My personal experience is that investing in units/flats is at least tricky.

You should invest in a flat because you want to live in Berlin, and you want to live in your own flat decorated in your own style.
An investment as a buy-to-let in a unit lower than 100.000 Euro, does not make sense because of certain reasons.

1. Your profits don’t cover Legal Costs

the profits of your flat investment does not cover legal costs. If trouble occurs you have to call a lawyer, because you don’t know the legal system nor the language. Trouble occurs more often with foreign investors because they have higher expectations in the market or the service ability of the service providers. The service provider (mainly the property manager) does not want to deal with small things in a language he does not fully understand, etc. etc. In the end you want to call the lawyer and the lawyer politely asks you for a pre-payment, as you are a foreigner.

2. Legal Due Diligence

the legal due diligence eats the first years profit and therefore is handed to the agents “free” service, but the agent often doesn’t have clue or the knowledge, in worst case both.

3. Financing is not available

financing is hard to find or even not available, due to the fact that banks don’t like small loans.
And the beauty (read: yield) of real estate investments comes with a loan, called leverage.
The only way is to buy 100.000 Euro property with 100% cash.

4. The Property Manager is not listening to you

Your weight in a condominium is small, and the property manager does not really want to deal with you outside his mother language.
You sign a German property management contract which you didn’t understand, and you don’t realize that you gave power of attorney to act with out your Ok for everything below a certain amount. Often this includes the rentals on a certain price. I don’t say the property manager cheats on you, but he really things 6.50 per sqm/month is good but you and the agent thought you might get 8.00

5. Low quality of the Building

flats with a price tag lower than 100.000 Euro are often not renovated or renovated just to look good. The real cost of ownership occurs later, or to late.

6. You don’t just buy the flat, you buy into the whole house

you buy a share of the condominium not just the flat: flat buyers are often not aware that they buy a share into the whole house, they just focus on the flat, and forget to check the roof and the cellar. But the roof and the cellar can cause major problems and damage total investment. If a prewar house has dry rot which is typically the case (I you use to say: If you are not aware of it, or did not have a dry rot decontamination yet, you still have it.) the financial damage to the condominium association typically exceeds 300.000 Euro. Which you pay your share.<br>Avoid this disaster by using an experienced engenier to check the building for you on your costs. (see no. 7)

7. Technical Due Diligence

no technical due diligence: 100.000 Euro buyers have not budget to call a technician to check the building inside out as well as the cellar and the roof (Note: always check and ask for dry rot). The engenier should be an authorized inspector by the chamber of commerce, we call this “Öffentlich bestellter und vereidigter Sachverständiger” or a “Dipl. Bauing.” he might not be appointed by the chamber but has the knowledge because of  his studies.

8. Time Pressure

flat buyers are often act or are put under time pressure by the seller or agent to close the deal. Mistakes as shown in 1.-7. happen, but you buy as seen with out any garantee. You have to proof that the seller/agent knew the problems, this is often time and money consume if not impossible.

Conclusion

If you don’t talk German and if you have (yet) no understanding of the market and of the typical problems of buildings in Berlin a unit investment is nothing for you. If you can put a budget higher than 300.000 Euro I highly recommend buying a multi-family-home in the city of Berlin.

Exception: new condos

If you buy into a new unit, either a fully refurbished or completely newly built condo, the the seller has to give you 5 years warranty.

This warranty often is circumvented by using a company structure that allows to “close” the seller company and there for you have no chance to claim anything.
Ask the seller about his structure and the warranties he will give you.

Additionally it is often the case that new condos are bought by foreigners, so the language problem (see no.4) might be solved. Ask the seller or sellers agent about the property management company, who is typically installed by the developer/seller for the first 1-2 years.

On top if you buy into a new development, even off-plan, you can be pretty sure the location must be good, because of the prices developers have to sell for more than 2.500 Euro (in more central locations even higher). But if the sqm costs 2.500+ people would only buy if the rental income gives the right returns, therefore the demand in this location must be high. High demand reflects a good location quality.

Updated: Check Point 4.-5. Disclosure: This reflects my experience of the Berlin Real Estate Auction Market, mainly with multi-tenant houses/apartment blocks. It applies for apartments and flats as well.

1. Financing Is Tricky And Hard To Find

its very hard to get financing for foreclosures deals. The best way is to buy the property with 100% cash and then finance. We will put you in contact with the right loan agents.

2. You Have To Put Down A Deposit

to be able to legitimately bid, you either have to
a) transfer 10% of the market value (determined by the court appointed appraiser) to the court house account or
b) present a bank check at the auction, testified by a German bank over the same amount, (Remember: therefore you need to open an account with a German bank, and transfer funds to the account). To just show up with cash is not possible and illegal for the court to accept.

3. Inside Property Inspection Is Not Possible

Please consider the fact that its highly unlikely to check the property from inside, in most cases you have to solely rely on the report made by a independent court appointed appraiser.

4. The Highest Bid Often Is Higher Than Market Price

This field of property investing is not a hidden niche anymore, we often experience fully booked court houses. With lots of bidders. The real deal, the bargain, you won’t find at the auctions anymore.

5. Paper Work And The Bidding Process Needs To Be Learnt By You

With a ratio of 30 checked properties versus 1 property bought (this is quite normal), you have to do a lot or research and paperwork. Most important call the property manager and ask about the renters, the other owners (if its a condominium) and the condition f the building.

Conclusion

If you don’t talk German yourself and if you have (yet) no understanding of the market and of the typical problems of buildings in Berlin this type of investment is nothing for you.

This is a very complex question! Depending on the country you reside in and how long you owned the property is very important. We would like to talk to you individually to give you a better understanding of the taxation.

Please contact us and we can discuss this by email or on the phone.

When you decide to sell the house or apartment, you can work with a Real Estate broker or also offer it freely on the market. There are no rules or regulations mandating that you must use a broker.

If you choose, we can help you sell your property. At any given time we have several investors who look for investment properties and we have sold many properties within a matter of a few weeks.

A good broker will provide you with an estimated market value and create a “property exposee”, basically the marketing material for your property.
Some brokers go as far as hiring professional photographers, creating floor plans and even dedicated websites for a property.

Any investment property can be given into the care of a property management company.
This is a very comon practice, even for investors living in the same city.
It is even mandatory when the property belongs to a partitioned apartment house.

Cost for property management is about 25,- to 35,- Euro per month for an apartment. Rental management is separate from general house management and can be transferred to an agency for a fee that is agreed upon by both parties.

We usually help our clients to find a property management and rental management company. We even stop by the properties frequently to check if things are ok.

Upfront, most costs can be flipped to the renter if the property is rented. Only the costs for maintenance and property administration and the bank fees can not be turned to the renter.

The costs that have to be paid are property tax – this is different from town to town but very small (between 150 Euro and 300 Euro usually for an apartment per year, a bit more for a single-house; it depends on the size of the property ground).

The maintenance (reserve fund), which is mandatory when owning an apartments as part of a community, is usually about 0.75 to 1.5 Euro per square meter living area per month. Its not necessary, but recommended if you are the sole owner of the property.

Garbage pickup, water, common house electricity, housekeeping, maintenance of the heating system etc. are additional costs which sum up to about 0.5-2 Euro per square meter per month. All of these have to be paid by the tenant if the apartment or house is rented out. Even the property owning tax normally will be refunded by the tenant to the owner as part of the normal monthly utility pre-payments.

Cost of financing are not subject of a possible flip to the tenant.

Moreover to obtain financing as a foreigner you need to get incorporated in Germany. The cost to get incorporated as well as to operate the company are not subject of a possible flip to tenant. This will lower your yield, but the leverage of your equity will become much better ( as well as riskier, as you know).

We will provide a sheet along with our investment proposal, so you can see which costs will occur, based on the property you are interested in.

Article revised by Alexander Korte on 2011-03-12

The total fees on top of the purchase price are about 10-12%.

• Purchase Tax (“Grunderwerbsteuer”): 3.5% (4.5% in Berlin) of the buying price. Due about four weeks after the notary deed has been signed by buyer and seller.
• Notary fees. These are about 1.2 – 1.5% of the buying price, plus any fees for a needed translation of the deed. As they can vary strongly we recommend to check especially the translation fees in advance. We have seen differences from 300 EUR to 3000 EUR for the same type of work.
• Agent fee. The buying fee for agents in Germany varies from Federal country to Federal country slightly. In most federal countries it is 6% plus the VAT.
• Registration fees, these add up to about 0.8-1.2%.
• If financing is needed, there might also be fees from the bank side for the mortgage, plus any additional notary and registration fees for that mortgage. Any mortgage needs to be secured in the land registry (Grundbuch) and that can only be done by a German notary (not a notary public).

Keywords: cost, registration, tax, vat,

Owning a property in Germany does not give one a right to immigrate to the country.
Immigration is a different matter and you need to check you eligability before buying property if you plan to live in Germany.

Keywords: live in germany, visa for germany, buy property to immigrate to germany

No. Anybody can buy in Germany who has a valid passport and the purchase funds that will be needed.

2011-08-10_AK: We will update this post soon, as the reasons why you should are much more than what we mention below.

Nevertheless we think there are reasons NOT to invest in Berlin as well.

Berlin is Germany’s political capital, and for a lot of young people artist and student as well as for intellectuals one of the hottest cities in the world. Just a few people are aware of the fact that the prices for real estate in the capital of one of the worlds leading economies are undervalued. Just recently I got an offer to buy a prewar-condo in one of the hottest areas in western Berlin Kreuzberg 61, so called Bergmann Kiez for 130.000 €/$ for a 2 Bedroom, 1 Living room, Bath and Kitchen (Space in total: 94m²)

Berlin used to be a divided city during the cold war. After the reunification the East-side of the side was more or less completely damaged. A special tax-deduction on real estate investments in the east part of germany trigger money into the wrong place but helped to get the market up and running. But still today you can find underdeveloped area downtown. Due to a capital bubble and a lot of “stupid-money” from tax-deduction seeker cased a lot of mis-investments, that is the reason why germany them self often are afraid about real estate investments in the East part of Germany.>