Buying the apartment I currently live as a renter

32 posts in this topic

Hello,

 

owner of the apartment we live in for 3.5 years died few weeks ago. He was represented by his son that told me back in spring that he would sell the apartment as soon as owner dies.

However, son has sisters that he doesn't go along with well, and I am not sure if they are going to go to a court to go through their inheritance. In a meantime, I have send them a letter where I say that I am interested in buying it. I understand that there are different opinions on was I supposed to do it or not, but I did. 

 

I am asking for advice, on what can I expect in this situation, what should I pay attention to, how to get with lowest possible price, etc... 

We are a family of four, with kids in 3rd and 5th grade going to a nearby schools.

 

Thanks.

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I doubt you'll get an apartment in Hadern for a low price, especially an inherited one where money is probably the only thing the inheritee(s) are interested in.

 

You've declared your interest which is the first thing to do, I guess you should now be prepared to wait and see how the inheritance pans out. If there was a will then it could be relatively quick, if not then you may have to wait some considerable time before things are sorted.

Battling siblings can delay things for ages, maybe years, especially if some want to sell and some don't.

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Owner came back to me after few months. He told me the price of some 15% over what Interhyp told me the market value is.

Owner lowered the price 10k, but it is still above interhyp market value. 

I am trying to lower it a bit more, but what is realistic nowdays? I spoke to a loan broker and he told me that he will sell his apartments in Munich since it is getting to the peak. In a way that it is not as good of investment as it was, but it is OK if you are going to live in it. I am not sure for how long we are going to stay in Munich. Financing is not a problem, but finding a way to lower it a bit more is.

 

Any advice is appreciated.

 

Thanks.

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It seems to be a seller's market. You can emphasise your financial status, and that you can close quickly. 

But, if siblings are involved they may have different ideas on what to do with the property.

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Property prices are increasing between 10-12% in the Munich area per annum for the last few years, with no slow down in sight. 

 

It's unlikely that the owner is going to "lower it a bit more" as they can probably get what they are asking for it.

 

 

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I really can´t see a price drop within the next few years:

- We will have average of 30.000 new people moving to munich for at least 15 years

- There is nearly no unused space within the whole city

- Prices for realties for new housing projects which will start in the next 2 or 3 years had even higher prices than the ones currently in developement

- Standards for energy efficiency still haven´t reached the currently known peak levels defined by the EU --> higher costs for isolation e.g. 

 

The only indiciator I see is, that the price incerases where much higher than the rent increases, but this could also mean rent is too cheap. What I also believe, because most new buildungs are for owners only I hardly see any new projects planned for renting out from the very beginning.

 

As the others mentioned it is a sellers market. I´am not aware of what data Interhyp uses, but in my experience I always add around 20% to every statistic I am aware of. I even have a one day old one lying on my desk telling me I could buy a SQM2 in Lehel for an average of 7500€. 

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30 minutes ago, MattR said:

There is nearly no unused space within the whole city

Oh c'mon, look at Englischer Garten: shit load of space there :).

 

At the moment prices are not dropping, but stagnating since houses/apartments become uninteresting as investment opportunity. I my street we some fairly new apartments looking at Theresienwiese: 70 m2 for €740,000. Double ouch.

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Latest numbers estimate an increase of around 3% for 2018 and 2019.

 

3% is still much more than what every bank offers. You could get more on the stock market, i made an average of +4% in 2017, but you also have much higher risks involved.

 

I also haven´t seen anything which was worth buying to rent it out long term in the last couple of years. Most people buy to park money and sell with a profit.

 

The most expensive price per sqm2 I am aware of is a little house in Lehel with 4 apartments 200sqm2+ each with the penthouse sold for 35.000€ per sqm2.

 

 

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A few thoughts

 

As a general rule of thumb they have to give you the right of first refusal and the new owner has to take over the lease and all the conditions. Depending on how the lease is written the new owner might be able to evict you for personal use. If you decide to continue renting join the meitverien and get their opinion on this. Even if the new owners buy it as an investment unit they can start raising the rent. Yes it's limted to the local index but it adds up

 

Secondly empty units (you're living there but as the owner you can move out) are hard find and are as a rule of thumb more valuable than a rented one.  

 

A few points to keep in mind when looking at property in Germany.

 

Check the NUK (nicht umlagefähige Kosten) this is the portion of the NK  that the owner has to pay and includes things like the Hausverwaltung other costs along with money going in the  reserve. Next question is does the building have a good reserve and finally how many owners are there to share the costs, more owners means more people to share the costs with. I looked at one unit that on the surface was a screaming bargain, great location, in good condition and empty but on closer inspection it had only 4 owners and quite a bit of debt due to a lack of reserve. Buying the place meant I took on 25% of the debt! Another example I own 2 side by side units. I don't know why they were converted into 2 separate condo corporations but they were. One is 2 buildings and the other is one building. Over the past 3 years the NUK has jumped quite a bit as repairs and upgrades have eaten into the reserve. I've also had a special assessment to cover some emergency costs. In the ideal world you'd be able to look at the past five years worth of owners meeting notes along with the condos finacial statements. That will tell you everything you need to know. Will they give it to you, depends depends on how desperate they are.

 

Finally remember a house ins't an investment. The reason people think they're a good investment is due to the money illusion e.g. my house is worth 2.5 million and I only paid XX 30 years ago, is the money illusion. I put a whole chapter in my book on that, why house prices are flat in Germany.  Long term housing simply increases only at the rate of inflation. This doesn't you shouldn't buy I'm of the thinking that paying a mortgage is still better than paying rent. 

 

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13 minutes ago, Tim Hortons Man said:

As a general rule of thumb they have to give you the right of first refusal

No, they don't. That only applies the first time a multi-unit dwelling is subdivided.

 

13 minutes ago, Tim Hortons Man said:

Depending on how the lease is written the new owner might be able to evict you for personal use.

It depends nothing on how the lease is written and entirely on whether the new owner's (or owners') circumstances justify Eigenbedarf.

 

13 minutes ago, Tim Hortons Man said:

Long term housing simply increases only at the rate of inflation.

That's quite the oversimplification that completely ignores supply and demand.

 

13 minutes ago, Tim Hortons Man said:

This doesn't you shouldn't buy I'm of the thinking that paying a mortgage is still better than paying rent. 

I have no idea what this means.

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5 minutes ago, Tim Hortons Man said:

The reason people think they're a good investment is due to the money illusion e.g. my house is worth 2.5 million and I only paid XX 30 years ago, is the money illusion. I put a whole chapter in my book on that, why house prices are flat in Germany. Long term housing simply increases only at the rate of inflation. 

1

 

You are right, but I think you need to elaborate. Historically, German property prices have been flat. However, that applies to the national average. In some regions prices go down, while in others they go up. If your house is in Munich, Frankfurt or Berlin, its value hasn't increased at the rate of inflation, whereas if it is in a small town in Westfalia, Brandenburg or Saxony, it's probably lost a lot of value. My better half sold his deceased mom's house (village center, pretty good nick), about 500 sqm, for little over 60K, and his own house (two separate two-bed apartments) for about 50K. Both are in a village in Westfalia. A friend of mine lives in a huge house (600 sqm) right in the square of a small town in Saxony, which is worth a fraction of what it was worth shortly after reunification. Yes, he bought it at the worst possible time.

 

I also agree with you about the "money illusion". I own an apartment in Frankfurt, which has gone up in value spectacularly in the last 8 or 9 years, but in practice that only makes me better off on paper. If I wanted to upgrade in Frankfurt, property deflation would work to my advantage as selling my property and buying a better one would be cheaper in a depressed market situation.

 

 

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1 hour ago, El Jeffo said:

 

1 hour ago, El Jeffo said:

 

It depends nothing on how the lease is written and entirely on whether the new owner's (or owners') circumstances justify Eigenbedarf.

 

Duh what do you think I said! He needs to go to the meitverien and get proper advice. 

 

1 hour ago, El Jeffo said:

That's quite the oversimplification that completely ignores supply and demand.

Nope, long term all housing reflects inflation. As I said I devote 2 chapters to this subject because it's such a persuasive myth. 

 

1 hour ago, El Jeffo said:

I have no idea what this means.

Exactly what it says, owning is often preferable to paying rent long term. 

 

If you think I'm taking all the postings here to put into a book your are sadly mistaken on what it takes to write a book. I have spent countless hours reading researching asking questions, trudging through heavy German, writing rewriting etc I have a whole new respect for authors now! The information I've gotten here while super helpful (pandamunich is such gem) really only covers a small portion of the book. To be clear it's more a Real Estate for Dummies than Contextual Handbook for passing the bar. It's also something I make very clear that there are times (like with the OP above) when you need to get proper advice. 

 

 

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1 hour ago, Smaug said:

 

You are right, but I think you need to elaborate. Historically, German property prices have been flat. However, that applies to the national average. In some regions prices go down, while in others they go up. If your house is in Munich, Frankfurt or Berlin, its value hasn't increased at the rate of inflation, whereas if it is in a small town in Westfalia, Brandenburg or Saxony, it's probably lost a lot of value. My better half sold his deceased mom's house (village center, pretty good nick), about 500 sqm, for little over 60K, and his own house (two separate two-bed apartments) for about 50K. Both are in a village in Westfalia. A friend of mine lives in a huge house (600 sqm) right in the square of a small town in Saxony, which is worth a fraction of what it was worth shortly after reunification. Yes, he bought it at the worst possible time.

 

I also agree with you about the "money illusion". I own an apartment in Frankfurt, which has gone up in value spectacularly in the last 8 or 9 years, but in practice that only makes me better off on paper. If I wanted to upgrade in Frankfurt, property deflation would work to my advantage as selling my property and buying a better one would be cheaper in a depressed market situation.

 

 

Quite interesting but in the north of the UK a lot of people who bought just pre 2008 are still "underwater". Got a friend in that boat. He followed conventional wisdom and invested in 3 rental properties, no money down, interest only mortgage etc. All three are under water and he can't sell and can't afford to pay off the mortgage. BTW I'm totally shocked at how different the UK is the US in terms of property investment. They're not even close!!!!

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21 minutes ago, Tim Hortons Man said:

Nope, long term all housing reflects inflation. As I said I devote 2 chapters to this subject because it's such a persuasive myth. 

 

When parts of south Europe, Africa and Asia become underwater or inhabitable due to climate change and instead of merely one million you get ten million refugees in Germany, the myth will be even more persuasive. Supply and demand runs as follows: The population of our ever more globalized world is still increasing, and the number of nice, safe and wealthy places to live is not. Owning square meters in an excellent location like Munich will almost forcibly give you a better return than the average inflation.

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as with any type of investment, the "return" on real estate depends on market conditions when you buy and sell.

 

I bought my house in Boston for 293k.  I put about 30k into it for improvements, and sold it for 430k after 13 years.  If I had sold it 6 years prior, I would have barely broken even on the original purchase price (sans improvements, and given the market at the time, that would have still been "good" compared to most, who were facing more serious losses).  

 

A friend of mine bought a house in Gauting in 2009 for 395k, and it's now worth double that.

 

inflation inschmation.  a true investment is bought low and sold high.  as with any investment, you have to be savvy to pick the right timing, and the right product, and that includes an element of luck (as does all speculative investing).  

 

 

 

 

 

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4 hours ago, Tim Hortons Man said:
4 hours ago, El Jeffo said:
4 hours ago, El Jeffo said:

 

It depends nothing on how the lease is written and entirely on whether the new owner's (or owners') circumstances justify Eigenbedarf.

 

Duh what do you think I said!

 

ummmm

 

you actually said:

 

4 hours ago, Tim Hortons Man said:

Depending on how the lease is written the new owner might be able to evict you for personal use.

 

maybe your use of english is different, but I understood your statement the same way El Jeffo did.

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Eigenbedarf can also depend on the circumstances of the tenant. Although the BGB statutes specify precisely when Eigenbedarf can be exercised, there have been precedent-setting court cases proscribing exercising Eigenbedarf against tenants who for example can't afford or are too infirm to move.

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Tim horton. Sorry but your book sounds shit. There are two large correlating factors only in real estate. Location and cost of borrowing money.

And dont pull the GFC arguement on me. The GFC was caused by the govt backing up BS loans. In a real free market these two factors rule as overlords.

 

 

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@Tim Hortons Man how is the book doing? Is it an ebook, or traditional? Not sure I agree that there are "a lot of people" in the north of the UK who bought pre-2008 and are underwater (by which I assume you mean negative equity). From my experience (I've used Liverpool as a buy-to-let market) the market is more "genuine" up there - i.e. linked to the location, quality of the property and employment/salary rates in the city. Overall there is a genuine link between build cost and purchase value (which has long since disappeared in areas like London). Property prices on the Liverpool streets where I've bought rose fairly well between 2008 and 2012, and the stagnation/risk of negative equity has been much more recent. 

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Good lord people are in a snit tonight, I think someone needs to get laid :lol:. Anyways I don't want to  argue semantics the point I was making was that he needs to go to the meitverien to find out his rights. 

 

42 minutes ago, coolness.personified said:

Tim horton. Sorry but your book sounds shit. There are two large correlating factors only in real estate. Location and cost of borrowing money.

And dont pull the GFC arguement on me. The GFC was caused by the govt backing up BS loans. In a real free market these two factors rule as overlords.

 

 

Sorry dude but you gotta learn your economics. Long term houses are a poor investment. Rather than arguing about this till the cows come home  let me quote a noble prize winner.

 

Quote

"owner-occupied housing is looking like a bad long-term investment ... it has offered practically no capital gains for the long term investors. Robert Shiller, Irrational Exuberance. 

 

If you want to know more I highly recommend Hilliard MacBeth's book When the Bubble Bursts. 

 

20 minutes ago, dstanners said:

@Tim Hortons Man how is the book doing? Is it an ebook, or traditional? Not sure I agree that there are "a lot of people" in the north of the UK who bought pre-2008 and are underwater (by which I assume you mean negative equity). From my experience (I've used Liverpool as a buy-to-let market) the market is more "genuine" up there - i.e. linked to the location, quality of the property and employment/salary rates in the city. Overall there is a genuine link between build cost and purchase value (which has long since disappeared in areas like London). Property prices on the Liverpool streets where I've bought rose fairly well between 2008 and 2012, and the stagnation/risk of negative equity has been much more recent. 

 

Going to be a downloadable ebook. I went that way so I could a lot charge more :D but also I've had tools created created for property analysis. if you take a look at Excel Fur Immobilien you'll get an idea of what I've put together. I'm also working on a free or 99 cent kindle book 100 tips for tenants and landlords. The tenant part I added recently after seeing another post about deposit complaints. Doesn't hurt that there are a lot more tenants than landlords. Tenative release date is Feb 1st depending on how long the editor takes. 

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