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Berlin letting agents - any recommendations?

Hi

I am considering buying a property in Berlin to let out for the long term (at least 10 years), with a view to hopefully making a profit from price appreciation.  The maximum amount I could spend would be €70,000.

Given the above, it is likely that most of the properties in my price range are likely to be one bedroom apartments. Presumably these properties would be suitable for single people or young couples looking for short-term accommodation.

With these considerations in mind, does anyone have any recommendations regarding letting agents in the area who specialise in this area of the market? Is it normal for agents in Germany to offer the full property management service similar to that offered by those in the UK ?

Finally, are there any other points which I should bear in mind when looking for a suitable letting agent?

Very many thanks in anticipation of your assistance.

It is not clear from your message whether you are thinking of AirBnB-like short-term letting or regular renting out with a professional caretaker (Hausverwaltung).
I have inquired about both a while ago and can tell you my thoughts, although I have no first-hand experience using them (in addition, I am in Stuttgart, so don't know local specifics about Berlin):
The short-term-letting scene is very dynamic with many providers offering all kinds of services. There might be exceptions, but in general, they do not do the daily maintenance (cleaning, preparing bedsheets, welcoming and seeing off guests), so this is only practical if you are in the neighbourhood yourself. They usually take a certain percentage of the bills (30% is common) for being listed on their webpage, without which you will not find customers. In major cities you can count on 80-90% occupancy and still earn more than regular rent.
If you prefer regular (longer-term rent, here are many Hausverwaltung companies with various service offerings. In general they are engaged cooperatively by the owners association of the whole complex (for caretaking of common property like garden, stairs, car park, etc.) and it might or might not be possible to ask for extra services. Inquire before you buy! Some, but not all Hausverwaltung also offer property agent services like looking for tenants for you. The cost of all this might make the investment unattractive, though.
Also keep in mind that there are tax and administrative aspects - property income is always taxed in Germany, for which you must submit a German tax declaration yearly (you need a tax consultant for this - no Hausverwaltung does it!) and for short-term letting you might need to register a business.

Didn't the Germans change the law regarding property price speculation where you were taxed on any profits made on resale?  I recall you need a special permit to do this.

Thank you for your replies.

My original intention was to buy a property with the intention of letting it out for short-term stays. However, in the interim, the authorities have clamped down on lettings of this nature through Airbnb and similar such sites, so should I eventually buy a property, I would indeed let it through an agent.

Thanks for making me more aware of the role of the Hausverwaltung, and the fact that a tax consultant will be required.

As regards taxes on capital gains – my understanding was that there would not be any liability if the property was retained for at least 10 years. 

Hope this clarifies my position.

Regards

Profits from selling a property (i.e. the difference between sales price and ackquisition cost) are tax-free after you ownded the property for ten years or more. (There is no permit required to sell.) But continuous income (like rent) is always taxable.
Non residents pay higher income tax rates than people who live in Germany. Ask a tax consultant for the details!

Beppi covered the subject pretty well. What I would add is that property has gone way up in most German cities over recent years. Thus it generally seems to be a pretty good investment. But with any property it is location and condition of the place that counts. I know  a number of people who have been buying properties and renting out and eventually selling some of them. The trick to making a good profit is usually to find a place that is in shabby but not too bad of condition. Thus one can buy it (relatively) cheap and renovate it. But one needs either the skills or connections to the right reliable workers to do this.

A budget of 70000 Euro will not get you a standalone property or even a row house in or near a decent sized city although an old very run down house in a very small out of the way community might be possible. But those are not the kind of places you can easily rent out. The best you can hope for is a very small apartment in a city and then the ownership is like a condominium in America. This means there other owners of the rest of the property.  The problem is when there are conflicts, or lack of money, about what things might have to be done in the building. Changing anything structurally or even the style of the building usually requires 100% agreement of all of the owners.

The roof and the windows are common property; one has to repair or replace these in agreement with the house community and do so through the property management (Hausverwaltung). Usually there is a monthly amount each owner has to pay to cover things like insurances and also to be put aside for repairs and upkeep. If you buy into a property and then find out there is little to no money set aside and they need to replace the roof and/or windows, or insulate the exterior or possibly replace a central heating (more common are individual systems in each apartment) then you are going to be looking at having to come up with a lot of unexpected money.

There are also situations where the fellow owners in a property have to cover the debts of one of the other owners if they cannot pay. This kind of thing can be very complicated and messy. One needs to know what one is getting into and see if there are leans against the property – and not just the apartment one is considering buying. Or have the property owners been involved in court cases? One could say add on balconies and then the owners of the neighboring properties don’t like it and take it to court. Court and lawyer costs and penalties could be extreme in some cases.

Also good to find out things like if there has been water damage or mold in a property which might make the whole thing unlivable. Hidden mold has resulted in lots of cases where people bought an old house to renovate only to find out that it would be cheaper to tear down than actually repair the damages.

And if you rent property out, then a renter can seriously damage it, fall behind on the rent and then disappear. A property management company might claim to vet the renters well but will probably take no responsibility if it goes bad.

What this adds up to is that it really takes some expertise and experience including local knowledge to properly appraise a properties worth.

While the horror stories Tom mentioned are all known and true, this is not what the majority of property investors experiences. You might well be lucky, too. (But it's up to you to decide if you want to base your investment decisions on luck.)

I wholeheartedly endorse his last sentense:

TominStuttgart :

What this adds up to is that it really takes some expertise and experience including local knowledge to properly appraise a properties worth.

Beppi is right that the majority of people might not have such serious problems but one needs to be warned because they are also not so uncommon. It's of little consolation to be in a bad situation and only then hear about the risks. One should not leave it to luck.

As an example, In the building where I have my apartment, there were 2 people that declared bankruptcy leaving the rest of the owners with debts. Lucky for me this was before I bought my place. We have had a conflict with the owners in the next house which also resulted in a long court case. We have also had constant battles with one of the owners in our building who has terrorized the house resulting in over a dozen court cases. They all go on for years and the courts often made decisions that were against us and ignored all of the relevant facts, regulations and logic.

Also, he claimed some years ago not to have the money to pay the court costs for one of the cases he lost. In this case we would have to pay. He brings a lawsuit, loses and then we still have to pay - because the court always gets their money. Yet he is not blocked from bringing further lawsuits, which he also might not be able to pay. We managed to get him to pay that time but that such a situation can even happen here is incredible. Again, despite existing laws one cannot expect fairness or competency from the German legal system.

Not to necessarily scare someone away from the idea of investing in property but do it with eyes wide open!

I am posting a link below to an article (in German) about the tax situation on profits from property. That one pays no tax after holding the property 10 years is the general rule but there are many details and exceptions! The tax free situation is meant for private rather than commercial property. If you (or members of your immediate family) live in it, it’s private – unless you might have taken a tax deduction for business use like a home office, something quite common for self-employed people. But as far as I understand, it one rents the property out, rather than living in it or letting it stand empty, it is considered a business property and not private.

If one buys, rents out and then sells a property then the actual profit is less than the selling price minus the purchase price. One has to pay different fees for notaries, realtors, property taxes plus maintenance, repair and renovation expenses. These can be deducted from the profit if one has kept all of the necessary bills and receipts.

After all, one can buy a rundown place for say 100,000 Euros and spend 250,000 Euros fixing it up. If one would then sell it for 200,000 then it would have a gross profit of 100,000 Euros although an actual net loss of 150,000 Euros. If one doesn’t have the receipts to prove the added investment of 250,000 Euros, then one would additionally be paying tax on the gross profit if the property is not considered tax free.

It would sound pretty straight forward that one of course keeps all of the receipts but it is not always so easy. What if one did a lot of the work themselves or with friends? One then has no receipts for labor costs. Or if one assumed the property would be tax free and was thus sloppy about keeping receipts. Even a property that was private might have to be sold because of extenuating circumstances before the 10 years are up, or maybe the law changes and the 10 years get extended… Lot’s of scenarios where one could lose out.

A general rule about investing in anything is that it is best to stick to things that are profitable independent of the possible tax rate. Thus if one is actually able to legally not pay tax on the profit then it is that much better but not the difference between a net gain and a net loss.

http://www.n-tv.de/ratgeber/Wann-der-Fi … 33661.html

Tom's post, although not entirely correct due to my (also limited) understanding of legal rules and tax implications, shows how complicated matters are and that absolutely need a good local property adviser, a tax consultant and a lawyer. Do not do it without!!!
One correction:  sales profit are tax-exempt even below 10 years, if you only used the property as your own private residence. Over 10 years also if you rented it out as a private landlord.
As Tom pointed put, commercial use is different. You can be classified as commercial landlord if you own several properties or earn above a certain threshold in rent.

Please be aware of the fact that it is almost impossible to rent out an apartment short term in Berlin. Due to the really tide housing market the Senat of Berlin decided to forbid "Ferienapartments". The only way would be to rent out a furnished apartment for 1 month or more.

Kerstin

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