Real Estate Investing in Germany: What You Need to Know

Wilkommen zu Deutschland!

What could possibly not be great about wanting to invest in German real estate, a place that serves beer in pitcher sized mugs and is beautiful to boot? I mean the country, not the beer, though it might be beautiful too, served by a beautiful waitress in beautiful traditional garb in a huge tent full of people clinking massive tankards of draft…so grab your lederhosen and let’s go!

Germany is a great place to vacation or live

Ahhh… Deutschland – Germany to us westerners. A country with eons of history and as diverse a geography as any in Europe. Part of the European Union, Germany is not only know for great (and strong!) beer, but for cleanliness, safety pretty much everywhere in the country, a strong economy, and open arms to diversity. Couple that with cutting edge quality, precision, and technical skills, and you have a business environ that is healthy and stable compared to many other places in Europe.

Germany has long been known for quality manufacturing and practical application of materials and workmanship to make things that work, run, and last. From tools to electronics to autos, Germany sets a high mark. Even the Autobahn is a work of practicality – you can go as fast as you want. You are, however, personally responsible for any damage you cause. However, getting a driver’s license in Germany is like many other things there, a lot more challenging than what we are used to in the U.S.

There are advantages to living in Germany

There are some advantages to living in Germany, especially if you are out of the really popular areas like Munich or Bavaria. Rent, for one, is generally cheaper, running around $450/mo for a flat. Groceries are generally cheaper than stateside. Utilities, too. Things like petro, well, they make up the difference on the expensive scale. Health care is good, public transportation great, Germany is very culturally diverse and green energy progressive, and they have strong beer and great schnitzel. A lot of alternative music comes out of Germany, too. Did I mention the beer?

Buying an East German castle ever been your dream? It won’t be East German, because it does not exist any more, but yes, castles can be bought in Germany.   A farm in Schleswig-Holstein? (You really didn’t think the cow was named after someone, did you?) Ditto.  Homes, apartments, flats, even just buy a room can be a real estate investment in Germany, a concept that might seem a bit odd in the West. Germany in general is stable in their real estate market and happy to take the money of foreigners, and was pretty much unaffected by the recession while the rest of the EU suffered.

How to prepare for investing in German real estate

If you are thinking of investing in German real estate, perhaps a vacation home in the Bavarian Alps or a studio in a major city so you can enjoy the popular German nightlife, you need to first educate yourself on investing in property in a foreign country.  Look for what is called a “Global Property Guide – Germany”. It will contain a lot of information about investing in German real estate. It will also list German real estate websites, what is involved for foreigners buying real estate in Germany, the German commercial real estate market, Germany real estate fees, and other topics you need a solid working knowledge about before heading into this venture.

Communicating in Germany as a tourist you would find relatively easy, as over half of Germany speaks an acceptable level of conversational English. When it comes to legal documents and negotiations, however, it is smart to engage a translator with knowledge in those areas. Germany has stricter laws than the US in many things. A word to the wise is always know what you are signing and agreeing to. The Germans will make sure you do, but it will be delivered in German.

It is fairly easy for foreigners to buy property in Germany

There are no real barriers to an expat buying a home or apartment in Germany or through the EU. You can stay in Germany up to 90 days without a visa, as long as you have a valid passport (good for 6 months). You do not need a residence permit to do so, but remember that buying a place to live does not guarantee Germany will issue you one, either. Having one first makes a big difference in getting a mortgage.  While an expat can borrow to buy property in Germany, if you have your residency permit you can only borrow up to 80% of the valuation, but if not, banks will limit you to 55-60% of how much the property is worth. There are also rules for the amount of income you have to prove, as well as that the mortgage can be met with 35% or less of your monthly income.

Buying real estate is a long-term investment in Germany, not a flippers paradise. If you decide to buy, and want to make income from it, look at rental property in a vacation area, or commercial real estate. Germans tend to buy (if they do, about half rent) or build a house, and live there. Forever. Seriously. Unless something like work makes them move, Germans as a general rule do not move around. Buying or building a home is considered a permanent thing, so the supply of property on the market is much smaller than here. That said, there simply is not a lot of cheap property for sale in Germany.

Since buying a home or castle in Germany is kind of a permanent thing, at least in terms of how the Germans look at it, getting a mortgage is more restrictive, especially if they think you are a short-timer. Another factor is commission rates and fees are much higher than you are used to. The average home sale price is $345,00 USD, so they make a bunch of Euros off the average home sale. German real estate agents act as house headhunters due to lower supply, German incentives for nationals, and local real estate investors (who hold the lion’s share of all German real estate), as finding what you want can be very challenging. You pretty much have to use a German real estate broker if you don’t have personal insider info just to find out something is for sale, as no real estate for sale signs appear in German yards.

Foreclosures and short sales pretty much don’t exist in Germany

Germany has a very low default rate on mortgages.  One way Germany makes sure everyone is on the same page is the notary does a lot more than here. They check for liens, verify salability of the property, and at the signing, must read verbatim the entire contract to all present. Yes. The entire contract. I tend to think this is a preventative to default, as not many people would want to live through that a second time. And notaries there charge a hefty fee.

Fees are very expensive when buying property in Germany

The buyer, not the seller, generally pays the German real estate house hunter. Between that, application fees, notary fees, registration and transfer taxes, and German real estate broker fees, the total runs 9-16% of the valuation, plus 19% VAT. Ouch. You cannot deduct mortgage interest if you live in the place, and if you rent it out the income has income tax from 14-42%, plus a 5.5% charge for solidarity (whatever the heck that is) on top of the tax.  Commercial property fees and taxes are similar.

The process gets reversed when you go to sell.  If you hold the property less than 10 years and make money on the sale, capital gains are taxed at 42% or your income tax level, whichever is higher. That is on top of seriously high Grundsteuer, property taxes.  There are also inheritance and gift taxes that range up to 50% of valuation, so plan accordingly for heirs.

Lots of people make Euros off your German real estate purchase.  Is your wallet bleeding yet?

That fairytale castle is not so cheap now, huh?

I like my digital real estate a lot better. It does not cost me nearly as much to maintain, there are no expensive fees and taxes, and I own it. Check out this link for information about how you can own digital real estate with a 80-90% return https://www.bestrealestatedirectory.com/lead-gen/

Just finding a property to buy in Germany can be challenging

While it is possible to find something a Privatverkauf, or private sale, it is hard. Most real estate listings will be online or published in a newspaper, and nearly all of those are contracted to a real estate agency.  It is important to know what your target property is, and price range. Prices vary tremendously between old East and now unified West, popular cities are much higher in general (as are their fees and taxes) and even block-to-block can make a huge difference on pricing.  If you are just venturing into German real estate investment, there are “specialty agents” who can help with information about locations and demographics. Their fees, though, are costly.

A big challenge is Germany underwrites their own on mortgages. If you are pensioned through the statutory program or are buying a “used” home, the government gives incentives or provides subsidies for German nationals to buy property.  It might be easier to just get acquainted with a real estate investment firms in the area you are hunting, or look into the German Real Estate Association. Their directories, besides brokers, list accountants, real estate attorneys, appraiser, surveying companies, notary of the public, and others that you may need to find in the future.

If you are looking to finance the property, another good place to check is the local savings bank, what we would call a savings and loan. They often have property for sale, and not always foreclosures. Germany has a very low default rate on mortgages, so there is very little foreclosed property to purchase. Germans also tend to take better care of their properties.  Derelict properties are not readily available, either, as municipalities monitor run down properties and the fines are stiff, so owners tend to take care of what they hold.  Buying a property a savings bank holds can increase your chance of being approved for a mortgage and make the whole transaction run easier.

Sprechen Sie Deutsch? You better, or be prepared to pay

Applying for a mortgage in Germany can be overwhelming and unnerving, especially to an expat not appreciating close examination of their finances, lifestyle, job, and other aspects. German mortgage applications are lengthy, tedious, and detailed. They ask things most Americans would be pretty uncomfortable answering, especially by an institution they have no feelings towards. You have to be very prepared when you start the process. There is a long list of documents you must provide, ranging from tax returns to 12 months of pay stubs to questionnaires…. all of which must be translated accurately into German by a translator who knows legal and financial issues, i.e. forget the free online translation site.  German financial institutions are not known for much sense of humor with clients that waste their time or expect a lot of coddling.

One of the weird things about getting a mortgage in Germany is there is no guarantee system on mortgages. This makes it really hard to get a mortgage approved if you have or had credit challenges, are within half a decade of retirement, can not prove income that meets what the bank wants to see, or can not cover in cash all the fees, charges, and other costs including the 20-40% down and closing costs.

Is rental property a good investment in Germany?

Yes. No. Depends. Rental rates vary widely, much wider than in the US. Some areas like Leipzig you can rent an apartment for around 330 EU a month, or about $375 USD. That does not leave a lot of meat on the bone for ROI. Rents, as well as house prices, have seen substantial increases in popular places like Munich, Hamburg, Berlin, and Bavarian Alps, so much so there have been public protests and unrest over it. In contrast, mortgage rates are at all time lows due to the situations the EU facing in international politics and trade, Brexit, and otherwise.

One thing you need to know about buying rental, or renting property in Germany. It is notoriously hard, if not nearly impossible, to get a renter evicted in Germany. The full process of eviction is long and expensive. Keep that in mind if you are buying an occupied place and you plan to move in. It might get crowded.

While it is nice to be able to buy a place in a cool spot like Germany, the question of inheritance tax alone is enough to make me pause. I want to leave a legacy for my family. My lead generation business, which I regularly make 80-90% returns on, does that. My lead gen sites are real estate – digital real estate – and I do not have to take out a mortgage to have a rentable property with a high rate of return. Getting $450/mo average rent for a property that I paid $345,000 just does not make good financial sense to me. It shouldn’t to you either. Check out how I make my money here https://www.bestrealestatedirectory.com/lead-gen/

So what’s up with Brexit? Why should it matter? It’s British, right?

Short answer, it is an EU challenge, it can cause economic issues and fluctuate the Euro a lot, and it affects every member of the EU, of which Germany is one. Since Germany is on the Euro, and the Euro is used all over Europe, everyone gains or suffers by Britain’s leaving the Union. It also affects things like trade agreements, tariffs, fuel prices, fees at borders/ports/terminals, and many other things. Things ripple out, and Germany is one of the biggest frogs in the pond to get jostled around by major issues within the EU, political or economic.

When I get into something that is going to require obvious long term commitment, I like to study it first and look at what is financially and personally best for me. Investing in a vacation home that I can get some, but not a decent rate of return on might soothe a vacation desire, but it does not do a lot for my finances. Wouldn’t it be a lot better to pump up the bank accounts first, then invest so I am not so worried about the return on the rental property? That seems a lot more rational to me.

There is a better way to buy real estate in Germany

I learned when I got to the point of wanting – needing – a vacation from my grinding $35/K a year corporate job that it was going to take a lot more money for even a conservative staycation than I was able to put away, let alone enough for a rad trip overseas to a neat place like Germany. And that was not even beginning to think about buying a place there. I’m sure you can relate.

The job in my field I got right out of college I thought would provide both financial returns and an opportunity to grow quickly. It provided finances, but just enough to pay the bills, and not much chance of growth. I wanted more. I began to look for a way to make some decent side money while still working the 8-5.

I was tired and discouraged to say the least. I was still not getting ahead, doing something for me. I knew I had to find a small business of my own that could provide a good return on my investment. I had already invested tens of thousands in programs, trainings, super schools, you name it, and was seeing pennies go into the savings, not dollars. And, by now, I pretty much hated the job, the shipping, all of it.  I really needed a vacation, which I could not afford. I just wanted my sanity back and feel like I was moving in the right direction.

The future of business starts with www

It hit me researching one night that the future of most everything in business was on, or going to be on, the Internet.  So I started to search, and came across an article about a guy who had put together training to teach you how to build lead generation websites. It talked about how little business owners knew and how much help they needed getting customers to call them instead of someone else. That made sense to me. I knew from experience most business owners were only concerned about their stuff and were pretty clueless how to sell their stuff or service.  The article went on to talk about the training guy, Dan, and how he worked his business every day, had built it from scratch, and was making a killing. That got my interest.

After checking around I found out this Dan guy looked pretty legit. He was making a lot of money and the return was really good. They had a link https://www.bestrealestatedirectory.com/lead-gen/ for information and to sign up for a no cost, no obligation call to get information. I figured what the heck, so I filled out the form and sent it in.  Dan himself contacted me at the time I had asked him to. We had a nice exchange and he came off really straight and level. He made it clear this was business model training, and what I got out of it was up to me, and that the sky was pretty much the limit. That part was yet to be seen I told myself. But the program did look solid, lots of help was available, and it was reasonably priced. After thinking about it for a few minutes, I thought what the heck, signed up, paid the tuition, and got to work.

Man, I am so glad I did.

The first part of the training I wrote my first website in six hours and was surprised to find it was not hard to do. It was this one:

 

 

 

I launched it and got leads the first couple days. I called around and quickly found a customer to rent the leads to. The guy still rents this same site from me, five years later, at $750/mo.  My return is really high on lead gens, as there is not a lot of expensive overhead. To date in five years I have cleared over $36,500 on this site, and I hardly ever touch it. Same site. Pretty good return for six hours of work writing it while I was learning!

I kept studying and learning and writing sites. In five months I turned in my resignation, and all the stuff exited my place not too long after. I put in some work the first six months, but any job is work and I got to keep the profit. It amazed me that in just five months I was not only paying all my bills, I was also able to expand my business and monetize it with the profits from my own business. It was mine. Sweet.

Dan was right.  The sky is the limit.  I just turned 30. In less than five years I am approaching a seven figure income this year. I work part time. I travel when I want to and do not have to worry how am I going to pay for it or do I have the time accrued. My ride is first class. I live in a really nice house in a really nice place. And I paid cash for all of it, out of my own cash. Mine.

What is limiting your sky?

Do what I did and book a call to find out more about how different your future can be with your own lead gen business. You own the real estate. And unlike Germany, you do not have to hold it at least ten years to see a break. Put some work and action into doing something for your own future and not some boss who thinks he is….

Well, you get the picture.

Do it now. There are businesses waiting to fund your vacation – and castle – in Germany. https://www.bestrealestatedirectory.com/lead-gen/