Holiday homes in Germany
At a glance
- Become a real estate investor
- Vacation flexibly and independently
- Deduct certain costs from taxes
Your guide to investing in holiday homes in Germany
If you are business minded and always looking for new opportunities to invest, you have probably considered purchasing real estate. If you’re in Germany or are familiar with the country, you’ll have seen apartments and vacation homes for sale and may be wondering if this could be a profitable investment. It's not just summer homes in Spain that are lucrative; a rise in German tourism, especially in cities like Berlin, have made investing in a summer house particularly valuable. In this article we will look at the reasons to invest in a holiday home in Germany. We’ll also guide you through all the things you should consider to make this venture profitable.
Why buy a holiday home
Property is considered one of the safest forms of investment, especially in a mature and stable market like Germany. Every year, thousands of people invest in a holiday home in Germany. Investors come from all walks of life and include retirees, people looking for a passive or secondary source of income, young professionals who want to diversify their finances and savings, and parents who want to leave a property to their children in the future and want to make it profitable in the meantime.
Renting your holiday apartment
To increase your chances of success and profitability, you will need to have an accurate idea of who is your ideal renter. For example, a family looking for a holiday home will have different needs and expectations from a couple. First-time holidaymakers in Germany will also have different needs from German travellers or those who know the country well. Consider the type of holiday your ideal renter might prefer: Some people are looking for basic, affordable accommodation, and might be suited to a smaller studio apartment. Other holiday-makers enjoy staying at a high-end venue. If you’re targeting the latter, you should have a look at luxury holiday homes in Germany. Property amenities and décor will also be dependent on who will be renting out your vacation property investment. Once you know who you want to rent your apartment to, you can start planning the best marketing strategy for your target group. When marketing your vacation home for rent, you should highlight what the area is know for: This could be nature, culture, shopping, city life, proximity to the sea or to hiking areas.
Costs to consider
In addition to the property sale price, you should budget for the following expenses:
- Notary fees, which are usually 1.5% of the property sale price.
- Property transfer tax. The exact amount varies depending on where the property is located, going from 3.5% to 6.5%. For example, holiday apartments in Berlin incur a property transfer tax of 6%, whereas in Saxony the rate is 3.5%.
- Real estate agent fees (if using an agency), which can be up to 3% of the property sale price.
- Property registration fees, which are approximately 1% of the property sale price.
You should also budget for décor and furniture upgrades, utility bills, and those extra touches that can make your holiday home more welcoming and attractive to renters.
Profitability of vacation rentals
When choosing between several vacation homes for sale, you’ll have to consider the sale price and any additional costs against your desired income. This will help ensure the transaction is profitable and your German property becomes a good source of income. You can use this basic formula to estimate the profitability of your vacation property investment: Annual rental income – Operating expenses x 100
For example, imagine you own a holiday home that cost 220,000 Euros (purchase price + ancillary costs + maintenance and other expenses). The property can deliver an annual rental income of 10,000 Euros. The calculation would be as follows: 10,000 – 220,000 = 0.045 x 100 = 4.5% (profitability is expressed as a percentage).
The general rule of thumb for vacation rentals is that they should be rented out for at least 120 days a year in order to be profitable. Before making a purchase decision, it is helpful to look at the prices for comparable holiday apartments in the region and their occupancy plans in the period from June to September. This helps to assess the potential demand.