How to make more money in Germany?!

[bobMorane 54]

I'm around 40, and my wife and I are both employed at the moment. I work in a technical field where you can earn about 90k annually if you reach a management level. This may happen in about 5 years from now if I can be that good/lucky!! 

On the other hand, we are planning to buy a house, and according to the current market, we may need to pay about 1.5-2K more each month for financing. Putting it all together, I think only relying on our salary does not brings us enough saving in the long term. Otherwise, we need to cut many expenses such as traveling, kids' extra programs, etc. 

 

You may say, "don't be greedy and live with what you have." But personally, I'm eager to know how one can make more money in Germany. Of course, I cannot have two 40hr/w full-time jobs. But what are other options to have direct or indirect earnings besides your main employment? 

No need to mention that I meant legitimate options only!

[karin_brenig 707]

8 hours ago, bobMorane said:

I'm around 40, and my wife and I are both employed at the moment. I work in a technical field where you can earn about 90k annually if you reach a management level. This may happen in about 5 years from now if I can be that good/lucky!! 

On the other hand, we are planning to buy a house, and according to the current market, we may need to pay about 1.5-2K more each month for financing. Putting it all together, I think only relying on our salary does not brings us enough saving in the long term. Otherwise, we need to cut many expenses such as traveling, kids' extra programs, etc. 

 

You may say, "don't be greedy and live with what you have." But personally, I'm eager to know how one can make more money in Germany. Of course, I cannot have two 40hr/w full-time jobs. But what are other options to have direct or indirect earnings besides your main employment? 

No need to mention that I meant legitimate options only!

 

oh boy... that reminds me of myself, about 25 years ago...

I'll tell you what I did - judge for yourself, if that would be a viable option.

 

First of all, you don't really need money (as in cash), you need a plan for a secure future (as in assets).
In my opinion the best (maybe only) option for long-term, stable, low-risk investment to secure your future is real estate.
People need to live somewhere. Especially in an overpopulated, relatively well-run country like Germany, housing is the easiest way to make money.

First buy a place for yourself to live in (start saving rent immediately) and then add one or more rental properties to that for immediate tax savings and future income.

I bought my first condo in Munich at a time when mortgage interest was around 8%. 60% of my net income went for just my place to live (mortgage  and utilities).
Ten years later I bought an apartment outside of town, but still within reach of the S-Bahn. Between the tenant and income tax savings, that apartment didn't cost me anything extra. It's paid off by now, and still generating income.

When we moved to the US for a few years, I sold my condo - at twice the original purchase price - and we bought a house in the US with a mortgage at 4.5% interest rate. Coming back to Germany at a very lucky point in time we bought our current home (25 km outside of Munich) whith an interest rate of 1.47% for the mortgage. Our mortgage payment is less than what renting the house would cost.

 

Currently interest rates are going up - and real estate prices are just starting to come down. Wait a little while for prices to drop a bit more, and then buy what you can afford. If you can't afford a single family detached home, start with a nice little condo somewhere. Chances are, within ten years or so, you'll have more "free" cash than renting the same place, plus you'll build equity. The real estate that I bought over the years, on two continents, doubled in value about every ten years. Meanwhile my income from the job went up, but it didn't double every ten years.

 

I've heard advice about investing in the stock market instead, but decided that wasn't for me. I'm lazy. I also don't like to invest in something that I don't fully understand and control. Also, living in Germany as a US citizen, renders most investments useless - no bank wants to deal with the reporting hassle.

[mtbiking 1,894]

8 hours ago, bobMorane said:

I'm around 40, and my wife and I are both employed at the moment. I work in a technical field where you can earn about 90k annually if you reach a management level. This may happen in about 5 years from now if I can be that good/lucky!! 

On the other hand, we are planning to buy a house, and according to the current market, we may need to pay about 1.5-2K more each month for financing. Putting it all together, I think only relying on our salary does not brings us enough saving in the long term. Otherwise, we need to cut many expenses such as traveling, kids' extra programs, etc. 

 

You may say, "don't be greedy and live with what you have." But personally, I'm eager to know how one can make more money in Germany. Of course, I cannot have two 40hr/w full-time jobs. But what are other options to have direct or indirect earnings besides your main employment? 

No need to mention that I meant legitimate options only!

 

You can change company and try to get those €90,000 or more. It's a good market right now to do that - I'm assuming that your degree is in a technical field,

 

But it's also a matter of mindeset. You need to focus on building a steady source of passive income ASAP - begin small, and it will grow. I remember the first time I received a dividend payout in my bank account,  €20, from my first stock market investments, and thinking that this is so much better than work. My wife writes student books and alike; the royalties are also a good addition to our income. A small rental property, if the numbers make sense at purchase, is also a good source of passive income. And so on..

[fraufruit 42,154]

8 hours ago, bobMorane said:

On the other hand, we are planning to buy a house, and according to the current market, we may need to pay about 1.5-2K more each month for financing. 

 

42 minutes ago, karin_brenig said:

First buy a place for yourself to live in (start saving rent immediately)

 

From what bobMorane said, it looks like his mortgage payments will be a lot more than his current rent. Or am I reading it wrong?

[karin_brenig 707]

28 minutes ago, fraufruit said:

 

 

From what bobMorane said, it looks like his mortgage payments will be a lot more than his current rent. Or am I reading it wrong?

yes, I read that too.

 

But there are things you can do to work around that:

instead of buying a house, they could buy a condo. Or they could buy a house in a "cheaper" region. Or they could buy a house with an "Einliegerwohnung" to generate income from day one. Or they could wait a few more months, because I see prices coming down further (and hopefully interest rates won't rise that fast).

 

I still firmly believe that buying "anything", even at a bit of a stretch, is better than "throwing your money away" by renting - unless you are really young and have no clue where/how you'll live five years from now.

 

Of course this is just my 0,02 € - maybe finding some age related sense of gratification as I look back at myself some 35 years ago.

[murphaph 9,813]

Our (family friend) mortgage advisor is telling is the same story is being repeated everywhere. As soon as people call about mortgages he just gives them a ballpark monthly repayment and they pull out.

[Eric7 554]

It baffles me how so many people can't do the basic maths themselves.
If you are borrowing €500k, each interest rate increase of 1% will cost you another €416.67 per month (plus whatever the bank is adding on in fees).
Going from 1% last year to 4% this year would cost an extra €1250 per month. Borrowing €1m would cost an extra €2500 per month. It's no wonder lots of people can't afford a mortgage now, but to be honest they probably couldn't really afford it before either.
A simple equation:
Loan amount * interest rate / 12 = monthly interest payment.
plus
Loan amount * Tilgung rate / 12 = monthly Tilgung payment.
Add them together and that's your monthly rate.

 

It's simple to work backwards as well.

If someone can afford €2k per month for their mortgage, with interest rates at 4% (they are actually a bit lower at the moment) & Tilgung of 1% (a basic minimum really) they can afford to borrow a total (including all associated costs) of €480k:
€2k * 12 months / 5% = €480k
€3k * 12 months / 5% = €720k
€4k * 12 months / 5% = €960k

With an interest rate of 3% and a Tilgung of 2% it's exactly the same:

€2k * 12 months / 5% = €480k
€3k * 12 months / 5% = €720k
€4k * 12 months / 5% = €960k
 

An interest rate of 8% (who knows!) and a Tilgung of 1% is very different:

€2k * 12 months / 9% = €267k
€3k * 12 months / 9% = €400k
€4k * 12 months / 9% = €533k

 

Lots of people bought property when the rates were very low. Once their fixed terms end, there could be trouble:

€2k * 12 months / 2% = €1.2m
€3k * 12 months / 2% = €1.8m
€4k * 12 months / 2% = €2.4m

 

My advice to prospective buyers is to first work out how much you can afford each month, then check possible interest rates, and only then actively look for a property that fits within your scope. No-one should be shocked at hearing a ball-park figure unless they are looking at properties they can't afford.

 

[Gambatte 925]

1 hour ago, murphaph said:

As soon as people call about mortgages he just gives them a ballpark monthly repayment and they pull out.

 

1 hour ago, Eric7 said:

It baffles me how so many people can't do the basic maths themselves.

 

I'm also very, very, very, very shocked that people so badly lack elementary numeracy skill. 

 

 

[silty1 3,613]

When the Count came on Sesame Street, they were away going wee-wee

[RenegadeFurther 2,393]

6 hours ago, karin_brenig said:

 

 

I still firmly believe that buying "anything", even at a bit of a stretch, is better than "throwing your money away" by renting - unless you are really young and have no clue where/how you'll live five years from now.

 

 

And what about inflation?

 

No one knows if we are near peak inflation. Say interest rates rise to 11%, would you rather pay a landlord or the bank?

 

For Central Banks to get inflation to 2% (as their mandate specifies), interest rates will have to go a lot higher than markets anticipate.

 

This will collapse the housing bubble.

[murphaph 9,813]

Interest rates of 17% were reached during the 80s in Ireland but if you had bought then you would still be significantly better off had you continued to rent. Inflation also drives up rents. Some German rental contracts base rent increases directly from the rate of inflation. The reality is, it's very rare that renting until you die is going to be more financially advantageous compared to buying something similar.

[karin_brenig 707]

2 hours ago, RenegadeFurther said:

 

And what about inflation?

 

No one knows if we are near peak inflation. Say interest rates rise to 11%, would you rather pay a landlord or the bank?

 

For Central Banks to get inflation to 2% (as their mandate specifies), interest rates will have to go a lot higher than markets anticipate.

 

This will collapse the housing bubble.

a "collapsed housing bubble" is actually good for potential buyers - even with higher mortgage interest rates and inflation. I continuously watch real estate prices, to invest in another rental property when "the stars line up".

 

It's just math - you need to calculate your personal "sweet spot", and then act as soon as possible. Renting will never create any equity for yourself, you just help the landlord finance another asset, or create another income stream.

[MikeMelga 7,311]

Right now if I were to buy a house, I would have to seriously downgrade my life standard. Renting allows me to invest in other things, allows me to have a great house, and save for the future.

This is an endless discussion. Buying is not always the best option.

One of my VP's, which probably makes >130k€, is stuck with a stupid real estate investment. All his money goes into paying for the house, which in the meantime is too small for his family, but he can't afford to swap to a bigger one. Nor nice holidays. He passes every day by my Tesla, and asking himself why he can't afford one.

If buying is an investment, fine, doesn't mean you need to live in that investment.

[fraufruit 42,154]

21 hours ago, bobMorane said:

Otherwise, we need to cut many expenses such as traveling, kids' extra programs, etc. 

 

Agree. Like bobMorane said.

[bobMorane 54]

3 hours ago, MikeMelga said:

Right now if I were to buy a house, I would have to seriously downgrade my life standard. Renting allows me to invest in other things, allows me to have a great house, and save for the future.

But when I retire, I do not earn the same wage to rent the same apartment! That's why we decided to buy a place/house to not pay a high rent 30 years from now. Unless you can tell me about other options to make and save more money besides an employment salary. I know one way might be to invest in real estate, which has its own in-depth discussion on when and how to buy what. But I'm also interested to know about other possible options to make more money in Germany.

[RAMBO 103]

House prices got out of control due to the demand of people taking advantage of the low interest rates.  If interest rates stay at this level or go even higher, plus the added problem of energy prices. There's going to be a lot of people in the shit, when their fixed rate mortgage ends, payments increasing by 4 folds. Then a lot of people are going to have to sell, and find then themselves in negative equity because house prices are going to crash big time. There is no way I would be buying a new property now or in the near future.

 

If I were you I would be saving everything I can, and get yourself in a good postion for when people become desperate in the next five years or so, and low ball them. In my small town right now there are about 40 houses for sale, when interest rates were 1% there were about 8 at anyone one time. But people are still asking(expecting) to get the same price as before.

[MikeMelga 7,311]

10 hours ago, bobMorane said:

Unless you can tell me about other options to make and save more money besides an employment salary. I know one way might be to invest in real estate, which has its own in-depth discussion on when and how to buy what. But I'm also interested to know about other possible options to make more money in Germany.

Real estate, specifically for own usage, is generally a safe investment, but has its drawbacks, namely if you're buying on a bubble or recession scenario, it's hard to terminate the investment (selling a property can take years) and it focuses the vast majority of your savings in one place, so no diversification.

 

Personally I have a mix of investments. Stocks, ETFs, funds (starting now), direct company investment (employees shares) and a small investment in realestate for renting out. But most people want to own the house where they live (understandable), so they invest ALL in that property, which depending where you live, it can be a big mistake.

 

Some of these investments at times required me to quickly source money from others, because of timing opportunity. As most of my investments can be liquidated within 1 to 30 days, I can take advantage of these opportunities that show up.

[TurMech 180]

12 hours ago, bobMorane said:

But when I retire, I do not earn the same wage to rent the same apartment! That's why we decided to buy a place/house to not pay a high rent 30 years from now.

 

When you retire, the kids (if you have!) will have moved out, and most likely a much smaller place will be enough for you and your wife. Moreover, you don't have to live in places, where you can find work, and even not in Germany.. If you catch a crash, and find a bargain, than it might make sense to buy.. 

[murphaph 9,813]

6 hours ago, RAMBO said:

House prices got out of control due to the demand of people taking advantage of the low interest rates.  If interest rates stay at this level or go even higher, plus the added problem of energy prices. There's going to be a lot of people in the shit, when their fixed rate mortgage ends, payments increasing by 4 folds. Then a lot of people are going to have to sell, and find then themselves in negative equity because house prices are going to crash big time. There is no way I would be buying a new property now or in the near future.

 

If I were you I would be saving everything I can, and get yourself in a good postion for when people become desperate in the next five years or so, and low ball them. In my small town right now there are about 40 houses for sale, when interest rates were 1% there were about 8 at anyone one time. But people are still asking(expecting) to get the same price as before.

The way most German mortgages and other instruments work also makes this far too "easy" to happen to people who aren't savvy with figures IMO. We have had a Kombikredit for the last 7.5 years. That's a so called Forwarddarlehen (this is an interest only fixed rate loan used to buy/build the property) + a Bausparvertrag with a compulsory (minimum) savings amount. We had 8 years fixed on the Forwarddarlehen at a very low 0.8% interest. We were only obliged to save something like 650€ a month into the Bausparvertrag and the Bausparvertrag can only be zugeteilt (paid out) once it hit 34% of the loan amount. I was very conservative however and pumped in a lot more than 650€ to make sure I had 40% of the loan amount saved up by the time the fixed rate ends and by Jesus I am now very glad I did as we will be able to take that amount and pay it off the interest only loan and start making normal repayments of capital + interest on that from April next year. Our repayments for the remaining 10 years will be less than what we've been paying in interest + savings and we can and plan to make overpayments to clear the mortgage in 6 years and 7 months. The thing is, it would have been far too easy for me to have left the savings amount at €650 and now we'd have only a third of the money we actually have to pay down the Forwarddarlehen (in fact we'd not be able to pay it down at all as the Bausparvertrag would not be paid out with such little in it) and we'd be facing 3.3% interest on the rest. I reckon a shit load of people will be getting very nasty surprises in the post over the coming year or two and they will have no idea what to do because they will be trapped in a Bausparvertrag that is well below the minimum 34% or whatever to allow it to be paid out yet they will have to make interest only payments on the Forwarddarlehen at 4 times the interest rate. 

[MikeMelga 7,311]

Everywhere in the world, people have been buying above their level, because of low interests. Lots will have to downsize and sell at loss, before they go bust.

In my neighborhood there used to be 1 house for sale actively on immoscout (i'm looking for some friends). Now I see dozens.