Buying property in Germany

289 posts in this topic

1 hour ago, BradinBayern said:

Here is a good article (in German) about the market right now.  https://www.tagesschau.de/wirtschaft/corona-interview-immobilienmarkt-101.html?utm_source=pocket-newtab 

 

it bases its assumption on Google search criteria for buying or renting which can be viewed as skeptical. I've installed the apps and i still see daily new properties on the market in the most asked locations which weren't listed earlier. Either the maklers had inventories prior to the lockdown or ive got no idea how they are posting them. Just a week before the lockdown began, i did reply to quite a few requesting visitation but most of the maklers aren't bothered to reply back. The one who replied said that there are already many applications to buy and he directed us to other properties which he had on offer. Looking into developments the prices can go either way but for sure places where the jobs are,  it'll stagnate or slow down but won't see drastic downturn.

 

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It is hard to tell right now.  It depends on how hard the financial crisis hits.  Historically, it is supposed to recover rather quickly because it is not a structural problem that caused the crisis, but we have never had an event like this before so it is hard to predict.  If most companies recover quickly and jobs are not lost then there won't be much change.  However if there are massive layoffs that that will of course have an impact on the real estate markets.  I wouldn't want to make a prediction either way. 

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I just bought some small size properties earlier this year in the berlin/brandenburg region for investment am not too concerned with current situation as have 10-15 year time frame. Interest rates are record low and believe we will be set for some major inflation over coming years which will good to reduce mortgage debt. Maybe short term 6-12 months  be some issues, and if have cash probably good time to buy as governments round the world devalue currency on goliathic scale, At end of day still need somewhere too live while some equities can probably live without. Saw someone mention easyjet hope that they are still around as dread and fear to see germany under national airline monopoly. Ticket Prices will skyrocket. I still remember air berlin going bankrupt and eurowings/lufthansa charging unbelievable high fares until easyjet came in. 

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7 hours ago, BradinBayern said:

It is hard to tell right now.  It depends on how hard the financial crisis hits.  Historically, it is supposed to recover rather quickly because it is not a structural problem that caused the crisis, but we have never had an event like this before so it is hard to predict.  If most companies recover quickly and jobs are not lost then there won't be much change.  However if there are massive layoffs that that will of course have an impact on the real estate markets.  I wouldn't want to make a prediction either way. 

You are assuming people are borrowing money to buy property... 

 

Lets just say for example, I buy a house in Munich with 4 flats...   I dont need a mortgage as I buy them with cash thats sitting in the bank,

 

Tennants have a contract with the utility providers... but they reduce my Rent from 900e per month cold to 300€ per month.. 

 

That still means the House brings me 1200€ per month and not the 3600... 

 

Am I losing money or still bringing it in?

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13 hours ago, SpiderPig said:

You are assuming people are borrowing money to buy property... 

 

Lets just say for example, I buy a house in Munich with 4 flats...   I dont need a mortgage as I buy them with cash thats sitting in the bank,

 

Tennants have a contract with the utility providers... but they reduce my Rent from 900e per month cold to 300€ per month.. 

 

That still means the House brings me 1200€ per month and not the 3600... 

 

Am I losing money or still bringing it in?

But how many people have that kind of money sitting around? I was curious so I tried to look it up.  According to this source, about 22% finance their purchase with no down payment and 71% pay less than 50,000€  https://www.immobilienscout24.de/baufinanzierung/ratgeber/wie-finanzieren-andere.html

That of course says nothing about how many people finance real estate from cash reserves alone.  I didn't find anything that gave that specific statistic, but given prices I cannot imagine it would be many. 

 

Rental properties are also risky.  Currently you cannot be kicked out if you do not pay your rent due to the corona crisis. Even in good times you can have mietnomanden.  Many areas are also considering or have implemented rent control. If corona breaks out in your property you could suddenly lose all of your rental income.  If a major company goes out of business, you might suddenly lose many of your renters.  People who I know with money in the bank are putting it into the stock market where the returns (once the economy recovers of course) could potentially be much higher.  I think you would be nuts to try to buy an investment property right now.  Maybe to live in yourself, but I am also not seeing any price drops (yet?).

 

But the main thing is that you cannot buy property right now even if you wanted to.  ASFAIK, there are no notary doing a remote service and you cannot even visit the property that you want to buy.  I cannot imagine that all of the steps necessary for real estate purchase would be possible with everything that is currently shut down. 

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43 minutes ago, SpiderPig said:

You didnt answer my question... 

 

You'd need reserves for repairs and for unplanned eventualities. 

 

And you need to check your monthly liquidity, as the tax office may ask for quarterly tax for next year in this year. Your tenants have only postponed their rent, or have you kindly agreed to reduce it out of the goodness of your heart?

 

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It was an hypothetical question....   but I would like Brad to read what I wrote and answer...  Am I losing money or still bringing it in...?    ( apart from the 2400€ that is mentioned...)

 

 

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Usually people talk about the repairs and the eventualities that HH_Sailor mentions - you are making money until you need a new roof, and then maybe not so much etc. etc.

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1 hour ago, BradinBayern said:

But how many people have that kind of money sitting around? I was curious so I tried to look it up.  According to this source, about 22% finance their purchase with no down payment and 71% pay less than 50,000€  https://www.immobilienscout24.de/baufinanzierung/ratgeber/wie-finanzieren-andere.html

That of course says nothing about how many people finance real estate from cash reserves alone.  I didn't find anything that gave that specific statistic, but given prices I cannot imagine it would be many. 

 

Rental properties are also risky.  Currently you cannot be kicked out if you do not pay your rent due to the corona crisis. Even in good times you can have mietnomanden.  Many areas are also considering or have implemented rent control. If corona breaks out in your property you could suddenly lose all of your rental income.  If a major company goes out of business, you might suddenly lose many of your renters.  People who I know with money in the bank are putting it into the stock market where the returns (once the economy recovers of course) could potentially be much higher.  I think you would be nuts to try to buy an investment property right now.  Maybe to live in yourself, but I am also not seeing any price drops (yet?).

 

But the main thing is that you cannot buy property right now even if you wanted to.  ASFAIK, there are no notary doing a remote service and you cannot even visit the property that you want to buy.  I cannot imagine that all of the steps necessary for real estate purchase would be possible with everything that is currently shut down. 

 

Depends on your tolerance to risk. The culture here in germany is generally risk averse even in the best of times. I take a long term perspective and dont follow the crowd blindly and when everyone is fearful for investing find normally good time to invest for returns. Tesla coming to berlin, germany will make a big difference on local economy and when eventually the new airport opens( imo worst case scenario in next 10 years more likely 1-2 years will transform economy. Do agree selecting good quality equities at bargain prices is sensible. recently picked up a few iconic stocks still with great dividends.

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Folks,

 

These are interesting comments on owning property.  I view owning rental property similar to owning stocks:  The property is the stock, the rent is the dividend. 

 

SpiderPig brings up an excellent example in his post.  You could have X amount of money in the bank (earning no interest).  Or you could buy a rental property with that money.  Compare the annual interest that money would earn in a bank against the annual rental income from buying a rental property (not really a comparison).  Owning rental property is not for everyone.  

 

S.  

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If had that kind of money laying around right now, I would invest half of it in stock and ETF's while they are dirt cheap. If I wanted to put the rest in real estate, I would wait until that market comes down as it surely will some time in the near future.

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whether you have money "laying around", or you have to borrow (currently mortgages run under 1% interest rate in Germany), especially given these uncertain times, I still consider real estate the only investment I dare to do.

 

I am extremely risk adverse.

 

And, just because I travel with two passports, most (if not all) banks in Germany would make it a big hassle for me to even try investing in anything other than real estate that I personally manage.

 

Even if you don't rent your property out to anybody, just the (almost guaranteed) increase on the value (given the population density in Germany) will give you great peace of mind.

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The question was already answered.  It depends on what other costs you incur.  Owning rental property is more like owning a business than owning stocks.  You cannot just say "I buy a house for x amount of dollars and then get x amount of rent". How much are you paying your agent/management company?  Taxes?  Accountant? Repairs before first rental and upkeep? Insurance? Are these condos?  What are the association costs/fees?  These costs could very well run in excess of the 2400€.

 

People who don't ask these sorts of questions have obviously never owned property.  You should stick with a REIT, the math is easier.

 

Even if you were to ask the simplistic questions of "If I am making 2400€ profit, am I making a profit?" which seems to be the silly type of question you would ask, the answer is yes, but what are your opportunity costs?  Sure if you want to invest about 4 million to buy a 4 flat MFH in Munich to make 2400€ a month you could do that.  What would that be?  A .008% return on investment? 

 

 

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1 hour ago, karin_brenig said:

whether you have money "laying around", or you have to borrow (currently mortgages run under 1% interest rate in Germany), especially given these uncertain times, I still consider real estate the only investment I dare to do.

 

I am extremely risk adverse.

 

And, just because I travel with two passports, most (if not all) banks in Germany would make it a big hassle for me to even try investing in anything other than real estate that I personally manage.

 

Even if you don't rent your property out to anybody, just the (almost guaranteed) increase on the value (given the population density in Germany) will give you great peace of mind.

Most experts agree that real estate has been in a bubble for some time.  It most certainly will pop after this crisis. It is just a question of how much.  While it is true that real estate does increase in value over longer periods of time, it still would have been a bad idea to buy at the top of the market in 2006 when you saw the crash coming.

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I have bought 3 properties since 2000 in DE... and each and everyone has seen a nice return!

 

How many properties have you bough Brad?

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7 minutes ago, SpiderPig said:

I have bought 3 properties since 2000 in DE... and each and everyone has seen a nice return!

 

How many properties have you bough Brad?

Sure you did. 

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Thats show just how much you know me!!

 

 

Plus, you avoided my question about how many properties you have bought in DE... 

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40 minutes ago, BradinBayern said:

Most experts agree that real estate has been in a bubble for some time. 

 

I don't know what that means.  What you call a bubble is what others call "the market".  If a "bubble" lasts a decade is it still a bubble?

 

42 minutes ago, BradinBayern said:

It most certainly will pop after this crisis.

 

How do you come to this certainty?

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