The professional approach to buying a block of rented flats in Berlin
Comparing prices in Berlin with other German or European cities, it quickly becomes clear that considerable potential for appreciation of value still exists here – at least for those investors who identify the right locations. The advantages of urban life in such a green, creative, free and secure city are self-evident. Many German and international companies have recognized the advantages of this town and are basing themselves in Berlin. For investors in Berlin and throughout Europe, Berlin remains the most interesting location. As tax advantages run out, investment properties are taking over as a new trend, especially as the prices per square meter are much lower than those for owner-occupied apartments or condominium units.
A further point in favour of investing in property is the economic crisis in Greece and its possible effects on the Euro. Here it becomes clear once more that bricks-and-mortar investments are more secure and more profitable.
In crisis-ridden times, the security of property investments has always made them the most viable choice. Advantages such as tax relief, the savings on rent in owner-occupied property and life-long security are simply unbeatable.
Reports published recently by the Gewo institute and by BBU, the federation of housing companies and housing cooperatives in Berlin and Brandenburg, have yielded interesting new insights. According to these reports, the population of Germany's capital city is growing faster than the available housing supply. As a result, demand will increase and rents and expected to rise, thus raising the profit margin for owners of blocks of flats further.
What factors should investors pay most attention to as they consider buying a house divided into flats?
When buying property, the thorough preparation of a dossier of hard facts is vital.
The key to success is the exactitude with which a property is scrutinized. Everything has to be checked and double-checked until the facts are beyond doubt. The seller is not usually in a position to prepare professional documentation. Old lists of tenants are used, gross and net rents confused, and further errors made.
What determines the value and the potential appreciation in property value?
“Location, location, locationâ€: the slogan echoes around the property sector. One aspect of location in particular – that the property be located in a quiet side street – is more important than all other aspects of the micro-location of a given property. Judging the location of a house involves studying not just the house itself, but also its environment – it's important to walk around the area for several hours. The image of the area is decisive. In difficult markets, it is important that property appeals to prospective tenants.
Investment in property is long-term investment, and it is important to have a sense of the location as it is currently, but also to see how it is likely to develop. The better the location, the more lasting the value of the real estate. But that makes properties more expensive. In poor locations, lower prices are paid and profit on rents is initially higher. But the initial profits and the potential for maximizing the value of an investment are factors which often stand in inverse proportion to each another.
Our service for you includes:
Detailed information on legal matters
The need for information on legal matters is often underestimated. In Berlin in particular, it is necessary to be informed in depth on the complicated topic of so-called social environment protection statutes or upper limits for rents in areas zoned for redevelopment. Ignorance can result in nasty surprises.
Structural analysis of tenant lists
Investors often underestimate the extent to which a property that has been let out must be looked after. Inadequate information about the current rental situation and misjudgements of tenants can lead to investments going wrong. Buyers must know that they become party to existing leases. If these are flawed, because of a lack of knowledge or because of carelessness on the part of the previous owner, then this will affects the new owner. Realistic calculation of yields rest largely on the question of the rental income which can be generated in the long-term.
Examination of lists showing how area is distributed
Calculating the area of residential or commercial units is complex. How are balconies and loggias considered? Have three percent been taken off the figure to allow for plastering? The impact of false information resulting from the use of old lists riddled with errors can be significant.
Examination of building substance
With certain old buildings, it is essential to have a report on the wood prepared or to go through the building with an expert and look for problems such as dry rot or woodworm. Without thorough inspections, superficial renovation work may hide such problems from view.
Solid financing of your property investment
While it is advisable to bring the maximum possible amount of private equity into the purchase of an owner-occupied property, buy-to-let properties can be financed externally to a higher level. Purely from a tax point of view, this can make sense, as the interest on the loan can be set off against tax in this case. Buy-to-let purchasers of apartment blocks should use their own capital for 20 – 30 per cent of the investment. While some professional investors use up to 100 per cent external finance, these investments are riskier than most. It is wise to have a reserve of about five per cent of the purchase price as a reserve fund for unexpected repairs. We will gladly assist you in organizing finance for your apartment block. More…
