Fictional teaching case
Does the rent cover the flat?
Follow one fictional rental from the monthly rent to the cash left after costs and the loan. Then test what changes the answer.
Fictional teaching case · Not a listing · No account required
The flat and the assumptions
A fictional two-room flat in a French regional city, bought for €150,000 and let unfurnished as the tenant’s main home. Every figure is a teaching assumption, not market data, a quotation or a loan offer.
Buying it
- Price
- €150,000
- Acquisition costs
- €12,500
- Amount borrowed
- €120,000
- Loan set-up costs (1.5% of the loan)
- €1,800
- Cash put in at purchase
- €44,300
- Reserve kept back
- €6,000
€12,500 is close to what the acquisition-cost estimator gives for a €150,000 resale. Cash put in is the cash-plan arithmetic: price minus borrowing, plus acquisition and set-up costs.
Letting it
- Monthly rent, excluding recharged service charges
- €700
- Empty per year
- 0.5 months
- Letting-agent fee
- 8% of rent collected
- Owner costs per year
- €2,010
Owner costs: taxe foncière €900, service charges you cannot recharge €360, landlord insurance €150, repairs allowance €600.
The loan
- Interest rate
- 3.50%
- Term
- 20 years
- Borrower insurance
- 0.30% a year of the initial loan
- Monthly payment
- €696 + €30 insurance
The same teaching inputs as the financing lesson preview. The payment is rounded up to the next euro, the insurance to the nearest euro.
Line by line
From rent to cash flow
One year at the baseline, in whole euros. Each subtotal is the exact sum of the lines above it.
| Line | Per year | Bar showing each line’s effect |
|---|---|---|
| Rent for a full year12 × €700 | €8,400 | |
| Empty months0.5 months × €700 | −€350 | |
| Rent collected | €8,050 | |
| Letting-agent fee8% of rent collected | −€644 | |
| Taxe foncièreAnnual property tax, paid by the owner | −€900 | |
| Service charges you cannot rechargeThe part of the building’s charges the tenant does not pay | −€360 | |
| Landlord insuranceLiability cover every co-owner must hold | −€150 | |
| Repairs allowanceSet aside for wear and replacements | −€600 | |
| Operating income before the loan | €5,396 | |
| Loan payments12 × €696: €4,133 interest, €4,219 repays the loan | −€8,352 | |
| Borrower insurance12 × €30 | −€360 | |
| Cash flow before taxAbout −€276 a month | −€3,316 |
Three ratios, three different questions
- Gross yield
- 5.6%
- Rent for a full year ÷ price. The headline figure: it ignores every cost.
- Net yield
- 3.3%
- Operating income before the loan ÷ price plus acquisition costs (€162,500).
- Loan payments and insurance
- 7.3% a year
- Of the amount borrowed. Part of it repays the loan, but all of it leaves your account.
Each €1,000 borrowed here takes about €73 a year in payments and insurance, while each €1,000 of the price earns about €36 of operating income before the loan. Borrowing always lowers cash flow, because the payments come out of the rent. Here it also lowers the cash return on your own money: the borrowed part of the flat costs more each year than it earns, even though less of your cash is tied up.
Stress tests
What changes the answer?
Each line changes one assumption from the baseline and leaves the rest alone. Pressures you cannot control sit beside levers you can pull, with what each lever costs you.
For cash flow to reach zero with everything else unchanged, the rent would need to be about €1,014 a month, 45% more than €700.
| One change from the baseline | Cash flow per year | Change from the baseline | Calculator |
|---|---|---|---|
| Rent 10% lower€630 instead of €700 a month. | −€4,057about −€338 a month | −€741 | |
| Two months empty a yearFor example, a slow re-let between tenants. | −€4,282about −€357 a month | −€966 | |
| Interest rate one point higher4.50% instead of 3.50%. The monthly payment rises to €760. | −€4,084about −€340 a month | −€768 | |
| A €2,500 repair this yearA one-off cost on top of the €600 allowance. | −€5,816about −€485 a month | −€2,500 |
| One change from the baseline | Cash flow per year | Change from the baseline | Calculator |
|---|---|---|---|
| Manage the letting yourselfSaves the €644 fee. It costs your time, and you handle the lease, the tenant and the checks yourself, possibly from abroad. | −€2,672about −€223 a month | +€644 | |
| Borrow over 25 yearsThe payment falls to €601, but interest over the life of the loan rises from €47,023 to €60,179 and the debt falls more slowly. In France a home loan generally runs no longer than 25 years. | −€2,176about −€181 a month | +€1,140 | |
| Borrow €30,000 lessCash put in at purchase rises from €44,300 to €73,850. | −€1,144about −€95 a month | +€2,172 | |
| Buy without a loanCash put in rises to €162,500. Operating income is then 3.3% a year of that cash, before tax. | €5,396about €450 a month | +€8,712 |
Amounts per year, before tax. The monthly figures are the yearly figures divided by 12, rounded to the euro.
“Try this” loads the baseline with that one change into the calculator below, replacing any figures you have entered there.
Try your own assumptions
Change the letting or the loan.
The flat, its price and its acquisition costs stay fixed. Change how it is let and financed, then compare your version with the baseline. Your figures stay on this page.
Your version
Figures changed. Select Update my version to refresh this result.
No current result until these figures are valid.
Cash flow before tax
—
a year · about — a month
- Rent collected
- —
- Letting-agent fee
- —
- Owner costs
- —
- Operating income before the loan
- —
- Loan payments and insurance
- —
Baseline and your version
Figures changed. Update your version to refresh this comparison.
| Per year | Baseline | Your version | Difference |
|---|---|---|---|
| Rent collected | €8,050 | — | — |
| Letting-agent fee | −€644 | — | — |
| Owner costs | −€2,010 | — | — |
| Operating income before the loan | €5,396 | — | — |
| Loan payments and insurance | −€8,712 | — | — |
| Cash flow before tax | −€3,316 | — | — |
| Cash put in at purchase | €44,300 | — | — |
Difference is your version minus the baseline. Costs are shown as money out, so a positive difference means more money for you, except for cash put in at purchase.
Reading the result
Cash flow is not profit, and not your return.
The baseline’s −€3,316 answers one question. Three others need different numbers.
Cash flow
Does money reach or leave your account?
−€3,316 in year one, before tax. This decides whether you add money each month, and for how long you could. The €6,000 reserve in this plan would cover about 21 months of it, before any extra repair or empty month.
The loan repaid
What do the payments also do?
Of the €8,352 paid to the lender, €4,219 reduces the debt, to €115,781 after a year. It is not spendable: you recover it only by selling or refinancing, and only if the flat is worth at least what you owe.
Profit for tax
What is taxed?
Tax is assessed on rental income under its own rules, not on this cash flow. When a household’s total gross income from unfurnished lettings is up to €15,000 a year, the micro-foncier regime replaces actual costs with a flat 30% allowance, unless the owner opts for actual costs or falls within one of its exclusions. Furnished letting is taxed under different rules, and your tax residence matters. This example includes no tax.
Tax rules checked 16 October 2026: Code général des impôts, articles 32 and 35.
Total return
Does the purchase make money?
That needs the cash flows, the loan repaid, the flat’s value when you sell, selling costs and tax, set against the €14,300 of acquisition and set-up costs paid at the start. The example estimates none of value, selling costs or tax, so it cannot answer this.
A negative cash flow is not a verdict against buying, and a positive one is not a reason to buy. Without a loan this flat would produce €5,396 a year before tax, but tie up €162,500 of your cash.
Important to know
What this example shows, and what it cannot
It shows
- How rent, empty months, owner costs and the loan combine into cash flow before tax, line by line.
- Which assumptions move the result most, and what each lever costs you.
- Why the cash flow is negative here: loan payments and insurance of €8,712 a year are more than the flat’s €5,396 of operating income before the loan.
It cannot tell you
- Whether €700 is achievable or allowed for a real flat: local demand, the lease and the rules that can limit rents, for example on re-letting in some areas.
- Whether a flat’s energy rating meets the minimum for letting it as a home. Check which DPE you have.
- What a lender would offer you. Lenders assess your income and commitments, not only the rent. See how French mortgages work for non-residents.
- Tax and social charges on the rent, or your own tax position.
- The flat’s future value, selling costs or total return.
- Furnished or short-term letting, which have their own rules and costs.
- Whether you should buy this or any property.