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7 mistakes foreigners often do when investing in Berlin and Germany

Posted by investabcom on August 3, 2017
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If Berlin certainly remains an interesting market these days, it is also a market with particular dynamics and hurdles which can deter a certain profile of investors. A lot of foreign investors who wish to invest or to live in the city are sometimes not aware of all parameters to take into account. Very negative monetary or moral consequences can thus impact your investment or your yield for rental investments. This post is to avoid them.

We try to cover in this article the main problems that foreign buyers run into when searching for a property in Berlin and the appropriate solutions to follow.

1- Underestimating counselling and notary costs

Being unable to master the German language means at permanent struggle to access the right information at the right time to make the best decisions. The property manager or owner might simply not be willing to speak English with you, introducing the need for a German speaking intermediary. That can sometimes can cost quite a bit, especially when investing in small amounts (eg: less than €100K).

Solution: get in contact with us and we can help you through our services in avoiding unnecessary extra costs.

2- A misreading of the sales contract

Foreign investors who didn’t really understand all the terms of the contract can have bad experiences. Some contract put more power into the hands of the property manager as one might wish. Some can decide in your stead what price the rent should be and thus impacting negatively on your yield for the property (eg: € 6.50/m2 instead of your € 8/m2 target).

Solution: our agency can put you in contact with lawyers who can represent you or explain you the contracts in details. You mandate them to represent you.

3- Underestimating renovation works

Some properties are put for sale with needed renovation works. This can sometimes hide deeper problems like necessary plumber works or floor replacements. Sooner or later, all those defects will need tending, and you will have to pay for it.

Solution: we have at our disposal trusted partners who can set up an offer for the necessary renovation works. An expert checking the apartment could give you a reliable feedbacks on the works that need to be done.

4- Forgetting the rest of the building

Some first-time buyers tend to minimize the impact of the rest of the building on the quality of their investments. Signing the sales contract also means that you will pay your share for the upkeep of the common parts such as the roof, central heating or courtyard. This can be especially costly in the case of some extensive works such as drying-out the cellar areas or getting rid of nasty wood fungus, which can sometimes cost hundreds of thousands of euros.

Solution: it is important to check those details and we can be controlled at the visit or on requesting all the documents to the owner. A technical expert can be called and review for you all those details. If necessary, we can get you in contact with trusted partners.

5- Forgetting the technical due diligence

In Germany, it is not mandatory to ask for an expert’s appraisal before signing a sales contract and some are tempted not to call one to save money and/or time. This can however prove particularly useful to detect faults in the property which in turn can become a strength during the negotiation phase. Those experts are called  Öffentlich bestellter und vereidigter Sachverständiger” or “Dipl. Bau.-Ing.”.

Solution: there again, we can help and put you in contact with the right experts.

6- Going too fast

Although being fast to take decisions in an asset in a competitive market such as Berlin, one must also take time to qualify those decisions. Not doing this can lead to mistakes we pointed out (1-5) and later in time real problems with your investment that can cost a lot more than what you wanted.

Solution: gather all the needed informations for taking the decision, analyse them (or let them analyse like explained 1-3). Once done, as we say in german, sleep one night over (take 24h) after analysing and take a decision.

7- Forgetting about tenancy law in Germany

Germany is not a country of landlords. Germans are notably known for avoiding investments in real estate. This had lead for a very favorable legal framework for tenants, who enjoy particularly good conditions in Germany. This means that tenancy contracts are not terminated when a new owner comes in, nor does it mean that the rent can be raised, and this for many many years. This explains in part why property with tenants are put for sale with a lower price that the market’s average.

Solution: in each building and apartment could be a different situation. It needs to be clarified before reservation what is possible with the current rental contract.

Conclusion

Buying into a normal single apartment unit comes with several technical and legal risks due to standard German rental contracts. A way around those hurdles is to buy newly-built properties which has no such conditions attached to it or alternatively buy Altbau which has just been renovated. This also brings much needed flexibility and increase your yield for your rental investment while allowing for a better control of the tenancy  contract.

For each situation, an explanation or a solution can be brought and should be studied. The idea is to find for you the suitable investment in Germany and the most advantageous conditions for you. Contact us now to get started right your investment.

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