the investment every month. For example: you receive €600/month in rent, the maintenance fee is €150, and the loan repayment + interest is €400/month – in this case, the cash flow is €600 – (€150 + €400) = +€50/month. This is a positive cash flow. If, on the other hand, the loan were larger and the expenses €700/month, the cash flow would be –€100/month, meaning you would have to pay the difference yourself.

The importance of cash flow:Positive cash flow is like a buffer zone for real estate investors. When a property generates surplus income, you can use it to build up a fund for unexpected expenses (e.g., building renovations, tenant turnover costs, vacant months). It also allows you to purchase a new investment property more quickly, as the extra income improves your ability to pay and creates savings. Negative cash flow, on the other hand, is only sustainable if you can afford to subsidize the investment with other income and do so consciously for strategic reasons (e.g., you expect the value of the apartment to rise or the rent to increase soon). There are investors who accept negative cash flow due to high expectations of value growth (typically this happens with some new developments or apartments in central Helsinki, for example). However, this is more stressful and risky –at least some kind of plan to turn the cash flow positive should be in place, whether through loan repayment or rent increases over time.

How to calculate cash flow: Subtract all recurring expenses from the monthly rent, including maintenance fees, financing fees (if you have a company loan and pay fees), estimated renovation costs per year (you can set aside, for example, 5% of your annual rental income as a reserve), and loan interestandrepayments. Please note that the repayment portion is not deducted from the rental income calculation (because it is, in a way, savings you pay to yourself, increasing your own wealth), but it must of course be taken into account in the cash flow calculation, as it is an actual expense from your account. Cash flow = Rent – (maintenance charges + interest + repayments + other expenses). This is the amount that remains below the line each month.

Benefits of positive cash flow:

• You will not have to sell your assets or use your salary income to maintain your investment. Real estate investment remains "self-sufficient."
• You can betterprepare for risks. If interest rates rise, positive cash flow may decline slightly or fall to zero before you have to pay. If cash flow is already negative, every interest rate increase will only deepen the hole.
• Peace of mind:You don't stress every month about how much money this investment is costing you. On the contrary, you see a small increase in your account, which is psychologically rewarding.
• Potential for a snowball effect: you can reinvest your cash flow, for example, as extra loan repayments (reducing your debt faster) or save it for your next investment (increasing your equity). Many experienced investors have used positive cash flow to grow their portfolios—the surplus from their first home helps finance their second, and so on.

When can negative cash flow be acceptable?If you know that you can easily cover the negative difference with your other income and the investment is otherwise justified (e.g., a new property with a 3% rental yield and a cash flow of -€200/month, but you expect an increase in value or rent increases, or you have other properties that generate extra income), you can consider it. From a tax perspective, negative cash flow can be beneficial in that your rental income is not taxable, and the excess portion of the loan interest can reduce your other capital income or generate a deficit credit in your earned income taxation. However, this should never be the main objective – the tax benefit is limited consolation if you have to constantly offset losses.

In summary:Try to build your housing portfolio so that your cash flow is at least neutral or, preferably, positive. This will put your investment on a sustainable footing and enable you to weather market storms more effectively. In practice, this may mean that you do not maximize your borrowing to the absolute limit, negotiate a sufficiently long loan term (so that your monthly payments remain under control), and choose properties where the rental income is at a healthy level in relation to expenses. “Cash flow is king”is a saying that is especially true for those who own multiple apartments: with positive cash flow, even a larger portfolio will take care of itself, but with negative cash flow, even a few apartments can start to strain your finances.

The investment property calculator also calculates a cash flow forecast for each property, both for a cash purchase and for a 70% loan over a 25-year period, for example. This allows you to quickly see whether the property is likely to generate positive cash flow. You can, of course, change the assumptions (loan term, equity share, interest rate) and see under what conditions the cash flow becomes positive. Our goal is to help you find properties that do not cause financial pressure but, on the contrary, support your wealth accumulation with a continuous income stream.

Taxation and expenses

How is rental income taxed and what deductions are available to real estate investors?

In Finland, rental income from investment properties is consideredcapital income, which is subject to capital gains tax. The tax rate is 30%, rising to 34% on any annual capital income (total capital income) exceeding €30,000. In practice, a tax rate of 30% is sufficient for most individual landlords, as rental income often falls below this limit – but if you own several apartments or receive other capital income (such as dividends or capital gains), some of your income may be subject to the higher tax rate of 34%.

The good news is that all expenses incurred in generating income can be deducted from rental income. This means that tax isonly paidon net income. It is both the right and the smart move for a real estate investor to take advantage of all legal deductions, as this significantly reduces the tax burden. Here are the key deductions:

• Maintenance charges (service charges):All maintenance charges paid to the housing company and, for example, water charges are deductible from rental income for the period during which the apartment is rented.
• Financing charge (capital charge):If the financing charge related to the housing company loan share of the apartment has been recognized as income in the housing company's accounts, it is also deductible. Recognition as income means that the housing company records the charges as income and does not fund them in the balance sheet. If the contribution has been set aside, you cannot deduct it from your rental income, but you can add the contributions paid to the purchase price of the apartment and deduct them from the capital gain when you sell it. Ask your property manager about your housing company's practice – it is often more advantageous for investors to have financing fees recognized as income.
• Loan interest:Interest on investment loans for housing is 100% deductible from capital income. Be sure to mark the loan in question as an "income-generating loan" on your tax return so that the tax authorities can allocate the interest correctly. Loan origination fees, arrangement fees, etc. are also deductible.
• Agency fees and advertising costs:If you use a rental agency to find a tenant or place a paid rental advertisement in a newspaper/portal, these costs are deductible. Similarly, credit check fees, for example, are tax-deductible expenses (they are part of the costs of acquiring a tenant).
• Landlord insurance:Many people take out separate landlord insurance (which covers damage, legal protection, etc., specifically related to rental activities). The premiums are tax deductible.
• Apartment maintenance costs:All running costs related to renting an apartment, such as annual maintenance, minor repairs (even a can of paint to touch up the walls) are tax-deductible. You can also deduct any usage fees charged by the housing association (e.g., sauna or parking space fees, if the landlord pays them).
• Renovation costs:The deductibility of renovations depends on whether they areannual repairs(maintaining the old standard) orfundamental improvements(raising the standard). Annual repairs – e.g., replacement of a broken household appliance, painting walls, replacing worn flooring – can be deducted in the year in which the expenses were paid, provided that the apartment was rented at that time (or at least rental activity had begun). Fundamental improvements – such as installing a completely new, better-equipped kitchen to replace the old one – must be deducted over a longer period as depreciation (usually 10 years of straight-line depreciation) or only when the property is sold at acquisition cost. Renovations often involve both maintenance and improvements, in which case the expenses are divided into these categories. In addition, if you renovate the apartmentbefore renting it out, you cannot deduct the expenses from the rental income, but they are added to the purchase price (i.e., taken into account when selling). This may come as a surprise to beginners – rental activity is only considered to have started once the apartment has been put up for rent (e.g., an advertisement has been published), so if you renovate immediately after purchase while the apartment is vacant, make sure to check the tax treatment.
• Travel expenses:You can deduct travel expenses related to rental activities, such as trips to view and inspect apartments, drawing up rental agreements, and attending housing association meetings. You can deduct mileage for the use of your own car (in 2024, the deduction is €0.27/km). So keep a logbook of your trips to the apartment or meeting places.
• Other expenses:For example, professional literature or training related to acting as a landlord can be considered income-generating expenses. Similarly, membership fees for the Finnish Landlords Association are tax-deductible – membership in this organization is often worthwhile due to the benefits it offers.

It is important to keep receipts and supporting documents for all expenses. The tax authorities may ask to see them if necessary. Usually, rental income anddeductions in different categories(maintenance charges, interest, other expenses, etc.) are reported separately on the tax return. If you are careful about this, you may find yourself in a situation where you only pay tax on your rental income after deducting a significant amount of expenses. Many real estate investors only pay tax on part of their gross rental income, because loan interest and maintenance fees, for example, reduce their taxable income to a small amount or even zero.However, remember that tax avoidance is not an end in itself– the goal is to generate net wealth. Taxes are paid on profits, so a low tax bill usually means that your investment is performing well.

What is transfer tax and how much is it paid on an investment property?

Transfer taxis a tax paid when ownership of real estate or securities (such as apartment shares) is transferred, i.e., in practice, in connection with a real estate transaction. The buyer of an investment property is liable to pay transfer tax, unless there are special circumstances that exempt them from this (the exemption for first-time buyers was previously the most significant, but more on that below). The transfer tax is paid on the basis of the purchase price (in this case, the debt-free price) and must be paid and reported to the Tax Administration before the transfer of ownership (e.g., transfer of the share certificate to the apartment share register) can be registered.

In 2024, there was a change in transfer tax rates:the transfer tax on housing shares was reduced from 2% to 1.5%. This means that when you buy an apartment in a block of flats or a terraced house (shares in a housing company), the tax is now 1.5% of the debt-free purchase price. At the same time, however,the transfer tax exemption for first-time home buyers was abolished at the beginning of 2024. This means that first-time home buyers under the age of 40 are no longer exempt from the tax, and all buyers now pay the 1.5%. From an investor's point of view, this change was not dramatic – investors are not usually first-time home buyers (because an investment property is not used as their own permanent residence, which was a condition for the exemption). However, if you arecombining the purchase of a first home and an investment property, for example, you are buying a property to rent out first and plan to move in yourself later, you will no longer be eligible for the exemption.

If you purchasereal estate(e.g., a detached house with land, or half of a semi-detached house with property division and no housing association), the transfer tax will be 3% starting in 2024 (previously 4%). However, most investment properties are housing shares, so 1.5% is the figure you should be prepared for.

Example:You purchase an investment apartment for €80,000, which is debt-free. The transfer tax is 1.5% × €80,000 = €1,200. If the apartment has a mortgage and the purchase price is, for example, €20,000 (and the mortgage is €60,000, debt-free €80,000), the transfer tax is still calculated on the debt-free €80,000, i.e., €1,200. It is usually paid from your own funds after the sale (it cannot be paid from a loan, as it matures quickly). The transfer tax must be paidwithin two monthsof the transfer of ownership, but in practice, in the case of apartment shares, it is often a condition that it be paid immediately and the receipt presented to the property manager before the new owner is entered in the share register. In electronic real estate transactions, banks often take care of paying the tax at the time of the transaction.

Note in the budget:Transfer tax is part of the purchase cost of the apartment, even though you do not receive anything tangible from the seller in return. Investors should include it in their yield calculations (as we did above when calculating rental income). The transfer tax cannot be deducted from rental income for tax purposes, but it is added to the purchase price when calculating the potential capital gain on sale (i.e., it is only beneficial for tax purposes when the property is sold). So if you ever sell the home, the transfer tax will reduce your capital gain accordingly.

In summary:The transfer tax for buyers of investment properties is 1.5%of the debt-free price of the property in the case of housing companies. Be sure to budget for this expense. For example, Sijoitusasuntovahti takes the impact of transfer tax on returns into account in its calculations. This is a one-time tax that does not benefit the investor as such, but is a mandatory part of the costs of a property transaction. If, for example, you are considering two properties of the same price, one of which is owned by a "first-time buyer" and the other is not, there is no longer any difference – you will always have to pay transfer tax (until 2023, the first-time buyer's benefit on the property would have meant that the property did not include a previously unused exemption – but now this is history).

How does a housing company loan affect a real estate investor's expenses and taxation?

A housing company loan(or company loan) is a loan taken out by a housing company, the costs of which are paid by the shareholders either in lump sums or as financial contributions over time. It typically comes into play in new construction projects or large-scale housing company renovations. For investors, a housing company loan is a double-edged sword: on the one hand, itreduces the sale price of the apartment(you buy the apartment for a lower price because the rest comes as a "loan"), but on the other hand, itincreases monthly expensesin the form ofa financing charge.

Impact on expenses:If your apartment has, say, a €50,000 housing association loan, for which you are charged a financing fee consisting of principal and interest, this fee can easily amount to several hundred euros per month. The tenant does not pay the financing charge separately – it is the owner's responsibility – so part of your rental income goes towards servicing the housing company loan. This has a direct impacton the cash flowof the property (see the cash flow section): with a high housing association loan share, it can be difficult to break even on a monthly basis unless the rent is exceptionally high in relation to the debt-free price. Many investors prefer to calculate with a moderate housing association loan share so that the rent covers the expenses. On the other hand, a housing company loan means that you do not have to take out all the financing on your own account as a bank loan – you can think of a housing company loan as a kind of “second loan channel.” Sometimes a housing company loan can have advantages, such as a long repayment-free period after construction, which can help with cash flow in the early years.

Impact on taxation:Investors benefit from the costs of housing company loans in their taxation under certain conditions. As mentioned earlier,financing charges are tax deductible from rental income if the housing company recognizes them in its accounting. Recognition means that the company records them as income (and, of course, as an expense in the form of amortization/interest to itself). Most investor-friendly housing companies recognize loan payments as income, as many companies have investor shareholders who want this. You can deduct the recognized financing charge from your rental income just like the maintenance charge – it is considered an expense incurred in order to generate income (paying the mortgage on the apartment is a necessary expense when renting out the apartment). If the charge is funded, you cannot deduct it from your rental income now, but: funded loan payments are added to the expenses you incur for the apartment and deducted from the capital gains tax at the time of sale. In other words, you do not lose the deduction entirely, it just materializes later.

What about the interest portion? The financial compensation usually includes both the interest on the loan and the repayment. The total amount of the contribution is tax-deductible, so both the interest and the repayment portion are deductible (unlike with a personal loan, where only the interest is tax-deductible, but the repayment is not, of course). This is one reason why investors sometimes prefer housing company loans:the repayment is a tax-deductible expense when it is collected as a contribution and recognized as income in the company, which is tax-advantageous compared to a personal loan (where repayments cannot be deducted). This tax benefit is, of course, offset at the time of sale, as the accumulated repayments are taken into account there, but from a revenue perspective during the investment period, it reduces the taxation of rental income.

To pay off or not to pay off?Investors can usually pay off their share of the housing company loan in one go if they wish. Is it worth it? It depends on the situation: if the interest rate on the housing company loan is high and the terms are unfavorable (and there is no right to deduction, e.g., funding), it may be sensible to pay it off and take out a more affordable loan instead. On the other hand, if the housing company loan is recognized as income and the interest rate is reasonable, many investors pay it off over time in exchange for favorable tax treatment. It is also worth noting that if you pay off a large portion of the loan at once, it is only tax-deductible as a lump sum payment if it is recognized as income – so check with the property manager that the lump sum payment is treated as income (usually this works in the same way as compensation).

Other tax implications:A housing company loan also affects anytransfer taxandcapital gains tax. As mentioned above, transfer tax is calculated on the debt-free price – in other words, a company loan does not “save” you from transfer tax, even though it reduces your purchase price. When calculating capital gains, if you have not paid off the loan, the loan portion is also considered part of your purchase price (in practice, you spent that amount of money when you bought the apartment, even though it did not go to the seller but remained as a debt to the housing company). In this sense, taxation ultimately treats apartments with housing company loans and apartments without loans fairly equally – the differences mainly lie in the timing (whether you enjoy the deduction immediately or later).

Summary:A housing company loan is a way to finance part of the price of an apartment. For investors, this means higher monthly payments, whichweakens cash flow, but on the other hand, it allows for a smaller equity investment and brings tax benefits as income (tax deduction for repayments). Be careful with taxation – it determines whether you deduct expenses from rental income or at the time of sale. A housing company loan should be taken into account in yield calculations just like any other financing: always calculate rental income based on the debt-free price and your cash flow with the financing charge. Sijoitusasuntovahti always informs you of the share of the housing company loan and whether the contribution has been recognized as income or funded, so that you can make the right conclusions.

Renting and apartment maintenance

How do I choose a good tenant for my investment property?

Choosing a good tenant is one of the most important tasks for a landlord, as the right tenant makes investing easy, while the wrong one can cause gray hairs. The process should be carried out carefully, and the following tips will help you ensure success:

• Conduct a background check:Request a credit report from the applicant or obtain permission to check their credit history yourself. A payment default entry is a sign of risk – it does not automatically mean rejection (depending on the situation), but an applicant with an impeccable credit history is usually a safer choice. You can also ask the employer or request a salary certificate to verify their ability to pay. For example, someone in permanent employment or a student who is managing on student financial aid and income from work is usually a safe payer.
• Interview the applicant:Always meet potential tenants in person (or via video call if a live meeting is not possible). A short conversation can tell you a lot: you will get an idea of the person, their life situation, their tidiness, and whether they have taken good care of their previous homes. Trust your intuition – if something seems off (e.g., the applicant avoids questions or gives conflicting information), consider other options.
• Check the tenant's needs and plans:A good tenant is someone for whom your apartment is as suitable as possible. Ask why they are moving and how long they expect to stay. For example, if the applicant says they are only looking for a solution for a couple of months until their own purchased apartment becomes available, you may not get a long-term tenant. On the other hand, a student who has three years of studies left in the city is potentially signaling a long-term tenancy.
• Ensure compliance with the housing association's rules:If the housing association prohibits pets or smoking in apartments, for example, make sure that the prospective tenant meets these conditions. You can mention "no pets" or "credit check required" in the ad during the application phase, which will weed out unwanted applicants.
• Security deposit and possible guarantees:Always takea security deposit(guarantee rent) equivalent to at least 1–3 months' rent, within the limits permitted by law. The general practice is a 1-month security deposit for many, but 2 months provides additional security. The security deposit can be a cash deposit in your own account or a bank account opened by the tenant with the money pledged in the landlord's name. Do not hand over the keys until the security deposit and first month's rent have been paid. If the applicant has limited income (e.g., a student without regular income), you can request a personal guarantee—for example, parents acting as guarantors in the lease agreement. The guarantee motivates the tenant to fulfill their obligations.
• Document the condition of the apartment before the lease begins:This is not directly related to the selection process, but it is essential for a good start to the lease. Go through the apartment with the tenant, fill out a move-in inspection form together, or take photos of the apartment's surfaces. This way, any damage that may occur later can be distinguished from normal wear and tear, and the tenant will also understand their responsibilities. A good tenant will appreciate this professional approach – it also protects them from being blamed for any damage caused by previous tenants.
• Communicate your expectations clearly: Tell the applicant what you expect from a good tenant during the selection process: paying rent on time, respecting neighbors (no noise), taking care of basic maintenance (ventilation, cleaning, reporting water leaks immediately, etc.). When you go through these points, you will also see the applicant's reaction – a responsible person will understand and accept the conditions, while an indifferent person may downplay them or take offense.
• Choose the most suitable candidate, not the first one if it doesn't feel right:When marketing a rental apartment, you may feel pressured to accept the first interested party, especially if you want to earn rental income quickly. However, it is better to be patient and choose the person who left the best overall impression (ability to pay + reliability + genuine need for an apartment). One good criterion is to ask yourself:"Would I give this person the keys to my apartment and go abroad for a year without any worries?"If the answer is uncertain, continue your search.

Finding a good tenant sometimes depends on luck, but these steps will increase your chances of success. Once you find the right person, keep them by providing good service as a landlord: respond promptly to reasonable requests (e.g., a broken appliance), be polite, and respect the tenant's privacy. A satisfied tenant will stay longer and treat the apartment better.

Sijoitusasuntovahti does not directly manage tenants, but we are supported in rental management byRentsi Vuokravälitys(https://www.rentsi.fi/). Take a look at their range of services – you will have access to experienced professionals who will help you through every stage of the rental process. We are also happy to advise our customers on the rental process, as our goal is to ensure that your investment generates a smooth return. Remember: choosing the right tenant is a long-term partnership!

What should you pay attention to in a rental agreement?

The lease agreement is the most important document for both the landlord and the tenant, as it defines the rights and obligations of both parties. Therefore, it must be drafted with care. Here are some key points to consider in a lease agreement:

• Written agreement:Always draw up a written rental agreement in two copies – one for you and one for the tenant. A verbal agreement is valid in itself, but very difficult to verify in the event of a dispute. You can use a ready-made agreement template, such as the one provided by Suomen Vuokranantajat (Finnish Landlords Association) or another reliable template, to ensure that all the important points are included.
• Rent and payment terms:Clearly state the monthly rent, due date (e.g., the 2nd of the month), and payment method (usually to a bank account) in the agreement. Also mention whether the rent includes water, electricity, or internet, or whether the tenant pays for these separately. If there is a separate charge for water per person or according to consumption, record this. The same applies to electricity: usually the tenant signs their own electricity contract, but in some cases it may be included (e.g. in furnished short-term rentals).
• Lease term:Is the agreementvalid indefinitelyor for a fixed term? Indefinite agreements are the most common and include statutory notice periods (1 month for the tenant, 3–6 months for the landlord, depending on the length of the lease). A fixed-term contract binds both parties for a specific period (e.g., 12 months) without the possibility of termination. In the case of a fixed-term contract, it must be ensured that it is made on legal grounds—for example, a 9-month student apartment is OK, as is a one-year fixed-term contract, after which it continues indefinitely. If you want to ensure that the new tenant stays for at least a year, you can draw up an indefinite agreement with a clause stating that the tenant may not terminate the agreement during the first 11 months. Such a condition is binding on the tenant (it is not binding on the landlord, who must always be able to terminate the agreement within the periods specified by law).
• Rent increase clause:It is recommended to includea rent increase clause in the lease agreement, especially in longer leases. Typically, the clause stipulates that the rent can be increased annually, for example, in line with the cost of living index or by a certain percentage (e.g., 3%), but not exceeding X%. The index clause is a fair and transparent way to ensure that the rent keeps pace with inflation. If you do not include any increase clause, the rent can only be increased with the tenant's consent. The increase must be notified in writing in good time (by law, at least one month before the increase takes effect). Many long-term tenants understand the need for an increase when it has been agreed upon at the outset – this ensures that your income does not lag behind the general cost level.
• Security deposit:Indicate in the agreement how much security deposit has been paid (e.g., "The tenant has paid the landlord a security deposit equivalent to two months' rent, €1,200, which will be held in account X/by the landlord. The security deposit does not bear interest.”) Also state the conditions for returning the security deposit: usually “the security deposit will be returned within one month after the end of the tenancy, provided that the tenant has fulfilled their obligations and there is no damage to the apartment other than normal wear and tear.”
• Prohibited and permitted activities:The agreement may mention any prohibitions or permissions, such as “Pets: Not permitted without the landlord’s separate permission” or “Smoking: Smoking is prohibited in the apartment and on the balcony.” Even if the housing association prohibits smoking, it is a good idea to repeat the prohibition in the agreement. If the tenant has a pet and you accept it, you can include a clause such as “The tenant’s dog – breed X – is allowed, the tenant is responsible for any damage and cleaning, and undertakes to ensure that the pet does not disturb the other residents of the building.”
• Tenant's responsibilities in maintaining the apartment:According to the law, the tenant must take good care of the apartment. If you wish, you can add details such as "The tenant must comply with the housing association's rules and regulations" (even though this applies anyway) and "minor maintenance tasks such as replacing fire alarm batteries, cleaning floor drains, and changing light bulbs are the responsibility of the tenant." This will remind the tenant of practical matters.
• Termination and cancellation situations:Although these do not need to be repeated in detail (the law largely regulates them), you can mention, for example, that "At the end of the tenancy, the tenant must hand over the apartment in a clean and similar condition to that in which it was received, except for normal wear and tear. The keys to the apartment (x number) must be returned immediately upon termination of the lease. The cost of replacement locks will be charged for any keys that are not returned." In addition, you can mention late payment interest on rent (e.g., late payment interest according to the law) and, if you wish, penalties for unauthorized actions (such as "if the tenant keeps a pet without permission or allows smoking, the landlord has the right to terminate the agreement" – although termination is possible legally in any case, this condition emphasizes the seriousness of the matter).
• Special terms:If there are any special terms in the agreement, such as “the apartment is rented furnished, with a list of furnishings attached” or “the tenant may use parking space no. 5, for which €20/month is paid to the housing company,” these should be noted. It is a good idea to put all verbal agreements and conditions in writing to avoid any confusion later on.

Once you have taken these matters into account, you will have covered most of the key points of the lease agreement. Remember to provide the tenant withthehousing association'srules and regulationsas an appendix to the agreement, as well as instructions on apartment-specific responsibilities (if the housing association requires snow removal from balconies, etc.). It is also good practice to exchange contact details more extensively: include the addresses, telephone numbers, and email addresses of both the landlord and the tenant in the agreement. If the landlord is a company, mention its business ID.

Finally,signaturesand date. The agreement is binding once it has been signed. If there are several tenants (e.g., a couple), all main tenants sign and are jointly responsible for the rent (jointly and severally). It is a good idea to hand over the keys and conduct any initial inspection on the day the keys are handed over.

In short: invest in a rental agreement to avoid 90% of potential disputes in advance. A clear agreement provides security for both parties. If necessary, consult a lawyer or landlord association in unclear situations – standard agreements are good, but if you have a very unusual situation, expert help is recommended.

You can download a free rental agreement template from our partner Rentsi Vuokravälitys' website!

Is it worth renovating an investment property?

Renovations can increase the value of a property and rental income, but they are not always immediately profitable.Renovations can be roughly divided into two categories: 1)necessary repairsand 2)improvements that increase income.

1. Essential repairs:These are renovations that must be carried out in order to keep the apartment rentable or habitable. For example, broken appliances, water damage repairs, mold removal, replacement of dangerous electrical equipment – these must almost always be done immediately, regardless of the cost, and are the responsibility of the landlord. If you buy an apartment and know that such critical repairs are needed (e.g., a broken refrigerator or a large hole in the wall), it is advisable to take care of them before the tenant moves in or, at the latest, during the first tenant's tenancy. Such repairs can usually be deducted from your taxes as annual repairs.

2. Improvements that increase returns:These include, for example, modernizing the kitchen, replacing the flooring with higher quality parquet, painting the walls for aesthetic reasons, renovating the bathroom even if it is still functional, etc. The purpose of these is often to raisethe rental levelor marketvalueof the apartment. The question is: will the renovation pay for itself in higher rent or sale price? This can be estimated in advance. For example, if a kitchen renovation costs €10,000 and you estimate that it will increase your rent by €50/month, the additional income will be €600/year. Roughly speaking, it will take more than 16 years for the increase in rental income alone to cover the cost – not a very attractive payback period. On the other hand, a kitchen renovation can increase the sale value of the apartment, perhaps even by €10,000 or more, depending on the market. If you are planning to sell in the next few years, the renovation can speed up the sale and increase the price. When considering the necessity of a renovation, investors should therefore weigh up the return against the cost:will this renovation significantly improve the rentability or rent? If the apartment is currently difficult to rent due to its poor condition, renovation may be justified. On the other hand, if the apartment rents well in its current condition, there may be no need to make major improvements, at least not immediately.

Taxation:Renovations that improve the property are often classified as basic renovations, which means that they cannot be deducted in full from rental income on a one-off basis, but are deducted as depreciation or in the event of a sale. This means that the tax benefits are spread over a long period of time. If you carry out a major renovation, you can choose 10-year straight-line depreciation (deducting 10% of the cost from your rental income each year). This is worth considering in terms of cash flow: you will not receive the full tax benefit immediately.

When is renovation particularly worthwhile?

• When the apartment is vacant and in poor condition:If you buy an apartment that the previous occupant/tenant has left in a very dilapidated state, it is often worth doing some surface renovations (painting, new flooring) before finding a new tenant. An apartment in good basic condition attracts better applicants and may command a 5–10% higher rent. Small surface investments are usually inexpensive to carry out yourself or have done, and can pay for themselves in increased rent within a couple of years.
• When you want to raise the rental segment of your apartment:For example, if other rental properties in the area are modern and command higher rents, but your apartment is stuck in the 1980s. It may be a smart investment to renovate the surfaces and fixtures so that you can compete on the same level. Otherwise, you may only be able to find a tenant by offering a discount, or you may not find a tenant at all.
• Before selling with the intention of flipping:Some investors buy apartments below market price due to their poor condition, renovate them, and sell them at a profit. In this strategy, renovation is an essential factor in generating profit. If you know what you are doing (budget, schedule) and the market is favorable, renovation can generate significant value appreciation even in a short period of time.
• Major renovations by the housing association vs. renovations by yourself:Be careful with renovations by the housing association. For example, pipe renovations usually increase the value of the apartment and the standard of the premises. If your bathroom is old, you may not want to renovate it yourself to match the new one just before the pipe renovation – it would be a waste of money, as the bathroom will be torn open during the pipe renovation anyway. Similarly, if the housing association does not plan to carry out renovations for a long time, but your apartment's kitchen is almost unusable, then it is time for a DIY renovation.

“Renovate or not”– ask yourself:Will this renovation increase tenant satisfaction, bring in more rent, or improve the resale value, and is it worth the cost?If the answer is yes, proceed with the renovation in a controlled manner. If you are unsure, you can postpone and see how the situation develops: sometimes it is better to rent at a lower price with a slightly shabby property and only renovate when necessary.

Many real estate investors say that"light surface renovations are profitable, while major luxury renovations are less so"from a purely rental income perspective. So don't overinvest in a rental property—tenants appreciate a neat appearance and functional appliances, but they are not necessarily willing to pay extra for marble countertops or designer faucets. Keep the standard in line with the requirements of the rental market: sometimes "good enough" is the best solution.

Tip:If you have multiple properties or are located far away, a good partner for renovations is invaluable. A reliable renovator or company that can make small updates at a reasonable cost will help keep your apartments competitive in the rental market. If necessary, Investment Apartment Guard can recommend professionals for renovations through its networks, as we want to ensure that our customers' properties are successful in the long term.

Risks and market conditions

What are the risks associated with real estate investment and how can you prepare for them?

Real estate investment is often considered a stable form of investment, but it also has its own risks.The most important risks for real estate investorscan be roughly divided as follows:

• Tenant risk:This refers to the risk that a tenant will cause problems – for example, by not paying their rent on time or at all, causing damage to the apartment through deliberate or negligent behavior, or even necessitating eviction proceedings due to disruptive behavior. You can manage tenant riskby carefully selecting tenants(as discussed earlier), requiring sufficient rental security, and being firm in monitoring payments when necessary. It is also worth knowing your rights as a landlord: if rent is not paid, act quickly – send a reminder, negotiate, and if necessary, initiate eviction proceedings (usually through the district court if payments are several months overdue). A good preventive measure is to keep in touch with your tenant and build a relationship of trust where they feel comfortable telling you in good time if they are having payment difficulties, so that you can agree on a payment plan, for example. You may also considertenant insuranceor a rent guarantee service that covers unpaid rent up to a certain limit.
• Risk of vacant months (rental rate):It is always possible that your apartment will be without a tenant at some point. Every day that it is vacant is lost income. The risk of empty months is more likely to materialize if the apartment is located in an area where rental demand is seasonal or low.Preparation:Keep your apartment competitive (realistic asking price, tidy condition). Advertise widely if a tenant leaves. Try to minimize the transition period – start looking for a new tenant as soon as the current one gives notice. Financially, prepare for at least 1–2 months of lost rental income per year in your calculations (use a conservative rental rate, e.g., 90%, if you want to be cautious). In large cities with good locations, vacant months may be rare, while in remote areas it may take longer to find a new tenant. Using the security deposit for the last month's rent (if the tenant leaves without paying) is also one way to reduce losses.
• Market risk (price decline):Housing prices may alsodecline. Reasons for this may include rising interest rates, a decline in the attractiveness of the area, an oversupply of new homes, or the general economic situation. If you have to sell your home when prices are low, you may suffer a loss. This risk is generally greater the shorter your investment horizon is – prices fluctuate in the short term, but the long-term trend has been upward in growth centers.Preparation:Treat real estate investment as a long-term investment. Don't panic about temporary price drops – you can always continue renting and wait for the market to recover. Make sure you don't have to sell in a hurry (i.e., keep a buffer to cover your obligations so you don't have to sell your home at a bad time). Invest in areas with good long-term prospects to reduce the likelihood of a significant permanent decline in value. If necessary, you can use a "buy and hold" strategy during weaker periods.
• Interest rate risk:If you use leverage,rising interest ratesare a significant risk. Over the past few years, interest rates have risen significantly from historically low levels, which has cut into the cash flow of many investors.Preparation:As already mentioned, calculate in advance the sustainability of your investment at different interest rate levels. You may want to consider interest rate hedging products, such asan interest rate cap(where the maximum Euribor is tied to a certain percentage) or a fixed-rate loan. These come with additional costs, but they also provide peace of mind. Another approach is to pay off the loan faster when times are good, so that when interest rates rise, the principal amount of the debt is already smaller. Also, keep a cash buffer to cover extra interest costs for a while. Keep in mind that rising interest rates also tend to show up in your taxes: interest expenses are tax-deductible, so your taxable rental income goes down and you pay less tax. This slightly mitigates the net effect. In the long term, interest rates also affect housing prices (high interest rates = downward pressure on prices), which, on the other hand, can create new buying opportunities for good properties – so be alert to opportunities.
• Risks associated with housing companies:Real estate investors are dependent on the operations of housing companies. Unexpected renovations (e.g., roof leaks, storm damage to the facade) can lead to additional maintenance charges. If the housing company is poorly managed, costs can spiral out of control or the value of the property can decline.Preparation:Participate in the activities of the housing company – attend general meetings or at least read the minutes. Also keep a fund for unexpected events in the housing company. However, major renovations in housing companies can often be predicted based on the technical condition of the property – find out what kind of repair history and plans the company has at the time of purchase. If the maintenance charge is unusually low, be prepared for it to rise (it may be underbudgeted). On the other hand, a well-managed company keeps costs under control and takes good care of its property.
• Legislative and tax changes:Political decisions can change the returns on real estate investments. For example, there may be changes to tax deduction rights or rent regulation (although rents in Finland are fairly freely negotiable, there is always discussion about, for example, extending ARA rents, etc.). For example, the aforementioned abolition of the transfer tax exemption for first-time home buyers in 2024 is an example that may indirectly affect the housing market.Be prepared:Stay up to date with the news and be ready to adjust your strategy. However, the Finnish tax environment has been quite favorable for real estate investors: for example, loan interest has been fully deductible from rental income, unlike for owner-occupiers. If this benefit were to be removed at some point, it would reduce the return for leveraged investors. The impact of such changes can be anticipated by making scenario calculations (“what if I can’t deduct the interest?”). However, changes often come gradually and predictably, so there is no need to lose sleep over speculation – just be aware.

Risk management in a nutshell:

• Always keepa buffer fundequivalent to several months' (3–6 months) expenses. This will serve as your safety net against all of the above.
• Diversifyyour investments if possible: for example, owning several apartments in different housing companies or different cities spreads the risk (if one place fails, the others may do well).
• Take outinsurance if necessary: Comprehensive home insurance for landlords, including liability insurance, can protect you from major damage. It is a good idea to require tenants to have home insurance with liability insurance, as this also reduces the risk (e.g., if their washing machine damages the floor, the tenant's liability insurance will cover it).
• Take care of your apartment:Check the condition of your apartment at least once a year (e.g., when there is a change of tenant or once a year at a convenient time) – it is better to detect small leaks, wear and tear, etc. in good time before they turn into big problems.
• Network with other landlords (e.g., join the Landlords' Association). There you can find information about current challenges and solutions.

The risks of real estate investment can be managed through foresight and an active approach. It is not entirely a “buy and forget” type of investment, but requires decisions and actions from time to time. However, many people feel that the risks are moderate compared to, for example, stock market shares – it is rare for the value of a property to plummet to zero overnight or for tenants to disappear completely.The most important thing is to be aware of the risks in advance and to approach them in a systematic manner. That way, you won't be caught off guard if any of these things happen, because you'll already have a plan in place.

Sijoitusasuntovahti strives to reduce the risk for our customers by for example, by providing a wealth of information about properties (so you don't buy a pig in a poke), helping to determine the right rent level (so you are sure to find a tenant), and even advising on problem situations based on our experience. We are property investors ourselves, so we understand the risks and want our customers to succeed in the long term – that way, we succeed too.

Is now a good time to buy an investment property?

The question of “when is the right time to buy” is always on investors’ minds, especially now that the market situation is exceptional in many ways. Outlook for 2025:Interest rates rose rapidly in 2022–2023, cooling the housing market and causing prices to fall in many areas. At the same time, rents rose in some areas as a result of high inflation, and tenant demand has remained stable, especially in growth centers. This means thatrental income has even improvedin some cases: if housing prices have fallen by, say, 5–10% from their peak and rents have risen, the returns on new purchases may be better than before. The downside is higher financing costs (high interest rates).

Now may be a good time to buy if:

• You find a property wherethe rental income is significantly higher than the loan interest rate. In this case, the investment will pay for itself even if interest rates are high.
• Your financial situation is stable and you have sufficient reserves. You can take advantage of market conditions – there are sellers who are forced to sell and fewer buyers, so you can negotiate a better price than usual.
• You believe in the long-term story: the population is concentrated in cities, the housing shortage has not disappeared (construction has slowed down, so in a couple of years there may even be a housing shortage due to the lull in new construction). So you are now buying from the "discount sale" before the next boom.
• You are prepared for interest rates to remain high for some time, meaning that your cash flow will last. If the bank grants you a loan, this also indicates that your ability to pay is sufficient even if stress tested at a higher interest rate.

Now may be a bad time to buy if:

• Your finances are already very tight with the current interest rates. If you have to play at the very limits and just hope that "interest rates will soon fall," there is a risk that if this does not happen, you will run into problems. In this case, it may be better to either wait for interest rates to fall or raise more capital.
• You can't find the right property: there are always good deals on the market, but if prices in your target area haven't come down and your investment calculations don't show a good return, there's no point in buying. New investment properties always come up for sale. It's better to wait months for the right opportunity than to buy a mediocre property "right now."
• You believe that prices will fall significantly and want to time the bottom. This is difficult to assess perfectly – you can only see the bottom in hindsight. But if, for example, interest rates rise further or the economy enters a recession, the buyer's market may deepen further. On the other hand, waiting too long can also be costly in terms of rental income: you will lose out on rental income during that time. According to one piece of wisdom, “Time in the market beats timing the market”– in other words, time in the market (owning) beats timing the market. In real estate investment, returns are largely generated over time, so if your horizon is decades, a few percent difference in the purchase price now may not be decisive.

In the current interest rate environment, it is also a good idea to negotiate financing carefully. Interest rate hedges and margins are negotiable – banks compete for good customers. Make sure you have room to maneuver: for example, if you are buying now in a location with a declining population, be prepared for the fact that renting may be slower. If you buy now at high interest rates, you can take comfort in the fact that interest rates are predicted to stabilize or fall slightly, which will likely improve your cash flow in the future. And even if interest rates do not fall, inflation will erode the real value of the loan and rents are likely to rise.

In short:If you find a suitable apartment at a good price and the figures show that the investment is profitable,now is the right time to buy. You shouldn't buy an apartment just because "you have to buy now" – but on the contrary, don't miss out on a good opportunity because of external fears if your own calculations and risk tolerance give you the green light. The worst moments in the market often seem bleak in the news, but that is precisely when the best deals are made.

Sijoitusasuntovahti monitors the market in real time,and we have noticed that in the current situation, many cash flow investors are becoming active: they are specifically looking for properties where rental income has improved in relation to price due to rising interest rates. Through our service, we have brokered numerous apartments that currently offer exceptionally good returns – precisely because not everyone dares to buy, so there is less competition. In other words, it is now a buyer's market in many areas. If you want to know what kind of discounts and yields are available, join our mailing list. We will help you assess whether now is the right time for you to buy and which property would be the best choice.

Good luck and success with your real estate investment!