The purchase price factor is a key figure in real estate valuation that describes the relationship between the purchase price and the annual net cold rent.
Formula:
Purchase price factor = purchase price / annual net cold rent
Example:
A house costs €1,000,000, the annual rent is €50,000
→ Purchase price factor = 20.
The lower the purchase price factor, the faster the investment is amortized through rental income.
Calculating the purchase price factor - step by step
Formula and input variables
To calculate the purchase price factor of a property, you need
- Purchase price of the property
- Net annual rent
Examples from practice
| City | Property type | Purchase price (€) | Annual rent (€) | Purchase price factor |
|---|---|---|---|---|
| Magdeburg | Apartment building | 1.000.000 | 55.000 | 18,18 |
| Bremen | Commercial property | 2.500.000 | 125.000 | 20,00 |
The purchase price factor in Magdeburg is 18.18, while the purchase price factor in Bremen is 20. This shows that regional differences and property types have a considerable influence on the yield.
Purchase price factor comparison - residential real estate vs. commercial real estate
von Poll Immobilien GmbH is a company steeped in tradition and, with over 400 stores and more than 1,500 colleagues, is one of the largest real estate companies in Europe. The head office of our company is located in Frankfurt am Main. Our clients are owners and prospective buyers of properties of stable value in prime residential and commercial locations.
