Rental Property — Is it Worth It? ROI and Hidden Costs
Analysis of rental property profitability in Poland. How to calculate ROI, what are the hidden costs and when rental doesn't pay off.
12 min czytaniaRental Property — The Myth of Easy Money
"Buy an apartment, rent it out and live off the rent" — this is one of the most popular beliefs about investing in Poland. But does it really pay off? We calculated it.
How to Calculate Rental ROI
Gross ROI (simplified)
Gross ROI = (annual rent / purchase price) × 100%
Example: Apartment for 500,000 PLN, rent 2,500 PLN/month:
- Annual rent: 30,000 PLN
- Gross ROI: 30,000 / 500,000 = 6.0%
Looks good? That's just the beginning.
Net ROI — The Real Picture
From revenue you must subtract all costs:
| Cost | Estimated annually |
|---|---|
| Administrative fees | 4,000 – 7,000 PLN |
| Flat tax (8.5%) | 2,550 PLN |
| Insurance | 300 – 600 PLN |
| Repairs and maintenance | 2,000 – 5,000 PLN |
| Vacancy periods (1 month/year) | 2,500 PLN |
| Equipment depreciation | 1,000 – 3,000 PLN |
| Management (if company) | 3,000 – 4,500 PLN |
After costs (self-management scenario):
- Revenue: 30,000 PLN
- Costs: ~12,000 PLN
- Net profit: ~18,000 PLN
- Net ROI: 3.6%
And if you bought with a loan, add interest costs.
Hidden Costs Nobody Talks About
1. Initial Renovation
New apartment for rental requires finishing: 80,000 – 150,000 PLN. Used one — refresh for 15,000 – 40,000 PLN. Add this to investment cost.
2. Vacancies
Statistics say 1 month per year, but in practice: finding tenant takes time, there's cleaning and repair period between tenants. In smaller cities vacancies are longer.
3. Problematic Tenants
Damages, payment delays, legal eviction costs. Eviction in Poland takes 6–18 months, during which you don't earn.
4. Rising Maintenance Costs
Administrative fees, property tax, construction material prices — everything grows. Your rent from tenant doesn't always keep up.
5. Transaction Costs
- Notary: 2,000 – 5,000 PLN
- PCC (2% from secondary market purchase): 10,000 PLN for 500,000 apartment
- Agent commission: 2–3% (10,000 – 15,000 PLN)
Rental vs Other Investments
| Criterion | Rental Property | Global ETF | COI Bonds |
|---|---|---|---|
| Net ROI | 3–5% | 7–10% (historically) | 5–7% (inflation + margin) |
| Liquidity | Low (months) | High (minutes) | Medium (with penalty) |
| Time commitment | Large | Minimal | Minimal |
| Entry threshold | 100,000+ PLN | 100 PLN | 100 PLN |
| Leverage (loan) | Available | None (for retail) | None |
| Diversification | One property | 1,500+ companies | State Treasury |
When Does Rental Win?
- You buy with high leverage (loan) at low rates
- Property value growth (capital gain) — in recent years 10–15% annually in big cities
- You have access to below-market opportunities
When Does Stock Market Win?
- You don't want to spend time managing
- You have smaller starting amount
- You value liquidity and diversification
Flat Tax — How to Tax Rental?
Since 2023, private rental is settled exclusively with flat tax:
- 8.5% from revenues up to 100,000 PLN annually
- 12.5% from surplus above 100,000 PLN
Note: flat tax is on revenue, not income — you can't deduct costs (repairs, loan interest).
Is It Worth It? Summary
Rental property can be a good investment, but:
- Real net ROI is 3–5%, not 6–8% as optimistic calculators claim
- Requires time, knowledge and commitment
- Real profit often comes from property value growth, not rent
- For most people global ETF + bonds will give comparable return with fraction of involvement
How Freenance Can Help
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