Tenement houses in Germany are a very attractive investment for foreign buyers. And it is not only "delicious" return (up to 10-15% per annum and above), but in the long run – the possibility to get a residence permit in the future in a developed European country. We talked about the trends in this market segment, prices and "pitfalls" with the head of the Moscow embassy of the German company Stimul Consulting Sergey Ermakov.
Why it the profitable to invest in German tenement houses?
Demand for rental housing in Germany is extremely high. More than half of the population traditionally live in rented apartments and houses. High demand is strongly supported by the constant influx of migrants.
Investments in tenement houses in Germany is a highly profitable stable business with minimal risk compared to regular buying of apartments or acquisition of commercial real estate.
In Germany in every house exist HOA - homeowners association- and all major decisions are determined by the board and are collectively accepted on the annual meeting of owners. Thus, you will have to obey the decisions of the HOA. Being the owner of the whole house you define who will live there, who will be evicted and how to manage money.
In comparison with commercial real estate, tenement houses are characterized by low risk. If you have 10 apartments, and some of the tenants moved out, it is not such a big deal for your pocket. As Germany is a country of tenants (more than 57% of the population rents accommodation), you will quickly find new tenants. But when the tenant move out of the store for example, the new search can take six months or more
Prices
Prices for tenement houses grow and will grow even more. If earlier it was possible to buy a property on 6-8 apartments for 50 000 - EUR 100 000, today it is very rare. The average cost is about EUR 1 000 m2. You can find cheaper property, for example property that is pledged to the bank.
Investing in tenement houses is a profitable business for the Germans themselves, given that the bank loan can be taken by 2-4%, and the yield particularly in the eastern states reaches 10, and even 15%. The large demand for housing remains, including by the influx of refugees.
In Hamburg, for example, daily arrive more than 500 refugees. Even there is a law on compulsory lease - until March 2017 refugees are placed in large commercial buildings (owners, of course, receive the average market rent).
Profitability
In Russia and Ukraine prefer to invest in capitals. But in Germany investments are developed all over the country. In large cities such as Berlin or Munich, the yield does not exceed 3-5%. But it is a stable passive income. However, finding a suitable home in Munich it is not so easy, much easier is to sell the property there.
We can say that the most interesting at the moment are the eastern lands. East was underestimated before, so there is a choice here, and even more, the yield can be up to 10-15%.
But, again, very important is the location of the object. Two houses on the same street may have different yields. You should always find out whether there are any industries close to home and educational institutions, which public live in the district. In the west, there are many refugees from Africa, Syria, and this increases the risk. In the east, the flow of immigrants is constrained.
Buying process for foreigners
For citizens and foreigners in Germany there are the same rules when they are buying a property. The new owner gets 2 main documents:
- Sale contract (if it is a direct transaction) or court decision (when buying distress property)
- An extract from the cadastre (land registry).
Payment is made via bank transfer, with no need to open an account at a German bank. You can pay out of the country where your currency account is opened. Not so important, where and by whom will be made the translation, much important is to specify carefully the purpose of payment "
There are 2 schemes of acquisition the property in Germany.
In direct sale the buyer provides only a valid identity document with the place of residence (passport). Parties sign the sales contract at the notary. The notary send a bill for his services, and after the payment proceeds to verify the documents. If it is determined that the object has an encumbrance, the notary finds its origin, and notifies all parties.
After verification, the buyer will be temporarily introduced into the land registry. The seller can no longer resell the object, lay it, give to someone. Further, the buyer pays the bill for the temporary entry in land registry and notary sends a message to the tax authority that the object has a new owner. Tax authority send the requirement to pay tax on the purchase of real estate. You need to provide copies of all the payment documents to the notary. Notary rechecks all once more and authorizes the payment for the object. After payment the notary sends a new application and you are finally brought in the land registry as the owner. The notary is legally responsible for legal purity of the transaction to its members with all his assets, thus eliminating the possible manipulation and deception.
The second way to get a property in Germany - to buy the collateral property from the bank. Banks are interested to sell the object as soon as possible, so initially offer low prices. With the right approach, you can further reduce the price negotiating at the court.
All bidders must register in advance and bring to the cashier of the court a deposit of 10% of the appraised value of the property. If the deal goes through, this amount is counted when paying. If a sale will not be carried out, the 10% are returned to the buyer.
You become the owner of the object directly in the court - the judge declares you as a new owner. After 3-10 days you will receive the mail from the court with the relevant documents and the requirement to pay the remaining amount within 6-12 weeks. Court sends the request to the Inventory and sent you the tax invoice. Further, the nesessary note is made in the land registry and you get an extract.
As you can see, this is quite a long process. But the bureaucracy in Germany is justified - strict order protects you from trouble in the future. A notary is responsible for the purity of the transaction. When buying in the court all debts and encumbrances are canceled – so there will be no third party claims.
Costs
Tax on purchase of real estate in various states of Germany varies, reaching 5-6% of the amount fixed in the contract. Notary Services, which controls the transaction – is 1.5-2% of the object cost.
When buying any real estate in Germany, you become the owner of the land on which it is built. This means that you have to pay an annual tax on land - about 1.5% of the appraised value. But these and other expenses for utility services under the law are passed on to tenants. Of course, if there are tenants in the house.
Take care of your home can be taken by management company (20-50 euros per month for each apartment), or by yourself.
If you are interested in a residence permit ...
If you are interested in obtaining a residence permit through the purchase of the tenement houses, then proceed according to the scheme:
1. Buy a Condo and create a Management Company;
2. The director must be a person who will apply for the residence permit;
3. Send an application for a residence permit in Germany, based on the existence of own business;
4. After reviewing your application, you will receive a coveted residence permit.
For reference: In 2015, 68% of property buyers in German were foreigners. In 2009, the situation was quite different: 86% of buyers were from Germany, and only 14% of the transactions were made with foreigners. Buyers from abroad now represent not only a huge two-thirds of "votes" - they are the force that provokes a rise in property prices.
Text - Alyona Eliseeva, ee24
Photocredit Depositphotos.com