How to calculate ROI on a Prague flat: a worked five-year example

Return on investment sounds like one number. In property it is at least four, and the one quoted in an advert is nearly always the kindest. A seller says "5% return" and means rent over price. A broker says "30% over five years" and means appreciation. The investor who has to find the monthly payment wants a third number, and the one who sells wants a fourth, after tax and costs.

This guide builds all four on one hypothetical flat, with every assumption written down so you can change it. None of the figures is a market price, rent, rate or forecast. The inputs are chosen for arithmetic, and the aim is to show how the layers interact, not to say that a Prague flat will do this. For other angles, see buy-to-let costs, returns and risks and rental yields in Prague.

The hypothetical flat

• Price: CZK 5,000,000. Purchase costs of CZK 80,000 (legal work, valuation, the CZK 2,000 cadastre fee and similar).
• Loan: CZK 3,500,000, 70% of the price, in line with the central bank's recommended 70% loan-to-value for investment mortgages from 1 April 2026 (as of 2026; check ČNB). Rate 5% over 30 years, equal monthly payments.
• Own money: CZK 1,500,000 deposit plus CZK 80,000 costs, so CZK 1,580,000.
• Rent: CZK 22,000 a month for 11 months a year, allowing one month of vacancy. Rent income is CZK 242,000.
• Owner's costs: CZK 36,000 a year of building charges the tenant does not pay, CZK 6,000 for insurance and annual property tax, and CZK 30,000 for repairs. Total CZK 72,000.
• Holding period: five years. Price growth 3% a year in the base case, a pure assumption. Selling costs 3% of the sale price.

Layer one: the yield

Gross yield is annual rent over price. Full-year rent is CZK 264,000 (12 months), so gross yield is 5.28%. After the vacancy month and the owner's costs, net operating income is CZK 242,000 less CZK 72,000, which is CZK 170,000, a net yield of 3.4% on the price. This is the number to compare with what a deposit or a bond would pay. The rental yield calculator on Hypoteky.com does the same arithmetic with your inputs.

Layer two: cash flow after the loan

The monthly payment on CZK 3,500,000 at 5% over 30 years is about CZK 18,789, or CZK 225,465 a year. Net operating income of CZK 170,000 does not cover it. The shortfall is about CZK 55,465 a year, before any income tax on the rent. Against the CZK 1,580,000 invested, cash-on-cash return in year one is about minus 3.5%.

Two things are true at once. The owner is subsidising the flat from salary, and part of each payment is repaying the loan. After five years the balance has fallen to about CZK 3,214,006, so about CZK 285,994 of principal has been repaid and about CZK 841,331 went on interest.

Layer three: the sale

At 3% a year the flat is worth about CZK 5,796,370 after five years, a gain of CZK 796,370. Selling costs of 3% take CZK 173,891. After repaying the balance, cash back is:

5,796,370 − 173,891 − 3,214,006 = about CZK 2,408,474.

Because the flat was bought after 2020 and sold inside ten years, the gain can be taxed. The exemptions are ten years of ownership for property acquired from 1 January 2021, two years of own residence immediately before the sale, or the reinvestment rule for own housing. None applies to a flat that was let throughout (as of 2026; check the Financial Administration). In this simplified example the taxable gain is the sale price less the purchase price and selling costs, CZK 622,479, taxed at 15%, about CZK 93,372. A real calculation will have more detail, and the property sale calculator on Hypoteky.com and our article on tax on a property sale cover the rules.

Layer four: profit on your own money

Add the pieces:

• cash back from the sale: CZK 2,408,474;
• less tax on the gain: CZK 93,372;
• plus five years of cash flow: minus CZK 277,325 (5 × minus CZK 55,465);
• less the CZK 1,580,000 invested.

Profit is about CZK 457,777, or about 29.0% on cash invested over five years, roughly 5.2% a year as a simple average. This is not an internal rate of return, which weighs when the cash moved; the ROI and IRR calculator on Hypoteky.com computes that.

The test: what borrowing did

If prices rise as assumed, borrowing lifts the return from 25.6% to 29.0%, a modest gain for a lot of risk. If prices stand still, the all-cash buyer still earns a positive return from the rent, while the borrower loses, because the loan costs 5% a year and the flat nets 3.4%. That is the rule of thumb in numbers: borrowing raises the return only when the flat earns more than the loan costs, once rent and price change are combined. Here the rent alone does not. All the lift comes from the price assumption, and the price assumption is the weakest part of the model.

What the example leaves out

Income tax on rent. A private landlord can use actual expenses or a 30% flat rate capped at CZK 600,000. On the flat rate, 70% of CZK 242,000 is taxable, which at 15% is about CZK 25,410 a year before credits. With actual expenses, loan interest counts and can bring taxable rent close to zero in early years. No social or health insurance is due on private rental income of this kind (as of 2026; check the Financial Administration). See tax on rental income.

The interest deduction. The deduction for mortgage interest is for the borrower's own housing need, not for a flat they let. Do not count it here.

Rate resets. A 5% rate that is fixed for five years may be higher or lower when it resets. Test the case at a rate two points higher. Our article on how a repo rate change reaches borrowers explains the timing.

Your time and the cost of money. The CZK 1,580,000 could have earned something elsewhere, and a landlord's time is not free.

Frequently asked questions

What is a good ROI on a Prague flat?

There is no single answer. Compare the net yield and the total return with the loan rate and with the alternatives you have, after tax and your own costs.

Is a gross yield the same as ROI?

No. Gross yield is rent over price. ROI after financing, tax and a sale is a different, lower and more uncertain figure.

Can I deduct mortgage interest on a let flat?

As an expense under the actual-expenses method, interest can reduce taxable rent. The separate deduction from the tax base is for your own housing need.

Do I pay tax when I sell?

Possibly. A flat acquired after 2020 and sold within ten years can be taxed on the gain unless another exemption applies (as of 2026; check the Financial Administration).

A practical next step

Copy the assumptions list into a spreadsheet, replace each figure with a real quote, and add two columns: prices flat, and the rate two points higher. If the result is unacceptable in either, adjust the loan or the price before you sign.

This is a general explainer, not legal, tax or mortgage advice.