Why a rented condo?
Why Berlin?
What is important when choosing property?
Can I afford such an investment at all?
What is rental yield?
What is a land register record?
What is the role of the notary when purchasing real estate?
What do the terms „estate in severalty“ and „collective property“ stand for?
What is a declaration of division?
Why a rented condo?
Generally, 94% of the Germans regard a property purchase the best old-age provision.
„Concrete-gold“ is the safest investment all the more in times of collapsing stock prices and strong devaluation of money. Thus, it is not surprising that for nearly 80% of the Germans real estate as a safe investment ranks before the bank book and even gold!
Here, the decision to purchase a property is considerably simplified by the current record low interest rates and the recent financial crisis.
In contrast, German life insurers barely make it beyond the guaranteed interest rate, which, anyway, has constantly been corrected down in recent years! Therefore many life insurants are likely to be massively disappointed when withdrawing from working life, at least, according to the opinion of many pension experts.
Currently, residential property is widely regarded a crisis-proofed investment alternative to life insurance, and, on top, it offers attractive yield prospects. All too obvious are the non-cash benefits, which distinguish the “pension in stone“ to the life insurance.
If property is not owner-occupied, but brought to the housing market as rental property, usually, stable receipts may be realized in retirement.
Why Berlin?
Apart from the metropolitan areas of Munich, the Rhineland and Hamburg, Berlin as a site for real estate buyers is supposed to have a promising future.
But, according to the investors, Berlin has a decided advantage over the other metropolitan areas.
While in Munich the average housing price is € 6,500 to 8,250 per m², in Berlin it is just € 3,200 to 4,500 per m².
The average rent in Munich is € 10.73 per m², whereas in Berlin – € 6.96 per m². It means the rental yield in the exhausted Munich market is at 2%, while Berlin, however, offers 3.09% – with growth potential!
| Munich | Berlin | |
|---|---|---|
| Purchase price per m² | 6,500.00 € | 3,200.00 € |
| Rents per m² | 10.73 € | 6.96 € |
| Rental yield | 1.98% | 3.09% |
| Rent and price potential | stagnating | rising |
The Süddeutsche Zeitung on 28/11/2010: „The new Munich rent index, which comes in spring of 2011, is expected to not reflect any further increase in rents – a novelty in Germany’s most expensive city. For the first time the price level is even likely to decrease slightly. The rent index in 2009 has still made an average of € 9.90 per square meter.“
The Tagesspiegel/Berlin on 30/05/2011: „The Berlin housing market is as tensed up as it has never been throughout the last ten years. In the past two years, prices have risen by four percent annually.“
Here, however, Berlin has the greater development potential due to the fact that the city compared to the aforementioned metropolitan areas has a much higher rate of tenants: approximately 85% (decreasing). In contrast, the tenants’ rate in those metropolitan areas is just 43%.
The high tenants’ rate in Berlin can be explained by the city’s historical development over the last 60 years. There were simply not too many people who wanted to purchase property in a city that used to be a walled western island.
Ever increasing rents and a thereby resulting residents’ interest in home ownership lead to ever rising property prices in Berlin and surrounding area.
With their survey, the BulwienGasa AG has confirmed this trend. „In only six of the 50 cities analyzed, one expects rising house prices – Berlin is one of them.“
What is important when choosing property?
Location matters. Location, location, location – it is essential when it comes to property.
The micro-location of an object in Berlin or surrounding area and its history are of relevance to the current yield as well as to its future development.
However, top locations as in Charlottenburg and Tiergarten in West Berlin or Prenzlauer Berg and Friedrichshain in the east, are not automatically those with the highest return or the fastest growing!
Can I afford such an investment at all?
For illustration reasons, as follows a simplified calculation:
100,000 € purchase price of the property plus additional costs € 8,000
5,000 € net annual rental
4.860 € costs of financing per year at 4,5% annuity (interest and repayment) to € 108,000
140 € monthly additional payment before claiming as tax exempt.
Those who let their property have the right to yearly claim it as tax exempt with 2% or 2.5% (depending on the year of completion). Additionally, further expenditures on the property would be claimed as tax exempt, too.
All in all, significant tax refunds could be received.
What is rental yield?
The rental yield is the net annual rent (= the net monthly rent x 12) in relation to the purchase price of a property
Example:
Purchase price without extras € 100,000, net annual rent € 5,000 = 5% rental yield%.
What is a land register record?
A land register record is a copy of all land registries, which exist upon a plot.
The land register is a public register that provides information about private legal relations upon plots.
Among others, the land registry describes the type and size of a plot, property relations as well as rights and encumbrances (e.g. way leave and access right, right of abode, etc.).
What is the role of the notary when purchasing real estate?
In realty purchasing matters, the task of a notary is to ascertain the mutual intention of both the contract parties to contract, to phrase and read it to them and, finally, to notarize it. Furthermore, he has to inform the parties about the legal implications of their agreements. In addition, the notary induces the process of the transfer of ownership as well as the capture of this transfer of ownership in the land register.
What do the terms „estate in severalty“ and „collective property” stand for?
Estate in severalty means property ownership or home ownership or the ownership of a particular condominium unit.
It is associated with a certain share of the collective property (e.g., staircase), the so-called co-ownership share.
What is a declaration of division?
When a condominium complex is constructed, the property owner has to make a partition. It is based on the plans approved by the authority for construction with declaration of division and seclusion certificate.
According to article 8 of the Condominium Act, the declaration of division lays down the co-ownership share in the collective property in connection with the ownership of a particular condominium unit. The declaration of division requires notarial certification.
