A successful investment in Berlin means first and foremost a clearly laid-out plan & budget, and this regardless of your situation, whether you buy a property to live in it or to rent it out.
The right budget to buy property in Berlin
It is important to really define your project and pinpoint all the financing requirements. Those can widely differ depending on the property if it will be your main home for many years to come, or if you are more interested in a rental investment with office or business/commercial spaces. How long the ownership will be is one the first criteria to consider, especially considering that real estate capital gains are tax free after only 10 years in Germany (non-residents).
Another point to keep in mind is the way your investment will take take place. Will you create a property management company or a holding company to support it or will you simply use your own assets & a loan from the bank? Although creating a company to manage your investment on your behalf is an additional burden, it’s an excellent way to optimize your costs and make use of certain favorable tax rules. In that case, it also possible to acquire an existing but idle property management company to reduce time & money to start one. Good to know: tax rate is the same for private individuals and for partnerships. Tax rate is at 15% for capital companies, such as limited liability companies.
The right goals to resell your property in Berlin
One of the leading criteria when starting your project is to evaluate everything that will impact on the resell value of your investment. It’s here time to think about things like capital gain tax, property transfer costs (14.5% of property sale value in Berlin) or neighborhood potential. All the same, it’s also good to measure the expenses put into furnishing, renovation or decoration works. When renting your property out, calculating yield is also about knowing exactly how much utilities will cost.
Picking the neighborhood
When purchasing property to invest, it’s a bit like choosing one’s own house. One tends to rent to people that are alike and in which one can trust. Hence, when you search & visit properties, it is important to picture who could live in it. It’s a good way to define the right district that will match your tenants ‘ expectations, and in time, a potential buyer.
Thinking about renting
While waiting for a reselling opportunity, renting your property should go on properly to maintain its condition and pay for the loan. This requires tenants than can be trusted and that want to stay for a longer period of time. This will probably influence your choice for the location and type of property. For example, a 60m2 in Charlottenburg or Prenzlauer Berg will more likely be interesting for high-earning young professionals who are looking for a cosy place to live.
Picturing potential buyers
Deciding who from a real estate investor or a private individual will be more likely to buy the property from you will help to start your search and decide how much budget you should put in your project.
Last but not least; be sure to have the necessary funds available & ready when reserving and buying the property.
If you need help setting the right budget, access to good conditions for a loan or simply explore the market, do get in touch with us. Our agents will gladly answer to your questions.