German Real Estate Investing Blog

A real estate as an investment can be very rewarding, but also has some risks. In this article, I therefore explicitly want to have a look at some of the risks of real estate as an investment. Investing in real estate is a popular way to increase your capital. But there are also some risks that should be considered. So in this blog post, we will look at the disadvantages of real estate compared to other forms of investment, such as stocks. What are the risks of investing in real estate? In my opinion, there are two major risks with real estate: the risk of rising interest rates and the risk that the property will lose value over time The risk of rising interest rates: higher costs Real estate that you buy with little money down a lot of financing carries a high interest rate risk. That's the risk that interest rates on your financing will rise. Although you lock in interest rates for a few years when you take out a loan for your real estate investment, at some point, those fixed ra...

The homeowner association fee (“Hausgeld”) is an important point of the monthly costs for people investing into real estate in Germany   Everyone who owns a house, apartment, or other real estate property in Germany has to pay a fee to the homeowner association on a regular basis. This fee is to cover for the ongoing expenses that are incurred for the property, such as maintenance and upkeep costs, insurance, cleaning costs, etc.  The amount of money varies depending on the property and the residential area. But how and when do you have to pay this homeowner association fee, and how is it composed? That's exactly what this blog post is about. Do owners have to pay the homeowner association fee per month or per year? In most cases, as a real estate owner, you will have to pay the homeowner association fee on a monthly basis. Often, the entire year's worth of the fee would officially be due at the beginning of the year, but in almost all cases, the payment is deferred and ...

Source: Money icons von monkik - Flaticon The gross initial yield is a yield measure for real estate that reflects the return on a property as a percentage of the purchase price (or the current market value). It indicates what percentage of the purchase price is generated annually as rental income. You get the gross initial yield by dividing the annual net rent by the purchase price of the property. Let's illustrate this with an example. Let's say you buy a property for €300.000, which is rented for a net rent of €1000 per month. With this property you achieve a rental income of €12.000 per year. The gross initial yield of this property is therefore €12000 / €300.000 = 0,04 = 4 % Is the gross initial yield a meaningful indicator of the quality of an investment? While the gross initial yield is an important factor in evaluating a property, it does not tell the whole story about the quality of the property. Much more significant factors for the quality of a property a...

Image by Oliver Putz from Pixabay When investing in real estate, the maintenance fee (“Instandhaltungsrücklage”) is an important matter when it comes to the maintenance and upkeep of your real estate assets. But how high should it be, what exactly is this maintenance fee, and which part of the maintenance costs is already covered by the common charge for the condo? In today's article, we want to approach exactly these questions and clarify essential aspects around the topic of a maintenance fee for real estate. We will also take a look at why it is crucial for you as an investor to properly account for the maintenance fee in your yield calculations when checking a buy-to-let property. What is the maintenance fee? The maintenance fee is money that you, as the owner of a condo, pay and set aside to cover the maintenance costs of the property. In Germany, the maintenance cost for a condominium consists of two parts: The maintenance fee for the common property and the maintena...

Image by Oliver Putz from Pixabay Real estate investments have become very popular in recent years. A real estate investment can be very lucrative, but it also carries risks. Especially if you buy a property that is overpriced by current standards. But why are there then so many people that are willing to buy properties that are completely overpriced? I think the main reason for this is the current fiscal conditions: we currently have a lot of money in the markets because of the loose central bank fiscal policies. And let’s face it: that money has to go somewhere! And so it goes into different asset classes. Vintage cars, stocks, old whiskeys, or real estate. Investors flock to real assets because they see how much their money is being devalued by inflation. According to the German Federal Statistics Office, the inflation rate in Germany rose to 7.4 percent in April! The last time there was such a high inflation rate was over 40 years ago, in 1981. With such inflation ra...

Image by  Oliver Putz  on  Unsplash Buying a property with 100% financing comes with both some advantages and some disadvantages. The main advantage is that you need very little equity and can therefore build up your real estate portfolio very quickly.  Also, your return on investment, relative to your actual invested capital, is of course very high with a 100% financing.  But on the flip side, you pay these two benefits with a greatly increased risk in your financing. But let’s not get ahead of ourselves and take a closer look at the two areas. What are the advantages of a 100% financing? The main advantage is clearly that you require very little equity to start your career. More specific: You only need to pay the ancillary purchase costs yourself (depending on the property itself and the state the property is on, that’s about 10% of the purchase price). The rest of the money you borrow from the bank.  For example, if you want to buy several properties...