German investment properties

E

Eoghan04

Guest
Was thinking of investing money in apts in Eastern Germany where properties are very cheap. Majority of people also rent in Germany so getting them let would be no problem. Typical apts can be bought from E15,000 upwards and the yields are in the region of 8-9%.Can any of you knowledgable people shed light on the pros and cons of such a business venture.
 
Whilst some cities in Eastern Germany are showing good growth and an improvement in unemployment rates things are still very low there. I have invested in Berlin which has some Eastern characteristics such as a low property value base and it also has some western characteristics in good infrastructure, capital city, media and entertainment centre, tourist trade, etc.. The beauty of investing here is that the base is still very low but you are operating in a massive country, superb efficiency, infrastructure good. I think it does not have the same level of risk as other countries such as Rumania, Bulgaria, Montenegro, Turkey, etc.Also the night life in Berlin is second to none - visit a jazz club, night club, bars, restaurants (?), 'other' clubs,. In Kreuzberg you could sit beside ethnic Germans eating Currywurst and drinking beer, Turks smoking and talking soccer, Punks just looking like punks, muslims in yashmaks, Americans looking for their ancestors and Irish looking at property. Super blend.
 
Many towns in Eastern Germany are suffering from population decline - a combination of low birth rates and people moving to the west in search of work. That's the main reason why property there is often so cheap.

AFAIK, Leipzig is doing well and would be worth a look. Dresden is OK I think, but I don't know much about it. Berlin is a case onto itself and is neither really east nor really west. Other than that, I'd be very hesitant.
 
Berlin, like any other major city, has its good bits and its bad bits. A poor apartment in a poor area is cheap. Make sure you do your homework.
 
MikeM said:
Yoganmahew,

What areas of Berlin would you recommend buying in ?

MikeM
Click to expand...
I have never been to Berlin, so will not give any recommendations on location.

What I would recommend is to go out yourself, see what the good areas are, see what places have lots of rentals available (a bad sign), see what places have few rentals, but good locations (a good sign).

Work out the cost to buy (including all fees), the rent you might expect, the tax you will have to pay on it, any other charges that cannot be passed on to the tenant in the German/Berlin market and from all this you will be able to work out the rental yield. If this is more than you would get from having your money on deposit in the bank, consider buying. If it is less, you are losing money unless you can count on capital appreciation. I would say you should never count on that, it should be a bonus if it happens.

Really you should not be any less picky with an investment property than you would be with your own home. It is your money after all. So, no buying off-plan, site unseen, no idea of the local facilities/infrastructure, tax situation, don't believe agent projections unless you can independently work out the figures etc. Oops, that's how Irish people buy property, isn't it?
 
My advice would be to try and make contact with a German living in Ireland. There are loads. My cousin is married to one and the advice was invaluable. Estate agents out there, are in the main muppets and very laid back. Be careful to discuss matters with an accountant as the tax on property investment within Germany are I think 35% and you have to file there once a year? I stand to be corrected on that though? All the advice above is very good, remember just because it is cheap does not mean it is good. Finally my bruther bought in the Dublin 4 of Dresden, although unemployment is very high the property was cheapish and the quality of tenant excellent. Company let to Google or somebody like that so no worries. Also very close to Prague - 75 miles away.
 
For Irish Tax situation regarding rental income in general see [broken link removed] and in particular see "How are foreign rents taxed"
 
Mike MGood areas are Prenzlaur Berg, Stieglitz, Spandau, Wilmersdorf Bad areas are: Wedding, some areas of Kreuzberg, and some eastern parts. I can provide a full list if you PM me. Your local bank will provide you with a fairly comprenhensive list if you request it.
 
Hi simplyjoe,
Could you PM me with that list please ... My research tells me that Leipzig & Dresden look good as a commercial investment as stated above ...
I'm interested in the retail/office areas ...
Thanks,
 
Salem said:
Hi simplyjoe,
Could you PM me with that list please ... My research tells me that Leipzig & Dresden look good as a commercial investment as stated above ...
I'm interested in the retail/office areas ...
Thanks,
Click to expand...

Salem,

I have commercial properties throughout Germany, what research have you done to verify the above two towns...I think there is a lot of merit in the choices but just interested in the research. I have some retail and rents are washing their faces at circa 8%.

At the minute retail sentiment in Germany is very low and sales are very sluggish due to VAT increase of 3%. It was widely expected that consumer spending would have given legs to growth but it failed to launch - be careful of retail and be smart where you buy - we had an insider with loads of knowledge. Information is critical. Check out the other German threads posted recently.
 
Camry said:
A recent article form the Times (UK) might be worth perusing:

Housing flood in Germany pours cold water on prices
[URL]http://business.timesonline.co.uk/tol/business/markets/europe/article2492906.ece[/URL]
Click to expand...

Thanks Camry, I posted the full report on another thread http://www.finfacts.com/irelandbusinessnews/publish/article_1011200.shtml

Knight Frank although not bullish on German residential are more positive on its future course compared to other countries listed in its 2007 survey. Also on a secondary note on flooding (I know out of context to the above article), East Germany is very prone to this so be very very careful where you buy. There will be jitters in all property markets over the next 12 to 18 months but after that Germany should stabilise. The market is fairly liquid with FDI into property set to break the 2006 record. Interesting FT thread from another post which gives a map of growth area's in Germany. Stay away from the dogs, these are going to be hopeless unless some sort of miracle occurs.

German Divide or http://www.ft.com/cms/s/0/78a96db0-6...0779fd2ac.html then go to interactive map.


Add on - Jumpshot very difficult numbers on German residential market, obviously no bottom found yet. But these are national indicators, any stat's on a regional basis? Commercial sector Salem talks about should be different, the parlysis in the residential market is caused by Germans relunctance to purchase but instead rent, coupled with the Eastern Block (per the map) seriously de-populating and causing a drag. National of renters will change, but it will take 10 to 15 years to see returns in capital terms.
 
[broken link removed]

Worth a look, HPX index only launched by Hypoport since April 2006 and not sure about number of properties that make up the index.
The shape of graph was not what I expected for the recovering German economy.
 
It´s time to get some know how in here:

First I think I have the best view on our market here, as I am a while in this business here in Germany. ( Now you know that I am German, so sorry for some mistakes in gramma and spelling )

Some facts mentioned above are totaly right but almost not complete.

The huge number of investors came to Germany in the last years mostly know what they do.
Surely its not right to say that not all parts of Germany are to recommend to invest just simply because the most foreigners don´t have the know how to make money out their investments.
I am dealing with smaler as well as bigger properties inside cities and on country side.
And we are really successfull in letting flats and houses everywhere. You simply must know in which area you have which target group !!!
Before you start to invest in German property find a person you can trust in our country, then tell him for what you are exactly searching and then decide to buy.

If you are builder, then come over. Here is enough work ! If you are an investor come and find the structure you need to reach your tragets.

If you think you can just buy and participate on some groth in the future how it went in the U.K. in the last years, please let be !

You have to work or pay for growth !
 
You must log in or register to reply here.
Back
Top