House prices in Germany

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We own investment properties in 6 different countries (between the US, South America and Europe) and I can honestly say that Germany is my least favorite place to own. The headaches of tenants, banks, and the court system has made owning here a living hell. I highly recommend not buying a property that you don't intend on living there yourself. One of the biggest mistakes that new homeowners get into is underestimating hidden costs behind an investment property. Aside from the initial costs of buying the property and paying the subsequent mortgage for x amount of years, you have inevitably large unexpected costs such as building repair, huge legal fees (for example landlord-tenant disputes and/or evictions) and remodeling expenses every time a tenant moves out. All of which require you to come up with cash out of pocket immediately. Not easy to do when a roof springs a leak and you're looking at a 20,000Euro bill. I'll give you a recent example, in one of our apartments we had a tenant who was a pain from the get go. She was always late or waited till the very last second to pay. She had 2 months that she didn't pay rent so we had to take her to court and after 8 months the courts FINALLY ruled that she must pay back what is owed. They gave her a payment plan of 50Euros a month to pay back 2,000Euros! (F**king ridiculous!!!) Who do you think had to carry her for those two months? On top, when her lease expired and we wanted to take over the apartment for ourselves, she refused to leave which meant we had to take her to court once again. Fast forward 2yrs and we finally have her evicted after over 12,000Euros in legal fees (and no our legal insurance wouldn't cover this, but that's another headache and long story), approx 25 missed working days, cleaning and remodel costs (she was a heavy smoker) in excess of 4,000Euros (and counting) which brings us to an added expense over the past 2 years of 24,000Euros plus. Forgive me for sounding disgruntled at the moment but the taste of disgust is fresh in my mouth at the moment. It's not easy being a landlord here, the landlord/tenant laws here are grossly imbalanced. The rental market is in general very low even in Munich. The rent that we receive only covers part of the mortgages and none of the added expenses combined with a low gains growth rate it's not completely the best investments we've made. Too be honest, at the end of the day losing my sanity and freedom isn't worth any of it even if the numbers DID all balance out. So, regardless of what any of you think, sitting back and collecting the rent to cover the mortgage is a nice thought but not realistic here by any measure.

 

Now with that said, if you find lets say, a hobby fixer upper and you are doing the work yourself the rewards CAN be more than what you were expecting. As many of you know we bought an old schloss we found for a steal over a year ago. We have begun the restoration on it ourselves and it really has been hard work but really fun. Recently someone has come by and tried to make an offer on our place which is over 10X our investment so far. We love the place and aren't willing to let it go but I must say it gives me a warm feeling that we made the right decision to buy it for Jr's future. :)

 

On the other side of the coin, renting gives you a huge amount of freedom and very little headaches in comparison to owning. And, the ability to invest in other areas that are not as risky here (in Germany).

 

One more thing, unless you have the freedom and availability of funds to travel back and forth, I would not recommend being an absent owner to rental properties. I must however have to say that buying raw land in foreign countries like Nicaragua, Panama and Brazil to name a few can be and have been very lucrative investments for us. In Brazil alone we have seen a 35% (and growing) increase in investment in the past 4 years. Nicaragua has grown to (25%) in 3 years but as an added bonus, NO CAPITAL GAINS TAX! Buying in these countries requires a lot of research, solid contacts and time but the rewards can be worth it. And the most sound advice in buying land...always buy on water, even if it's a little creek that runs through your village, it's prime real estate and will almost always hold it's value.

 

@ML: I gotta show you the beach front property in Nicaragua! 50 acres on the east coast not far from the Costa Rican boarder with jungle reaching up to the beach line. I'm thinking that it'd be a great eco project. :)

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Holy crap, f_f, 50 beachfront acres! It's my dream to buy a bunch of land in South America... thanks for the no capital gains tip. ;) I think the GerMan is coming around to the idea. Fortunately, yo hablo español. I could see myself retiring down there, on a big rancho.

 

Turning it into an eco-retreat is a GREAT idea which is getting more popular down south. Hey, whatever it takes to save the beautiful landscape from axes that hack!

 

Glad you confirmed my suspicion... that investment property in Germany would be a big pain in the po-po.

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LOL, yeah it's pretty sweet. We bought it 3 years ago and I'm having to fight tooth and nail with MY GerMan to keep it. The problem is...we've got too many projects going on at the same time. But, since my first visit I wanted to do something nice and eco there. Especially, if I can combine it with benefiting the local economy too. I'll pm pics tomorrow. :)

 

Our "retirement property" is in Brazil just outside of Rio DJ. We bought an entire peninsula (80 acres) with unbelievable breath taking ocean, beach, lake and mountain views! Our home sits on top of the plateau but we plan on splitting the rest for a housing project of about 10 to 20 homes. Properties down south are very affordable even for beginners. I'm currently looking at Argentina and Uruguay for a ranch for my mom and our entire family. It's a great time to buy in S.A.!

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Sorry to hear about your problems with a German renter, FF. Guess we've been lucky. A guy has been renting our condo near Stuttgart for over 10 years with no trouble at all.

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On avoiding paying house prices in Germany....

 

Living his life with bearly a care,

renting a tent beneath my stair,

look folks, you can see him there,

it's Gladly my cross-eyed bear! :lol:

 

2B

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Suddenly I'm madly looking at real estate in Nicaragua. :lol: f_f, did you do this all online, have help from an agent, oder? Looking forward to your PM. :D

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Buying is only automatically better than renting if you don't need a mortgage

 

Even that's debatable of course. Our capital is tied up in the property and so we pay a notional rent - interest / investment income foregone. I own outright but if I sold, I could invest the money, that'd generate a monthly rental payment. No difference really.

 

My housing is in no way "free" or "cheap" simply because I don't make a monthly mortgage payment. As prices rise, it becomes more expensive for me, same as as rent rates tend to rise. But I possibly have less flexibility to respond to changing market prices than someone who rents.

 

In money terms, I just see property as like any other savings plan - the monthly capital repayment is what's contributing to your financial future, no different from other monthly cash deposits. As others said, it's capital gains that make the difference. I'd say one big advantage is leverage. A bank may lend you 500k for a house, whereas it won't to put it in a bank for 20 years (unless you already own of course and they can secure it). And you get the "utility" of "owning" in a 500k house that you could not buy with your own means.

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Buying is only automatically better than renting if you don't need a mortgage

 

Generally I agree with that, and a lot of other things said on the thread but the only simple truth is 'you're all different' and buying or renting has to fit your circumstances.

 

We are currently paying a mortgage and making the extra annual repayments that we are entitled to each year (thanks to a very informed chap at Interhyp who found us the DKB who take up to 5% of the original amount every year this amounts to an increasingly significant extra repayment). If we make these extra repayments we will save several thousand in interest over the lifetime of the mortgage...

 

... but in the future we will probably want to move to a bigger place and rent out our current flat so then the mortgage interest would be tax deductable so a mortgage as large as possible may improve our situation then.

 

If I were you I'd find a place you like and enjoy living in it, regardless how you pay for it.

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Renting is a waste of Money! You may as well find a deal in a local hotel where they clean the room for you too!

 

Oh don't be silly. Living in a hotel is obviously the most expensive option, followed by owning. Renting is the cheapest option when calculated on a monthly basis (i.e. the monthly mortgage repayment, the initial purchase costs, and the cost of owning a property such as maintenance and insurance comes to substantially more than the monthly rental income).

 

 

Or maybe you cant afford to buy a place... sour grapes etc!

 

I own a property but it's not in Germany and I don't live in it. I rent the place I live in, out of choice and for a number of good reasons.

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She had 2 months that she didn't pay rent so we had to take her to court and after 8 months the courts FINALLY ruled that she must pay back what is owed. They gave her a payment plan of 50Euros a month to pay back 2,000Euros! (F**king ridiculous!!!)

The court did not give her a payment plan. If there was a payment plan you did. The court decides if your claim is valid or not and that is it. They do not grant payment plans in a verdict. Either you or your lawyer agreed to a plan after the verdict (which has nothing to to with the court) or you settled to avoid a verdict in which case you agreed to the plan as well.

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Sorry to hear about your problems with a German renter, FF. Guess we've been lucky. A guy has been renting our condo near Stuttgart for over 10 years with no trouble at all.

 

Thanks Bipa, like I said the taste is still fresh but I'll get over it. Move on and forward right?

 

There are a lot of people out there (mainly renters) that think that landlords are basically scums of the earth because all they do is sit back and collect their rent. Owning property takes a lot of investment, a lot of hard work, a huge amount of stress and a bunch of risks. It's not as easy as they think.

 

 

Suddenly I'm madly looking at real estate in Nicaragua. f_f, did you do this all online, have help from an agent, oder? Looking forward to your PM.

 

Hahaha, yes it's infectious I'm afraid. But I have to retract my statement that Nicaragua has "NO CAPITAL GAINS TAX" it was late and I was lazy to look up the current rate. It has gone up but if the value of the property is under $250,000USD then you get better rates depending on other variables of course. I also have to correct myself as to WHEN we bought the property it wasn't 3 yrs it's almost 7 yrs ago (how time flies!!!) which back then, Nicaragua had 0% CGT for investments with a holding period of 7 yrs (it's at 10 now) as they were trying to attract foreign investors. Luckily for us this is grandfathered in. But, even at current rates as they are and a continually growing market (due to an increase in eco-tourism) it's still very attractive to purchase there. I did most of the research online but as it's proximity and inexpensive direct flights from Ft.Lauderdale made it easy for us to make a few scouting trips before we bought. We always seek out "for sale by owner properties" first but these particular ones were bought through an agent. I wouldn't recommend him because he tried every slimy trick in the book. But, I would recommend one that was really pleasant and informative. His specialty is Granada and Lake Nicaragua and he has a great reputation with all the locals (*bonus-he's kinda handsome to boot :P ). If you're looking for a ranch he'd be able to help.

 

I would like to point out that on that CGT table link above shows that Costa Rica, Ecuador and Argentina all have a 0% CGT and Paraguay is slightly higher at .15%. Costa Rica's market has pretty much topped off so making a good profit will take more time. Ecuador and especially Argentina are the better markets to buy in as they have more room for growth. There are many variables to consider when buying, proximity to the US was important to us at the time as well as building costs and political climate. You may want to take a look at Brazil too, their CGT is at 13% but because of the growing economy and new oil deposits found off the coast of Rio DJ the property prices are starting to make a steady climb. EscapeArtist.com and Viviun.com are great resources for expats and investors as well as a good data base of listings. There are more but these are my favorites, let me know if you need more help I'd love to lend a hand.

 

As you can tell this is one of my favorite topics next to soap of course. ;)

 

 

...buying or renting has to fit your circumstances.

 

We are currently paying a mortgage and making the extra annual repayments that we are entitled to each year (thanks to a very informed chap at Interhyp who found us the DKB who take up to 5% of the original amount every year this amounts to an increasingly significant extra repayment). If we make these extra repayments we will save several thousand in interest over the lifetime of the mortgage...

 

... but in the future we will probably want to move to a bigger place and rent out our current flat so then the mortgage interest would be tax deductable so a mortgage as large as possible may improve our situation then.

 

If I were you I'd find a place you like and enjoy living in it, regardless how you pay for it.

 

I can't agree with you more, buying and renting does have to suit your circumstance as well as obtaining a mortgage and self financing does. There are sooo many factors involved in making the decision of how, what and where to buy. There is certainly a huge learning curve involved but once you get the hang of things it can be quite fun and rewarding.

 

P.S. Care to pass on the Interhyp chaps info?

Another good point...early repayment costs can be VERY high here.

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In my case, age is a factor influencing my decision to buy. Less than 5 years to go until pension age - certainly don't want to be paying rent then.

 

If I were younger and still had the possibilty of changing careers, I might well look upon things differently.

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The court did not give her a payment plan. If there was a payment plan you did. The court decides if your claim is valid or not and that is it. They do not grant payment plans in a verdict. Either you or your lawyer agreed to a plan after the verdict (which has nothing to to with the court) or you settled to avoid a verdict in which case you agreed to the plan as well.

 

It was 4 years ago so the case isn't fresh in my mind but yes the verdict was in our favor then I believe they "recommended" the payment plan based on her non-existent income. Which somehow we had no other choice but to accept. Again I can't remember the specifics but I remember that it was BS.

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""Or maybe you cant afford to buy a place... sour grapes etc!"

 

I could go out tomorrow and buy property. When I lived in London, I let myself be persuaded by colleagues to buy property, so I took a week off work, looked at a couple of flats one day and had bought it by the end of the following week. But did this make me feel safe and secure? No, it bloody well didn't. That was one of the worst decisions of my life. I was happy to sell it.

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P.S. Care to pass on the Interhyp chaps info?

 

The guy we talked to has left(it was 4 years ago we talked to him) but the place we went was the Schwabing/Freimann office. Would recommend a visit, as well as selected TT advertisers.

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Great, thanks H.A., I will see what they have to offer.

 

 

""Or maybe you cant afford to buy a place... sour grapes etc!"

 

I could go out tomorrow and buy property. When I lived in London, I let myself be persuaded by colleagues to buy property, so I took a week off work, looked at a couple of flats one day and had bought it by the end of the following week. But did this make me feel safe and secure? No, it bloody well didn't. That was one of the worst decisions of my life. I was happy to sell it.

 

Going out and buying a property tomorrow is not a good move. Sometimes it takes months and even a couple of years before we decide to buy a certain property. Knowing what you are getting into is key but there are other things that you just can't for see...enter risks. As with any investment you have to educate yourself and find your own comfort zone.

 

For example...one of our first purchases in Central America was Panama. We did some research and checked out a few properties one of which was a nice little beach lot on the lip of a lovely lagoon. We bought it for $15,000USD which at the time was our "comfort zone". Three years later the original owner approached us and offered to buy it back for $60,000. I wasn't crazy about Panama so it was easy to let go. Today, 7 years later, it would be worth $150,000USD, no regrets because the $60,000 was reinvested in another gem (Nicaragua).

 

I'm not trying to go off topic, I'm trying to show that buying real estate anywhere is relative and depends on your own circumstance whether you buy in Germany, Australia or anywhere in the world.

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Renting is dead Money.. END of! ou are paying someone elses mortgage!

 

You have either not read the posts here properly, or are unable or unwilling to understand them because what you are saying is blatantly wrong..

 

 

In my case, age is a factor influencing my decision to buy. Less than 5 years to go until pension age - certainly don't want to be paying rent then.

 

If you have the money to buy a house outright (which I assume you so, because otherwise you'll have a mortgage which is basically the same as paying rent), then you could always continue to rent, invest the money in something else, and pay the rent with your profits. I'm not saying this is the best way in all circumstances, but it really comes down to where you invest your money - in a house or something else. What will pay a better return is anyone's guess.

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@Keefy: If you are interested in real estate perhaps buying raw land is an option for you. Land (especially waterfront) holds it's value well and doesn't have the extra costs of owning a home does. Our hunt for a retirement property got us our start. We didn't need a house right away so we began looking for empty beachfront lots. In Brazil, for example, you can still get a nice beachfront building lot 100'x100' for under 40,000USD (many are owner financed too). You can find properties (tear downs) with land here in Germany for under 30,000EUR that you can sit on (these require your own funds to purchase as banks won't finance land). My point is, it's not too late to invest without having to put up a huge amount of funds at a reasonable risk.

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We know a couple of people who are landlords in a big way. They own multiple apartment blocks with multiple units. They both say that you have to have a high number of units, so that the bad teannts (about 10%), are balanced by the good. One inherited his, the other who bought says that you have to buy cheap, and then renovate with cheap labour. He used students. They both advised against letting one or two units.

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I would suggest first renting, than buying. My husband even said that buying a house here is quite expensive. His cousin bought a house for about 30.000,- Euro, but that was a fixer--upper (Schnäppchenhaus). You end up putting more into those houses than you would in renting an apartment or house. I think the prices here are pretty reasonable. I am from the US. My 2 Bedroom, 1.5 Bathroom ran me close to $1000/ month. You can get the same thing here in Germany cheaper than that. Granted the rooms are cut down in size, but so long as I have a huge ass back and front yard, I'm cool. Can't get that in the US unless you bought a house that was built in the early 1900's.

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