Buy-to-Let Properties For Sale
Why invest in buy-to-let property:
- Stable income
- High liquidity on project exit
- Save on taxes
Why You Should Buy-to-Let in Germany
Have you ever considered investing in an already-rented property in Germany? You would not be alone; an increasing number of canny investors choose to purchase apartments and houses as buy-to-let properties. This is because Germany has an exceptionally generous system for buy-to-let mortgages that offers many tax advantages. In this article, we break down all the important points to keep in mind before purchasing an investment property to rent out.
Financial and tax incentives
After a decade, you can decide to sell a buy-to-let property without incurring any capital gains tax.
If the property was constructed after 1925, 20% of the building's value can be deducted for tax purposes. You can additionally deduct allowable expenses, such as maintenance costs and mortgage interest, from your rental income. It is only possible to deduct the purchase price of the building or the value plus any renovation costs less the land value. The land cost is usually calculated according to local community land value tables, which are published online.
- The terms and conditions of repayment and interest rates are very similar to the domestic market.
Investing in the German market
In many countries, this scale of generosity is extremely rare. Mortgages often needed to be paid over 20 years, for example, and the interest rates on rental properties are usually several points higher. Any capital gains are predominantly taxable, and it is also very unusually for build-up cost to be depreciated. Consequently, investing in rental properties can be just as interesting for investors as buying one for personal use in Germany. As a broad estimation, if you keep a property for ten years, the return is likely to be between 4 to 5 percent - attractive by any standards.
Leverage is an essential factor
As a property investor, leverage is a key consideration. The following example demonstrates this: if you use 20 percent of your capital for a property with a purchase of 10 percent, and take out a loan for the remainder, your return will be much higher. Other advantages of buy-to-let in Germany include
Stable income: investing in long-term residential rentals in a good European city district can bring in an income of €10,000–16,000 yearly. The income will be stable as the average German citizen rarely moves home (the average German family typically rents the same apartment for at least a decade).
Price growth potential: low-risk and low-yield locations (high-end and central districts of big cities) grow faster in price than those with higher risks and yields.
- High liquidity on project exit: a flat in a good district often sells as soon as it goes on the market. Residential property in certain areas of Berlin, for example, have been known to sell within three hours of advertising the listing, with as many as four prospective buyers competing to bid on it.