When thinking of invest in a quality apartment, Berlin is one of an ideal city in Europe. Being one of the safest and politically stable economies, it makes the town lucrative for any investment. Also, the city has heavily invested in infrastructure like transport, communication, and as well as social amenities like healthcare. This year, PricewaterhouseCoopers named it in top two European cities best for development and investment.
What Do I Have to Consider?
Before purchasing any real estate property, there factors that I consider very important to consider. First, there is the financial commitment and how to go about it. Consider the financing plan whether it will be through the saving plan, mortgage or through finding a financial partner. Analyze the motive for the purchase, whether the apartment is for rent, resale or living. Also, search for a suitable location where it is easy to access and where social amenities are available. Bear in mind the laws, fees, and taxes that govern the particular area.
Berlin has 14% property ownership rate, the lowest rate in German. Also, it has one of the lowest capital interest rates. From the real estate market analysis, in Berlin new apartment rental returns ranges from 2.5% to 3.5%. Therefore, investors are taking advantage of these incentives to venture into properties for renting out highly.
What You Need to Know on Property Investment in Berlin
The developed German law adequately protects any property investment done in the country whether done by the locals or by foreigners. From what I gathered there are various taxes, fees and legal proceeding that one needs to be aware of when buying an apartment. Therefore, it is prudent to consult a real estate lawyer or a tax consultant when shopping for an apartment.
For laws, there is the full freehold title which is typical for property ownership. It ensures the property bought is transferred after being entered in the land register. Also, there is the German tenancy law. It proclaims that if the property bought has an existing tenant, the new owner will continue with the current lease as the landlord. The right to termination of an apartment contract requires the owner to notify the tenants three months in advance.
Be Aware of Taxes and Fees
A property owner in Berlin needs to pay annual real estate tax as well as income tax on any earnings from the property. Any property sold within ten years of purchase attracts tax on profit made. Also, the owner is required by law file annual tax returns for any tax paid.
During the apartment purchasing, the buyer should be aware of additional fees paid on the deal. These expenses include the notary cost that ranges from one to two percent and the land registry office fee of 0.5%. Also, there is the property transfer tax of six percent and the agent’s fees that could go above seven percent.
The Germans banks can finance international buyers’ up to 50% of the value of the property. By consulting real estate agents, the buyer can find suitable financing options as well as on how to rent out the property.
Nothing Works Without Papers
In my research, I realized how important it is to have proper documents. Therefore, before buying the property, I need to request the following records from the owner. First, there is the Budget plan (Wirtschaftspläne), which described the details of different financial expenses by the owner. Secondly, the declaration of division which shows the details of items that belongs to the apartment and those that are jointly owned. Also, there is the document for energy consumption assessments and the ground layout of the property.