Building Wealth with Real Estate: What Really Happens Over 20 Years

Andriy Bezborodko · 2026-10-13

You earn well, put something aside every month and yet see that the account hardly grows. At some point, you ask yourself whether a let flat would be the better way. After all, there are people in your circle of friends who have apparently built wealth with it.

That is possible. However, it is slower and different from what many expect. A financed flat rarely brings in money in the first few years; it costs money. The wealth is created primarily by you paying off debt month after month, with the rent covering a large part of it.

We calculate this using an example over 20 years. Without assuming that the flat will increase in value, and with all the costs that you bear yourself.

01Where the Wealth from a Property Comes From

For a let flat, there are four sources from which wealth can arise. Only one of them is truly predictable.

Many calculations online revolve around the last line. Appreciation makes the numbers look good but is a bet. Our calculation therefore leaves it at zero.

What remains is a mechanism that experts call the leverage effect. This means that you move a large sum with little of your own money because the bank finances the majority. The lever works in both directions. It amplifies a gain in value but also a loss in value.

02What You Should Bring With You

Building wealth with real estate requires three things: a stable income, a reserve and time. If one of these is missing, the plan quickly becomes a burden.

A stable income. The bank checks whether you can still pay the rate if the rent fails. You should do the same. A household budget shows what is left after all fixed expenses. The monthly contribution for the flat must fit in there, with room to spare.

A reserve. You usually pay closing costs from your own money, around 5 to 15% of the purchase price depending on the federal state and estate agent. In addition, there is a cushion for vacancy, repairs or a special levy from the owners' association. Several thousand euros should still be in the account after the purchase.

Time. The closing costs are lost in the event of an early sale. A profit on the sale within ten years is also taxable (§ 23 EStG). Anyone who needs to access the money in five years, for example for their own house, has a problem with a buy-to-let flat.

03Example Calculation: What Does Building Wealth Cost Me per Month?

Thomas (41) and Lea (39) are married, have a combined taxable income of €110,000 per year and around €25,000 in their overnight deposit account. The names are fictional, the numbers are a calculation example and not a forecast.

They buy a let existing flat in Saxony, built in 2005, 60 m², for €210,000, i.e. €3,500 per square metre. The tenant pays €780 cold rent. Property transfer tax (5.5%), notary and land registry costs together amount to around €14,900. Thomas and Lea pay these themselves, leaving a good €10,000 as a reserve.

The bank finances the purchase price in full, at 3.8% interest and 2% repayment. From the service charge, €100 per month stays with the two of them (management and community reserve), plus they set aside €40 for their own flat and plan 3% of the rent for vacancy.

In the first year, Thomas and Lea therefore pay around €398 extra per month, or around €295 after the tax refund. At the same time, €356 per month flows into repayment. If you exclude the repayment, the rent and tax already cover the ongoing costs of the flat in the first year.

What Happens in 20 Years

Now for the more important part: the development over the years. The fixed interest period lasts ten years. After that, Thomas and Lea refinance the remaining debt, and for this, we openly assume a higher interest rate of 4.5%, again with 2% initial repayment. We deliberately keep rent and costs the same. If the rent rises, it looks better.

Three things stand out. First, the contribution after tax increases slightly in the first ten years, from around €295 to around €348 per month. As the debt decreases, there is less interest to deduct from tax. The rate remains the same, so the tax savings shrink.

Second, the rate drops to €861 with the follow-on financing, even though the interest rate rises. This is because the new repayment of 2% only refers to the smaller remaining debt of around €159,000. The price for this is that the debt decreases more slowly in the second decade. Anyone who continues to pay the old rate of €1,015 pays off the debt faster.

Third, wealth building is tight in the first ten years. After ten years, Thomas and Lea have contributed around €53,300 themselves and reduced around €51,000 of debt. Assuming the value of the flat is the same, they are in roughly the same position as if they had simply put the money aside. The gap only widens in the second decade. After 20 years, they have contributed around €76,100 and reduced around €91,100 of debt.

04"So I Still Won't Have Paid Off the Property After Ten Years?"

This was a question from an interested party in one of our consultations. The answer is yes. With 2% initial repayment, around €159,000 is still outstanding in the example after ten years. At 1.5%, it would be around €171,800.

This is normal. An annuity loan initially pays mainly interest and only later mainly repayment. After the fixed interest period ends, you need follow-on financing for the remainder. And then the interest rate that applies on that day counts.

At 6%, Thomas and Lea pay around €200 more per month in installments from the eleventh year than at 4.5%, or around €130 more after tax. The remaining debt even decreases slightly faster because the higher installment also contains more repayment. On balance, however, if the value remains unchanged, hardly more remains than they have paid in themselves: around €94,400 net wealth compared to around €92,500 invested.

With higher repayment, it goes faster, but the monthly contribution increases. Instead of 2%, Thomas and Lea could also pay off 1.5%. Then their installment drops from €1,015 to €928 per month, and the contribution after tax in the first year from around €295 to around €207. In return, around €171,800 in debt remains outstanding after ten years instead of €159,000, and the follow-on financing will be correspondingly larger. Paying less therefore also means: building wealth more slowly.

05Step by Step to the First Flat

Anyone who wants to build wealth with real estate should follow the order. First your own situation, then the object, then the financing.

After the first flat, the question of a second one often arises. It only makes sense once the first one is running stably and your reserve has been replenished. How to get from the first property to several units is described in our guide Building a Real Estate Portfolio.

06Property or Securities?

This question comes up in almost every conversation. An honest comparison of returns is hardly possible because both are very different investments. What can be compared are the characteristics.

07For Whom Building Wealth with Real Estate is Suitable

For couples, the conversation at home often decides. "I don't want to get into big debt," some interested parties say. This concern is justified. A calculation that both have understood is the best basis for a decision, in one direction or the other.

08Risks: What Can Slow Down Wealth Building

• Loss in value: If the value of the flat falls by 15%, Thomas and Lea would have around €59,600 net wealth in the flat after 20 years, but would have contributed around €76,100 themselves. The lever then works against them.
• Interest after the fixed interest period: If the follow-on interest rate is 6% instead of 4.5%, the installment in the example increases by around €200 per month from the eleventh year. With more remaining debt, correspondingly more.
• Vacancy and rent failure: If the tenant moves out, the entire rent is missing, and you pay the full service charge yourself. An eviction in the event of default can take many months.
• Renovations and special levies: If the owners' association decides on a roof or heating renovation, a special levy of several thousand euros can become due.
• Life events: Job loss, separation or illness hit ongoing financing hard. A forced sale costs the closing costs and often a discount.
• Tenancy law: Rent increases are capped, for existing rents to a maximum of 20% in three years, in many cities 15% (§ 558 para. 3 BGB).
• Tax law: Depreciation, offsetting of losses and tax-free sale after ten years apply under current law. They can change.
• Concentration risk: A flat depends on one house, one location and one tenant. The larger its share of your wealth, the heavier each of these risks weighs.

09Further Reading

• Rent Index: What Landlords Need to Know
• Buy-to-Let Property: Checklist for Beginners
• Financing an Investment Property: Tips for Success