The German legal system reveres the right to private property. But tenants in this country are also protected. For example, owners do not have the right to arbitrarily terminate a long term lease. Moreover, even a debtor can be evicted from rental housing only after the official court decision. The owner can terminate the agreement unilaterally just in case he became homeless. Also termination is allowed in anticipation of repair works in the building. But then the owner must notify the tenant at least 3 months prior the start of work.
As you can see, prior to the acquisition of property in Germany is important to consider emerging risks. How to protect yourself from not receiving income? Follow the rules below:
1. Select objects in the economically developed regions. Invest in a large city with low unemployment (Berlin, Munich, Hamburg).
2. Make the lease with a lawyer, assure at the notary.
3. You need to be sure of the solvency of the future tenant. Let the lawyers check his financial status, credit history in the bank, etc.
4. Take the deposit from the tenant. By law you can request a sum equivalent to three month's rent. During the court proceedings (if they will happen) you will probably lose your rental income. Due to the collateral, the lessor may at least partially compensate his losses.
5. When selecting an object, pay attention to the existence of tenants. Change ща the owner in Germany is not a satisfactory reason for the cancellation of the contract with the tenants. Before buying ask the old owner how faithfully the tenants paid him rent and for how long.
6. Remember that if the contract was concluded for a long-term lease, you will not be able to arbitrarily raise rents on the basis of a price rise on the market (if it is not stipulated in the contract).
By the way, is not always the low cost of a house or apartment is a "risk factor". There are many reasons why the owners decided to sake the property urgently at a reduced price. It can be moving to another region or country, the loss of work. For unemployed Germans it’s much more profitable to move to a rented apartment, the rent will be paid by the state. In addition, property owners in Germany are not entitled to unemployment benefits.
A separate case – the sale of collateral (bank) real estate. When the borrower can not repay the loan, the collateral (house or apartment) is returned to the bank. Banks are interested in quick sale of such property, therefore, often they are agree to sell the objects at a much below market cost.
Tax benefits when purchasing historical objects
One of the most promising options are investments in real estate, which is a historical monument (with subsequent reconstruction). If the buyer of the building restored it its original form, the tax will be reduced by 90% (i.e. 10 times) over the next 10 years. Refurbished old buildings in Germany are valued much higher than modern buildings.
Let's consider a specific example from practice one of the agencies. An investor from Russia has bought for €200 000 a semi-abandoned building that was a monument of history. After the overhaul there were 8 premises for rent. The object could be immediately sold and the owner would collect €560 000.
However, the new owner choose the other way – renovated spaces were quickly leased. Since the repair was new, it was installed pretty high rent. Tax benefits allowed to partially cover the cost of repairs and reconstruction.
Another way to save
And finally, another way to save is to buy a house that was built with the latest energy saving technologies. In this case the utilities and heating costs will be minimal.
Keep in mind that European energy companies rates are constantly increasing. Therefore, when buying energy-saving home the return on investment is much faster.
Text - Alyona Eliseeva, ee24
Photocredit Depositphotos.com