According to data from the Bank of Lithuania, in the first quarter of 2026, housing rental prices grew by about 5% year-on-year – roughly twice as slowly as sales prices. The housing price gap from the economically justified level was estimated at 7% at the end of last year, compared to 4% a year earlier.
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According to Ugnius Latvys, CEO and partner of “KAITA Group,” one of the largest real estate development companies in Lithuania managing more than 1000 rental properties, this does not automatically mean that investing in rental real estate is no longer worthwhile. However, general market growth alone, which previously could have concealed less optimal decisions, is no longer sufficient.
“Based on the trends of the properties we manage, we can assess recurring patterns. Our experience shows that overall market growth is not the most important factor. Long-term results are primarily determined by whether the property meets the needs of a specific tenant group and remains financially accessible to them,” says U. Latvys.
He states that when housing prices do not increase, some buyers wait for a clearer market recovery. When prices start to rise, there is a fear that the best time has already passed. The ideal moment to buy is usually only seen in hindsight.
Therefore, notes the “KAITA Group” CEO, it is more important to assess not whether the entire market is cheap or expensive today, but whether a specific property at a specific price can generate reasonable income, maintain tenant demand, and be financially sustainable during tougher times.
“The first investment does not have to be the most profitable on the market. But it must be understandable: how much will need to be invested in total, from where the income will come, what expenses can be expected, and what would happen if circumstances worsen. When there are clear answers to these questions, rising housing prices are not by themselves a reason to stay out. However, they are a very good reason to calculate more carefully,” says U. Latvys.
The yield seen in the advertisement is not yet what the owner will earn
According to the expert, beginner investors usually calculate investment returns like this: if a property costs 150,000 EUR and its rent is 750 EUR per month, the annual yield is 6 percent.
“The number is correct, but it only shows the gross yield. To assess how much the investment will actually earn, rental income must be compared to the total invested amount, not just the purchase price of the property,” says the “KAITA Group” CEO.
If it takes another 15,000 EUR to furnish and prepare the property for rent, the investment will increase to 165,000 euros. One month without a tenant will reduce annual income from 9,000 to 8,250 euros. Insurance, minor repairs, depreciation of furniture and appliances, administration, and taxes will also need to be considered. After these expenses, the initially seen 6% can turn into a much more modest return.
“First, one should calculate not the property price, but the total amount needed until the first rent payment. Investors are often surprised how much the final result changes due to furnishing, a few months of vacancy, or initially underestimated maintenance costs. Each of these may seem small individually, but combined the picture is quite different,” explains U. Latvys.
It is also worth including time in the total investment cost. If the owner prepares advertisements, organizes viewings, selects tenants, draws up contracts, and handles daily issues themselves, this work usually does not appear anywhere in the financial table. However, when comparing different investment options, it should not be ignored.
There is no single yield suitable for everyone
According to U. Latvys, there is no single number from which a property becomes a good investment. Yield must be evaluated together with the property’s location, condition, financing terms, expected tenant demand, and the owner’s involvement.
The same 5% gross yield can be attractive in one case and insufficient in another. If the property is new, fully furnished, adapted to a clear tenant audience, and should not require significant additional investments in the coming years, a lower initial yield can be justified. If repairs are expected, rental demand is unclear, and the owner will have to take on all administration, even a higher percentage may not compensate for the risk.
“Vacancy periods can significantly reduce the final annual return. By combining long-term and short-term rentals, we essentially avoid them and maintain an annual return of more than 6% in our managed projects. However, such a result is not self-evident. It is necessary to constantly monitor demand, manage pricing, change the rental model if needed, and promptly fill vacant properties. For an individual owner renting alongside their main activity, achieving the same occupancy and result is usually much more difficult.
It is important to distinguish two different sources of income: rental income and future property value change. The first can be calculated quite accurately based on today’s market. The second can only be forecasted.
“In the long term, a well-chosen property can appreciate, but future price growth should not be used to embellish current calculations. If an investment looks attractive only by assuming that after five years the property can be sold for much more, there is more risk in it than the rental yield shows,” says U. Latvys.
On the other hand, one year’s yield also does not reveal the entire value of a long-term investment. Stable rental demand, low maintenance costs, and property liquidity after ten or more years are no less important, although they cannot be captured in a single percentage.
It is worth testing the investment with a worse scenario
Before buying a property for rent, it is worth repeating the calculation by reducing the planned rent by 10%, assuming at least one or two months without a tenant, and leaving a reserve of a few thousand euros for repairs or equipment replacement, says the expert.
If the property is purchased with a loan, it is necessary to assess the possible change in financing costs. Comparing monthly rent only with the bank installment is not enough: the owner will still have to cover expenses when the property is empty, and some maintenance costs will arise regardless of income.
“A good investment should not become a financial problem as soon as there is one empty month or a larger repair bill. If the entire model works only by getting the maximum rent, having a tenant twelve months a year, and not incurring any unexpected expenses, there is too little room left for reality in the calculation,” says U. Latvys.
This does not mean that the investment must generate positive cash flow every month. Part of the loan payment reduces the credit balance and thus increases the owner’s share of the property. However, a person must understand in advance whether rental income will be enough for all current payments or if part of them will have to be covered from their own funds each month.
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