Property investment: mortgage vs cash purchase comparison
Buying a rental property with a mortgage or cash in Belgium: advantages, disadvantages, detailed simulation and criteria for choosing each strategy.
Direct comparison: credit vs cash
For a property at EUR 200,000 with a rent of EUR 900/month:
| Criterion | Cash | Credit (80 %) |
|---|---|---|
| Equity invested | EUR 200,000 | EUR 50,000 |
| Monthly cash flow | +EUR 700 | +EUR 50 |
| Return on equity | 4.2 % | 9.6 % |
| Financial risk | Low | Medium |
| Remaining available capital | EUR 0 | EUR 150,000 |
| Interest deduction | No | Yes |
Credit offers a better return on equity but lower monthly cash flow. Cash offers security and a higher immediate income.
Advantages of investing with credit
The leverage effect
The leverage effect multiplies the return on equity. With EUR 200,000, you can buy 1 property for cash or 4 properties on credit (EUR 50,000 down payment each).
Tax deduction of interest
Mortgage interest is deductible from real estate income in Belgium. This deduction can completely cancel the tax on cadastral income in the early years.
Capital preservation
Keeping capital allows you to seize other opportunities, build a cash reserve or diversify your portfolio.
Advantages of buying for cash
Immediate and maximum cash flow
Without mortgage payments, cash flow is immediate and high. This is the ideal strategy for generating a supplementary income.
Zero rate risk
No credit means no rate risk. In periods of high or uncertain rates, cash protects against yield erosion.
Easier negotiation
A cash buyer is more attractive to the seller: no suspensive financing clause, shorter completion time.
[!tip] Practical tip Even when buying for cash, always keep a 6-month reserve for unexpected expenses (works, vacancy, disputes).
Which to choose
If the property yield exceeds the cost of credit: favour borrowing. If rates are high or you want maximum immediate income: cash makes sense. In all cases, consult an adviser to optimise taxation.
To manage your properties, use a rental management software. Consult the rental investment guide and create your lease online.