Although the market has begun to level with the rest of the country, Berlin is still offering prices below what you could find in Hamburg, Munich, Paris or London. With a keen eye and the right approach, it is still possible to find an investment opportunity in Berlin for rental or simply to live in. In this post, we try to guide you through the process of buying an apartment in Berlin.
1. Define clear investment goals
A good investment starts with the right questions. Before diving in the market, make sure to pin down your priorities and your objectives for your project. It’s also good to remember that in Germany, any estate property can be sold tax-free after 10 years. Thus, try to plan your investments with that in mind:
- Are you going to rent the property out or are you going to live in it?
- Do you have an absolute ROI on capital gain?
- Can you find a synergy between different properties?
- Are you looking for several smaller properties or rather a single bigger one?
A clear structure will ensure you meet your goals when buying an apartment in Berlin. We can also assist you in finding answers to these questions.
2. Select districts and get to know the “Kiezs”
Needless to say that the one golden rule to follow is always “location first” when investing in property. This stays true in Berlin with one little difference: the importance of local neighborhoods or “Kiez”. Within a district like Neukölln or Prenzlauer Berg for example, there can be smaller more attractive areas that have been gentrificated next to more destitute, not-cared-for streets. This dynamic is interesting because it means that a lot of potential is still to be discovered next to more “obvious choices” where prices vary between 2500€/sqm to 4000€/sqm within a few streets radius.
The only way to match your investment goals with the right district is to visit the city to feel what is best for you. It is often said that it’s easier to make a good operation when the investor identifies with the potential buyer. An emotional attachment to the area is thus generally a good sign. It also provides peace of mind on the potential of the property. Check the reasons to invest in Berlin and the district where to go.
3. Set a budget and secure funds
Depending on your investment preferences, you might want to allocate a maximum budget to buy an apartment in Berlin. You might also want to add a 10% negotiation margin on top to reach an agreement with the seller if need be. Considering the current rates, even if you have all the necessary cash to buy an apartment in Berlin upfront on your own, it would be wise to go to a bank to finance at least part of the sum. Make sure your deal with the bank is secure so you can move fast to make your bid when interested in a property. Speed is often key.
Also note that the inability to come up with the sum after signing the purchase contract is not a “safeguard” and doesn’t cancel the sales contract as it can be in some countries. You will be then in a dire situation.
4. Understand the local buying process when buying an apartment in Berlin
Indeed, the buyer needs only one signature to purchase a flat in Berlin. There are no other documents involved before serving as a middle-step. Once this document has been signed and the purchase paid, the ownership is transferred in the land registry which can take up to 7 weeks. Do note that there are no documents securing the reservation of a apartment. The seller can freely decide to respect an oral agreement with you or not.
5. Work with experts such as Invest-AB
Although you are probably familiar with the laws, trends, processes of your own home market, it can often be challenging entering a new country with different parameters and another language. Therefore, we do recommend to work with a local expert that has both knowledge of the Berlin market and a deep understanding of common issues when being a foreign investor.
Invest-AB has all the necessary skills and the network to assist you wherever you feel you need guidance. Here to contact us.
6. Setting a reservation and notary appointment
If you are ready to buy an apartment in Berlin and found a property that filled all your requirements, you are ready to set a reservation on it and organize a meeting with a notary. A notary is the only compulsory middle-man in charge of drafting the property transfer contract, which will allow its registration in the land registry.
To complete a reservation, you will have to fill in a form showing the intention of buying it and to pay a reservation fee to validate your reservation. It is not set what you have to pay; it always depends on the selling conditions. Only once the reservation has been confirmed, you will be good to get a first version of notary contract.
7. Land registry and payment
Once both parties have signed the agreement (“Auflassung“), the seller has left the ownership right to the buyer. This has to be noted in the land registry (“Grundbuch“) at the local Amtsgericht in the same district where the property is located.
Fees associated to property transfer:
- Notary costs: 1-2%
- Land registry office fee: 0.5%
- Property transfer tax: 6%
8. Renting out and property management
In the case of a rental investment, a few additional steps have to be taken to be sure that it well managed. In Germany, a property management is required to manage it for you, at a fixed costs between € 30 & € 40 per month and per apartment. It is also going to be probably necessary to open a bank account in a local bank to collect the rent each month.
We can also help you find the best partner to manage your property for you once you have bought an apartment in Berlin. Do not hesitate to get in touch with us.
9. Anticipate the resale of your property
When thinking about capital gain, it is important to consider the potential resale value after buying an apartment in Berlin. We already mentioned that the resale is not taxed after 10 years but if you want to maximize your ROI, a good rental yield will allow you to cover potential renovation costs to increase property value for example. As always, the desirability of the location is the most important factor to consider; it decreases risks and increases profitability.
AB-Invest is an estate agency with complete focus on international customers. We help them in many aspects of finding, securing, managing and selling estate in Berlin & Germany. We assist our customers over the course of months or simply days, depending on the level of assistance needed. Feel free to get in touch to learn how can help you buy an apartment in Berlin or simply browse our current portfolio.