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Why residential property is a good investment choice

There are multiple choices for property investments in Germany.

Due to the fact that Germany is a very stable economy and one of the biggest economies in the world a real estate investment in one of the main cities like Berlin, Munich, Hamburg, Leipzig is very attractive and relatively risk-free investment.

Foreign investors are facing the same standards as Germans, every foreigner is legally able to acquire property in Germany.
Taxation on buy-to-let property income for foreigner is as low as 15,6%, therefore some source consider Germany a tax haven.

After the decision for an investment in Germany is taken, one has to decide which type of property suits best the needs of the investor.

We differentiated between commercial and residential real estate. Buy-to-let residential property is not considered commercial it’s considered residential.

Commercial Property Investments

if the usage of the building is subject of a commercial operations, even if the operation has s.th. to do with living it’s considered commercial

  • office
  • retail (malls, shops)
  • logistic property
  • hotel (hotels, boarding houses)
  • senior citizen homes
  • hospitals
  • power plants

Residential Property Investments

all types of properties that are able to be a permanent residence are considered residential

  • unfurnished flats
  • furnished flats for long-term rentals (3 month and more)
  • student facilities

As residential real estate is by far the biggest market, in trade numbers as well as in space in Berlin our services and this websites mainly covers this type of investment.

Since residential real estate investments have proven their stable income even in a crisis like the 2009 world economic crisis German residential real estate is everybody’s darling. In fact the highly regulated market, that give renters a wide range of rights makes this market so stable. The regulation is a down side when it comes to generate higher returns, but it helps to keep the market very stable.

A Germany renter typically doesn’t move, as this guarantees him a very low rent (rent adjustment is restricted by law).
Even wealthy Germans tend to rent their private home, as there are no tax benefits on owner occupied flats. People tend to rent, even if they own property as an investment. However this only makes sense if you need to be flexible, once you settle it’s definitely better to own the family home.

Commercial real estate is attractive as well, here we mainly talk about investments in office, retail (malls, shops), logistic, hotel or student facilities. Commercial real estate is considered more risky, and therefore has higher returns. However the minimum investment is typically higher than a residential investment and the investments are done by professional investors, funds or investment companies. At the moment our company and therefore this websites does not cover this type of investment.

Once you decided for residential investment you need to determine the location, size and type of residential investments.

Depending on your budget you can invest in a flat 100.000 Euro to 2 Mio Euro or an apartment block starting at 1 Mio Euro in Berlin an 500k Euro in Leipzig.

If you have a total budget (incl. financing) of 1 Mio. Euro and more, and you have a good opportunity (offer) to invest in a block,
I would always go for a block if possible.
This comes with a lot of benefits, that we cover in this post:

Why you should go for an apartment block and not a flat if you can afford it“.

Investors with a total budget (incl. financing) of lower than 1 Mio. Euro have as well great opportunities, and even a variety of possibilities.

Why not every residential investment is a good idea and which investment will outperform the market while keeping stress level low, we cover in this post:
Why you should not buy an apartment“.

About the author: Alexander Korte is a Berlin based residential property developer and active real estate investor and co-owner of a brokerage & advisory firm.