Real estate investment for beginners: how to do it on a budget

Geld anlegen?

In conversation with Lukinski / Kapitalanlagen (Stephan M. Czaja) – Buying your first condominium (as an investment) without risking everything right away – it’s possible. Small apartments around 25,000 euros are the perfect place to start. In many German cities, you can find small properties near the university or in peripheral locations that can be transformed into modern micro-apartments with a little skill.

Invest cheaply: Small apartment, big style & clever returns

Why is that?

Why 5,000 euros can be enough

For many first-time buyers, this sounds too good to be true. But: if you can raise around 20% equity – i.e. around 5,000 euros for a purchase price of 25,000 euros – and the bank finances the rest, you have already laid the foundation. In addition, there is a small buffer for modernization – and this is exactly where your leeway lies.

• Only 20 % equity required
• Low entry hurdle for your first investment

Upgrading with style: color, kitchen, charm

What you can get out of a nondescript apartment with a small budget is enormous. A new wall color immediately creates a fresh atmosphere. A laminate floor from the DIY store enhances the feeling of living. And with an inexpensive fitted kitchen, you not only add function, but also real added value – especially for potential tenants.

Achieve more rent with little effort

Those who invest in simple furnishings often get significantly more per square meter. Especially for students, young professionals or single travelers, it’s not the size that counts – but whether everything you need is there. Renting out furnished means you can charge a premium and appeal to a target group that is looking for exactly that.

• Fitted kitchen increases the rental value
• Furnished apartments generate more income

Who you rent to: Students, Singles, Mobile

Your small, cleverly furnished apartment is in tune with the times. More and more people are living alone – and they don’t want to live in huge apartments. Whether student or digital nomad: An apartment with 25 m², furnished and in good condition, is quickly rented out. Especially in cities with universities or good public transport connections, the vacancy rate is often zero.

High demand for small apartments

So why spend more or opt for large properties? Small apartments are not only easier to finance – they are also back on the market more quickly. And with a property management company, you don’t have to worry about almost anything.

• Stable demand for small units
• Property management takes over letting & administration

Less risk, more control

A small start also means: you risk less, but learn just as much. You build up initial experience, benefit from monthly rental income and can sell again at any time. Thanks to the compact size, you have lower operating costs, less maintenance – and a very clear calculation.

More overview with a small area

Instead of renting out a 4-room apartment, where you might end up with three empty rooms, you invest in a single small unit – with a clear target group. Your fixed costs remain manageable and you have full control over your income.

• Less effort, more overview
• Lower operating costs

Start with little capital – but a lot of impact

You don’t need millions to start investing in real estate. Just 5,000 euros is enough to buy a small apartment, upgrade it a little – and turn it into a real source of income. And best of all, you’ll learn everything you need for your future portfolio.

Micro-apartment as a capital investment: advantages for you

Small apartment with 25 m² instead of a large 4-room apartment. Why? More and more people are living alone in single households. Students, singles, holidaymakers, but also professional groups such as fitters, who are often in different cities. Learn more about investing in small condominiums, so-called micro-apartments, here.

• Micro-apartment as a capital investment

Challenges & restrictions with a roof tent

The freedom of camping in a rooftop tent is undoubtedly tempting. A quick and uncomplicated set-up, the prospect of breathtaking places to spend the night and the opportunity to experience nature up close are just some of the reasons why more and more adventure-seekers are opting for a rooftop tent adventure.

Of course, camping with a roof tent also has many advantages, which you can read about here:

• Roof tents Advantages

However, as with everything in life, there are also some disadvantages and limitations to consider. You can get an even better overview directly from the source: Rooftop tent disadvantages (Campwerk).

Expensive abolition: why it’s still worth it

You may have to dig a little deeper into your pockets at the beginning. Rooftop tents are often a little more expensive than conventional tents. This is because they are specially built and made of high-quality materials. But don’t worry, it pays off! Rooftop tents are still cheaper than most caravans and motorhomes and can be used for many camping adventures to come thanks to their robustness and durability. After all, you’ll save yourself the expense of other accommodation when you’re on the road because you’re equipped with a roof tent.

Here are a few important things regarding the costs:

• Purchase price more expensive, but cheaper than caravan/mobile home
• Investment pays off in the long term, as no more hotel costs

Pay attention to the fuel: additional weight

Of course, the additional weight on the car roof can also increase your fuel consumption. Your driving behavior can also be affected by the additional weight. However, it is fair to say that this does not come close to the fuel consumption of a caravan or motorhome. In comparison, the roof tent is lighter and puts less strain on your car. There is also a maximum speed limit for some roof tents. You should definitely adhere to this to prevent accidents and save fuel.

Other disadvantages are:

• Increased fuel consumption, but less than a motorhome
• Speed limit, but fewer accidents & fuel consumption

Unsafe during storms & thunderstorms: Watch out for lightning!

Most rooftop tents can withstand rain and wind, but in the event of a heavy storm or thunderstorm, it is better to stay in the car or drive to the nearest hotel. Of course, this also means costs, but on average it is still cheaper than staying in a hotel for your entire vacation. A roof tent does not have a closed metal construction like a car. In addition, it is in an elevated position due to its place on the car roof. This can quickly make lightning strikes dangerous. However, you can simply sit in the car during thunderstorms with lightning.

Pofi tip: Always check the weather forecast so that you can plan accordingly.

You should pay attention to this in bad weather:

• Less stability during storms – solve with: one night in a hotel
• Do not set up in case of lightning – solve with: wait out thunderstorms in the car

During thunderstorms you can wait in the car and then set up the roof tent again!

No space for heavy furniture, such as cupboards

A rooftop tent is one of the most space-saving options for a vacation in the great outdoors. But due to its more compact size, the space in a roof tent is not comparable to the living space in a fully equipped caravan or motorhome. And of course you can’t permanently install furniture, you have to reassemble it every time. On the other hand, a roof tent is of course much lighter and cheaper, and you often have more sleeping space compared to a conventional tent.

You have these disadvantages due to the space in the roof tent:

• Less living space than in a caravan, but more sleeping space than in a conventional tent
• Less space for permanently installed furniture, but the roof tent is therefore also significantly lighter

Tip: With the right camping accessories, you can also stow everything important in the roof tent to save space!

Fold in the roof tent: then drive on!

And while you can easily drive from destination to destination, your car is still not 100% freely available. Once you’ve unfolded the tent in the evening, you still have to fold it up to drive to the supermarket. However, most models are designed for quick assembly and disassembly, so this should be quick and you can still buy your well-earned snack for dinner.

Short & sweet:

• Roof tent must always be dismantled first, but with a little practice it can be done very quickly

Rooftop tent manufacturer: Our recommendation

We’ve just told you a lot about the disadvantages, but perhaps we’ve been able to pique your curiosity with the solution to these disadvantages. If you would like to know more about roof tents, you can find many different models with different functions in this article:

• Rooftop tent manufacturer

Rooftop tent comparison: the best rooftop tent?

To make sure you find the right roof tent for your needs and have fewer disadvantages, you can find our shopping recommendations here:

• Rooftop tent comparison

Problems can be solved – and then everyone is quickly happy again!

5 mistakes! What to look out for when investing?

Your goal is financial freedom? Anyone can build wealth with real estate. Investments allow you to build up money over the long term. By investing, you can make your real estate work for you and benefit from interest, dividends and price gains over time. However, investing in real estate without any knowledge is too risky. You don’t have to reinvent the wheel. Every real estate professional has already made mistakes that you can benefit from. Stick to this checklist, avoid the 5 mistakes and minimize your risk of failure. Let’s go!

Risk checklist: What you should avoid

Stick to these points and nothing will stand in the way of your successful investment:

1. Don’t invest in real estate with too low a return
2. Designing financing for the long term instead of the short term
3. Bring in enough equity
4. Financing compared
5. Calculate net return not just gross return

Find out now what the 5 biggest mistakes are that you can make when investing.

Advantages: Freedom on the car roof

Roof tent camping is becoming increasingly popular and not without reason. A camping vacation with a roof tent offers you many advantages. One of the biggest is that you are flexible and independent. You can camp almost anywhere as long as you can find a suitable pitch. You can discover new places without depending on fixed accommodations. So camping with a roof tent adds a sense of adventure and freedom to your travels.

Make sure you don’t sleep outside the campsite uneralubt. Read more: Wild camping.

Fold & go: Travel independently

When you want to travel further, you can simply fold up your roof tent again and drive off. Roof tents are usually quick to set up and take down. Most models have mechanisms that are designed to allow you to open the tent as quickly and conveniently as possible. You save time and can focus on exploring the surroundings faster. On the roof of the car they are also extremely space-saving and you hardly notice the roof tent on the onward journey – you can even continue to use the trunk as normal.

Small to large: different models

Unlike traditional tents, rooftop tents don’t require additional floor space. This means you usually don’t need a particularly large pitch either, which can be cheaper. Even with an awning, there are rooftop tents that require less space than a caravan or camper. For roof tent are also available for purchase in different sizes. There are different models and sizes of roof tents that can be adapted to different needs. Whether alone, in pairs or as a family – there are suitable options.

You can see the different sizes here:

• Roof tent 2 people
• Roof tent 3 people
• Roof tent 4 people
• Roof tent 5 people

Sleeping on the roof of the car: free from bad floors

The fact that your roof tent is on the car roof protects you from the cold or uneven ground. The ground plate, which is attached to the top of your car, is always straight. This way you can lie comfortably and not get stabbed in the back by a root in the middle of the night. Often it also gives you a better view and closeness to nature. Despite the feeling of being in the middle of nature, you are protected from curious animals.

In the middle of nature: but still weatherproof!

If you have a roof tent with hard shell, you usually also have extremely high stability in rain and wind. This means you are better protected from rain, moisture and other weather conditions. Nevertheless, most of the roof tent models have windows and sometimes even skylights. So you can experience the sunrise, the starry sky and the surroundings directly.

Overview: 9 advantages of roof tent camping

And finally, roof tent camping can be a social experience. Many campgrounds and meetings offer the opportunity to meet other campers and share ideas. For example, about these nine advantages of camping with a roof tent:

• Flexible travel
• Quick assembly and disassembly
• Space-saving
• Protection from animals & weather
• Versatility
• Proximity to nature
• Spirit of adventure
• Community
• Higher comfort & better view

Disadvantages & why it is still worth it

There are always two sides to the coin. A roof tent can also bring its problems. For example, the purchase price is first higher than most conventional tents or a one-night hotel stay. After that, however, the price is worth it, as there are rarely many more costs after the purchase price. With a hotel stay you would have to pay again for the next vacation, with a roof tent you have only a small fee for the campsite, because you have your sleeping place directly with it.

Pay attention to the fuel: extra weight

Of course, the extra weight on the car roof can also increase your fuel consumption. However, it is fair to say that this still does not come close to the consumption of a caravan or motorhome. The roof tent is lighter in comparison and therefore requires less load on your car. There is also a maximum speed for some roof tents. You should adhere to this in order to prevent accidents and to save fuel.

Unsafe during storms & thunderstorms: Attention lightning!

Rain and wind can withstand most roof tents, but in case of a stronger storm or a thunderstorm you should better stay in the car or drive to the nearest hotel. A roof tent does not have a closed metal structure, like a car. Additionally, its place on the roof of the car puts it in an elevated position. This can make lightning strikes dangerous very quickly.

No space for heavy furniture, such as cabinets

A rooftop tent is already one of the space-saving ways to vacation in nature. But due to the more compact size, the space in the roof tent is not comparable with the living space in a fully equipped caravan or motor home. But in return, of course, it is much lighter and cheaper.

Fold in the roof tent: then drive on!

And while you can easily drive from destination to destination, your car is still not 100% freely available. If you’ve already unfolded the tent in the evening, you’ll still have to fold it up to make one trip to the supermarket. However, most models are designed for quick setup and tear down, so this should be quick and you can still buy your well-deserved snack for dinner.

Summary: 5 disadvantages

Here you can find an overview of all 5 disadvantages.

• Higher purchase price
• Slightly increased fuel consumption
• Not suitable for storm & thunderstorm
• Limited living space
• Must be folded in before moving on

Roof tent manufacturer: Our recommendation

If the advantages have made you curious, then you will find here the various roof tent manufacturers. You will find many different sizes, types and models, so you can find exactly the roof tent that suits you.

• Roof tent manufacturer

Roof tent comparison: the best roof tent?

Looking for the right roof tent or strong accessories and equipment for the camping site? Here you will find our shopping recommendations:

• Roof tent comparison

Building savings contract: Saving for real estate financing

A building savings contract is a special type of loan. Building savings contracts usually consist of a savings plan and a real estate loan and are concluded with a building society. The basic idea of building savings and the associated building savings loan is the promotion of home ownership. You conclude the contract if you plan to build or renovate a house in the future or buy an existing property.

The building savings contract quickly summarized.

• Special type of loan
• Consists of savings plan and real estate loan
• Is concluded with a building society
• Serves to promote home ownership

Compare immediately current conditions for your building savings contract in the Immobilien-Erfahrung.de building savings calculator.

Building savings: How a building savings contract works

When you conclude a home savings contract, you specify various points that remain the same over the entire term of the contract. For example, you specify your savings target, also known as the building savings amount, and the term. A typical building savings contract has a term of between seven and ten years.

The building savings contract then goes through three phases:

1. The saving phase
2. The allocation phase
3. The loan phase

You will now learn the details of the individual phases.

Savings phase: Savings period in which equity is built up

The savings phase is the first phase that a building savings contract goes through on the way to financing your property. During this time, you save a contractually agreed percentage amount of the building savings sum. In addition to the savings target, which is between 30% and 50% of the bauspar sum, the duration of the savings phase is also defined when the contract is concluded.

The monthly savings rate is calculated according to the savings amount and term. During the savings phase, it is also possible to make special payments in addition to the monthly payments or even to provide the agreed minimum building savings balance through a one-time payment.

The savings phase in summary:

• Fixed part of the building savings sum is saved up
• Over a set period of time
• Monthly savings rate depends on savings amount and term

As soon as the savings target is reached, the building savings contract enters the second phase.

Allocation phase: Distribution of the building society loans by the building society.

The second phase of bauspar contracts is known as the allocation phase. In this phase, the amount of the bauspar loan is determined. The amount is determined by the difference between the building savings sum and the building savings balance. In order for the contract to be ready for allocation, certain requirements must be met.

The requirements for an allocation of a building savings loan are:

1. The agreed building savings balance was reached
2. Further allocation criteria were met

The exact allotment criteria vary from one building society to another. As soon as the allocation conditions are met, the loan is allocated and can be drawn down. The loan can only be used for residential purposes. This includes, for example, the construction, purchase or renovation of a property.

The loan is tied to a residential use.

Loan phase: disbursement and repayment of the real estate loan

Once you have decided to take out the loan, your building savings contract enters the final phase: the loan phase.

It begins directly after the allocation phase and starts with the loan application. The terms and conditions of the loan were already agreed when the building savings contract was concluded. This is often an annuity loan.

The amount of the building savings sum determined at the beginning influences the amount of the loan and consequently also the monthly repayment installments. In contrast to a construction loan, which often leaves a residual debt at the end of the fixed-interest period, the home savings loan is repaid in full within the term.

The loan phase at a glance:

• Starts with the loan application
• Terms of the loan already specified at the time of conclusion of the contract
• Repayment is made in monthly installments
• As a rule, no residual debt remains outstanding

Advantages of building savings contracts: Security and promotion

Like any financing method, the building savings contract also has advantages and disadvantages. Building savings contracts offer a flexible combination of savings and security for the construction or purchase of a home. They are characterized by attractive interest rates, favorable loan conditions, tax advantages and deposit protection. In addition, a home savings contract can also be used as a hedge against unforeseen events.

The advantages summarized:

• Combination of savings and credit product
• Flexible repayment options
• Attractive interest rate and favorable loan conditions
• State support through premiums
• Safe variant of real estate financing

Disadvantages of building savings: High fees and long commitment

In addition to the advantages, there are also disadvantages, as with all financial products. Due to the necessary prior savings phase, home savings contracts are less suitable for immediate financing.

The disadvantages at a glance:

• Long commitment period
• Low liquidity
• Higher costs compared to other forms of savings
• No availability of building savings in emergencies
• No flexible repayment options

For whom is a building savings contract worthwhile?

A building savings contract is suitable not only for those who want to fulfill their dream of owning a property, but also property owners. In addition to construction or purchase, the loan can also be used for modernization or as a maintenance reserve.

When and for whom is a building savings contract useful?

• People who want to purchase real estate in the next few years
• Investors who want to use government subsidies to build up assets
• Home savings customers who expect interest rates to rise
• Real estate owners who value calculation security
• Home purchase financing supplement

If you belong to one of these groups, a building savings contract can be doubly worthwhile. Building savers are supported by the state and receive state subsidies under certain conditions. The subsidies include the housing subsidy, the employee allowance and Wohn-Riester.

Tip: Taking out a home savings contract is particularly worthwhile during periods of low interest rates.

The Interview: “Digital Art” NFTs

Thank you for taking time for us today, on a busy Monday morning. Most people who search the internet for the word “NFT” certainly still know very little. Could you perhaps summarize briefly and quickly….

What are NFTs, explained very simply?

Stephan Czaja: With pleasure! I also try to keep out as many technical terms as possible. But you have to have heard a few.

NFT means “Non-fungible Token”. Simply explained, a token is a digital object that can contain additional information. This is also how we get to the NFT. “Non-fungible” means “not replaceable.” Here, simply put, every transaction is recorded. Meaning: I publish a GIF in a NFT marketplace, someone buys this GIF and sells it. Every transaction is documented. So even the 2nd, 3rd and 4th buyer knows that it is the original.

Simply translated, a digital file whose ownership is documented.

The big advantage is this: Suppose someone makes digital art and publishes it. No matter if it’s a picture or a video, it can be copied easily and nobody has the reference to the original file anymore. Through documentation (blockchain), you can trace individual files. So you can see who published a file, who bought it and who sold it. Through this transparent trade, values can be measured to individual digital objects, whether image, video or other.

Just like in the “real” art world.

Mona Lisa at the Louvre, Justin Bieber NFT, … Comparison

I always like to explain it with the Mona Lisa. There are thousands of copies, millions of photos, but only one original. We know that it is the original because its history is precisely documented and it hangs in the Louvre today. In principle, the picture is worth no more than the material from which it is made. The value only arises through supply and demand.

Suppose Justin Bieber makes an NFT. Many fans would want to own it, knowing that this object (whether physical or digital art) is from him.

So the big question now is how will the demand side develop? Will digital art establish itself, will it remain a niche product?

Personally, I think there’s just as big a market for digital art as there is for psychic art. Of course, it will take another five years, ten years, for me to solidify the structure, from capital investors and investors, to auction houses – sort of away from “nerds”.

Can you give us a successful example?

Successful examples of NFT art now abound.

Spectacular! 69 million $ for 1 picture

69 million for 1 artwork – The most spectacular sale was the digital work “5,000 Days”. The international auction house Christie’s wanted to integrate the hype about NFT art into their own portfolio. So they looked for artists who were already making digital art. They then found a New York artist who had already been making a digital painting for 15 years, every single day. Perfect! They put the 5,000 photos together and made it into one big, single piece of art.

Artist (Beeple) after the sale:

https://www.youtube.com/watch?v=AXC-_kWqZXo

The artwork was then sold for 69 million dollars. This made the artist the 3rd richest living artist in the world overnight. This shows the potential of digital art.

CryptoPunks and Bored Ape: Successful Collections

CryptoPunks – Especially popular are collections, which are compilations of computer-generated images. Let’s say 1,000 different cats, each with 50 different hats, glasses, hairstyles, which are compiled individually. Among the most successful projects are the “CryptoPunks”.

Here also to see in the marketplace:

• CryptoPunks

Screenshot: OpenSea / CryptoPunks / Lukinski.com

Bored Ape Yacht Club – However, the “Bored Ape Yacht Club” collection was also extremely successful.

Here also to see in the marketplace:

• Bored Ape Yacht Club

Screenshot: OpenSea / Bored Ape Yacht Club / Lukinski.com

What does such a top NFT cost?

Prices for these special, very successful collections are high.

The most successful CryptoPunks work would currently have to be around 120 ETH (Ethereum), which is round about $360,000.

At Bored Ape Yacht Club, the most expensive pieces are currently at 100 ETH, or $300,000, at the current rate.

What can be an NFT?

In principle, any digital object can be an NFT. Primarily, it is about giving a digital object additional information, e.g. sales history or a smart contract.

This is how artists earn (more) money!

This smart contract is particularly interesting for artists. In the normal art market, they profit once when they sell. With NFTs, artists get a percentage for each subsequent sale. The percentage is determined in the Smart Contract itself and is usually between 1% and 10% of the sales price.

Artists earn money:

• Physical art: 1. When sold
• Digital art (NFT): 1st sale + each subsequent sale (pro rata).

NFT types at a glance

Artists can then publish various forms, images, videos, but also accessories for the metaverse in the future. There are already games that work with this, which means that NFTs are also a topic in gaming. Of course, the principle of the classic trading cards can also be easily transferred to the digital world, with a certificate of authenticity.

• NFT images
• NFT videos
• NFT Games
• NFT Collectibles
• NFT Music
• …

Why buy NFT? What do you do with NFT art?

As mentioned before, in the end it is not different from the Mona Lisa or other famous works of art like “Fillette a la corbeille fleurie” by Picasso, “The Scream” by Edvard Munch or even “Adele Bloch-Bauer I” by Maria Altmann. When enough people attach value to an object, but this object is scarce or unique as in this case of artworks, the price increases.

If no one is interested in an object, it has no price, well maybe the material value.

Anyone who buys NFT art assumes that it will increase in value in the future. Accordingly, NFT art is an investment, like many other things, whether Rolex watch or real estate.

What is the cost of 1 NFT?

There are millions of works of art that you can buy, images, videos, many for very small amounts. If you consider that a single collection, of an artist, can already contain 10,000 individual works. Payment is often made in Ethereum, a cryptocurrency. Currently, one unit is worth about $3,000. Some things can be bought for as little as 0.001 Ethereum, which is about $3. So the initial amount is relatively small.

Caution. Take transaction costs into account

Here’s another tip for those who are buying for the first time: Pay attention to the transaction costs when transferring. Without any further settings, the transaction costs can be as high as $70 for some providers. You can always find the settings at the end of the purchase. The faster the NFT is to be transferred (entry in the blockchain), the more expensive, so $70 maximum, approximately.

NFTs from well-known artists are then already more expensive, even new releases can cost several $1,000 here.

How to get NFT?

You can buy, sell and trade such digital art via NFT marketplaces or NFT exchanges. Currently there are about 20 providers, which I have also listed on my website: NFT Marketplaces.

In principle, you can imagine the platforms as well as ebay.

Providers are among others OpenSea, Binance, there are many. Here you can buy an NFT, sell an NFT or even hold it in your wallet, which is a digital wallet. A wallet is a small app, nothing more. Sellers, or artists, put their works online at a fixed price or even an offer price, with duration from 7 days to 6 months.

What are the advantages / disadvantages of NFTs?

If someone actually wants to invest their money in NFTs, they should always keep in mind that they can only resell their artwork if they find a buyer. Ultimately, like the stock market. The only advantage is the potential increase in value, comparable to the first Bitcoins, which were relatively cheap at the beginning.

Be careful though, NFTs are individual objects (tokens) and not exchangeable like shares or cryptocurrency

So remember:

You can only sell if someone wants to buy!

Those who are risk-averse and have “play money,” money that he or she can invest:

• Potential increase in value

For artists in addition, the previously mentioned share, of each additional sale.

What are the disadvantages of NFTs?

As mentioned earlier, there are tens of millions of NFTs. Each one has an individual value. Anyone investing should be well versed and knowledgeable about the art market in general. Buying NFTs is not as “easy” as cryptocurrency, for example.

• Risk of losing money – 1 NFT out of 1.000.000 has success

Wow! Thank you for the detailed interview.

If you want to learn even more about NFTs, including coins, tokens and the blockchain, read more on Stephan Czaja’s website here.

NFT: Blockcain, Coin, Token, Marketplace – Step by Step

NFT – Digital Art, a new phenomenon. Here you will learn everything: What is an NFT? How do you buy NFTs? What marketplaces are there and how is the art market developing for investors. Meanwhile, higher prices are being achieved in the digital art market than in the physical one. Collections like “CryptoPunks” , “Bored Ape Yacht Club” are just two of the most famous works of digital art. The work “5,000 Days” made the artist overnight the 3rd richest living artist (sold at the price of $69 million at Christies). Buy, sell, collections and picture frames for digital art. Welcome to the world of NFT.

• NFT: Digital Art – external

Why finance?

Acquiring a property is an important decision, whether as a capital investment, a home of one’s own or as a private provision. With the different types of financing it is possible for everyone to make his first home or his first capital investment possible. Before you enter into a financing you should deal with some points before. You should check your equity, consider the incidental acquisition costs, calculate interest and repayment, housing allowance and reserves, and calculate your monthly burden.

Own home or real estate as an investment

Buying your first own apartment or house is a purely emotional decision, whereas in the case of real estate as a capital investment, it is purely a matter of the economic aspect and therefore an emotionless decision must be made. In both cases, however, it is important to deal with a checklist and the ancillary purchase costs in order to avoid serious mistakes.

Buy first apartment

Buying your first own apartment is a great experience in life. To ensure that nothing goes wrong when buying your first apartment, it’s best to have a checklist at hand!

• Buy first apartment
• Buying an apartment: Checklist

Purchase price + ancillary purchase costs / credit rating (rule of thumb: how much is left over in the month?)

Buying an apartment or house always involves additional costs! To be able to cover these, you should think in advance about how high the maximum purchase price may be and how much money is available per month.

• Maximum purchase price
• Incidental purchase costs

Types of financing

If a property is purchased, the purchase price is usually paid off with the help of real estate financing. For this purpose, the buyer can choose from various types of real estate financing. From annuity loans, partition loans, full financing, construction financing to many other types of financing.

But what does financing actually mean? It is a measure for the procurement and repayment of capital. But some forms of financing require security in the event of default, which must then be recorded as a mortgage or land charge in the land register.

Annuity loan: Probably the best-known form of financing

An annuity loan is a typical form of real estate financing. The fixed installments must be paid regularly and consist of an interest and repayment portion. The special feature of the loan is that the amount of the installment remains the same throughout the entire term, but the ratio of interest and repayment changes nevertheless. With each payment, the loan debt decreases and the interest portion thus decreases, but the repayment portion increases.

Who is this type of financing suitable for? For security-conscious investors who want to count on fixed rates over the fixed interest period.

The most important in a nutshell:

• Fixed rates
• Composition of interest & repayment portion
• Steady rate
• Change of the interest & redemption ratio

Advantages and disadvantages of the annuity loan

Probably the greatest advantage of this typical form of financing is the constant installment, which allows a fixed monthly budget to be planned precisely. It is also often possible to make unscheduled repayments at certain times and thus repay the loan more quickly. One of the disadvantages, however, is a long fixed interest rate, which means that you are tied to monthly installments for a longer period of time. If your personal situation changes and you want to repay earlier, you will have to pay a high full repayment penalty for the early repayment. After expiration of the debit interest rate commitment, follow-up financing is usually required; the interest rates are based on the current market investment, which can be either positive or negative.

Advantages:

• High planning reliability
• Fast redemption
• Decreasing interest burden
• Accurate calculation of follow-up financing
• Residual debt fixed from the beginning

Disadvantages:

• No change of contract possible
• Agreement of unscheduled repayments for flexibility
• Credit institutions do not always accept unscheduled repayments
• Borrower must assume full repayment penalty

Reverse mortgage: mortgaging the owner-occupied home

There are different forms of financing to finance the dream of owning a house or apartment. The reverse mortgage is one type of many financing options. It is a loan that is paid out by an insurance company, bank or private individual. The basic idea behind it is that property owners borrow against their home and in return receive a loan with a fixed term from a bank, insurance company or private individual. The loan amount is then transferred as a monthly annuity or a one-off payment. A real win-win situation: owners can stay in their home and even supplement their pension at the same time.

Who is the reverse mortgage suitable for? This form of financing is particularly worthwhile for older people who are already retired and no longer want to leave their home, but still want to supplement their pension.

• Disbursement of a loan by insurance company, bank or private person
• Mortgaging of the home
• In return receipt of a loan with a fixed term
• Paid out as a monthly pension or a one-time payment

Advantages and disadvantages reverse mortgage

Do you have little or no equity capital available for buying a house? Then the reverse mortgage is exactly the right form of financing for you. It is especially suitable for retirees who have paid off their property with savings and income all their lives. A special advantage is that owners can live in the property until the end of their life and receive money for their property during that time. The pension can thus be supplemented. Thus a high planning security is created, since the height of the annuity, interest rate and running time are specified in advance. Clear disadvantages of this form of financing are fees and the interest rate of the loan. There may also be closing fees if the average age is exceeded and the inheritance is significantly reduced.

Advantages:

• Lifetime right of residence
• Pension is improved
• No interest or redemption payment
• Heirs can redeem real estate

Disadvantages:

• High fee costs
• Low payout amounts
• Elimination of inheritance
• Maintenance of the property

Here you will see the verification of the equity and monthly income, in order to then be able to set up a type of financing:

Repayment loan: Decreasing installment burden during the term

An amortizing loan is a particular form of financing characterized by a decreasing installment burden over the term of the loan. The interest portion decreases from installment to installment, so that it constantly decreases and becomes more and more similar to the repayment amount. Wondering if the amortizing loan is right for you?

If you want to pay off your loan quickly and efficiently, then this form of financing is suitable for you. However, you should have a regular and solid income so that the high installments can be paid at the beginning.

• Decreasing rate burden over the term
• Constant reduction
• Fast & efficient redemption
• Regular, solid income should be available

Advantages and disadvantages of the amortizing loan

The amortizing loan brings with it advantages and disadvantages that should definitely be weighed up against each other before concluding a financing deal. A significant advantage is that the borrower pays off a fixed amount per month, thus reducing the residual debt. However, the fact that the residual debt remains relatively high at the beginning and only decreases sharply at the end of the term is a clear disadvantage.

Advantages:

• Faster reduction of residual debt & interest amounts
• Free capital can be used
• Landlord may use proceeds from rent for increased repayment of principal
• Low total cost of credit

Disadvantage:

• Residual debt high at the beginning
• Additional costs for early reduction of residual debt
• Loan form rarely accessible to private individuals
• Longer term in most cases

Building savings contract: Combination of loan & savings

Very simple! This is a combination of real estate loan and usual savings. First, it is determined how much should be saved per month, which then results in the building savings amount. The contract is divided into several phases. In the first phase, the saver pays in a fixed amount each month. He then receives interest on this amount.

The second phase begins when a certain amount has been saved, for example 35 percent of the total amount. Then comes the allocation. You receive the right to a building loan at a lower interest rate for the remaining amount. The building savings contract is suitable for people who want to finance their dream of owning their own property as cheaply as possible. However, this financing option is not intended for short-term financing goals.

• Combi of loan and savings
• Different phases
• Monthly fixed amount with interest
• Allocation starts from a saved amount
• Right to soft loan
• Long term financing

Advantages and disadvantages of a building savings contract

A building savings contract has advantages and disadvantages. You can read more about this type of financing here.

Advantages:

• High security
• Capital guarantee
• Profit through government subsidies
• Intended use flexible

Disadvantages:

• Interest on credit balances lower in the initial phase
• High processing fees
• Monthly charge higher than other financing

Full financing: With little capital to own a home

There is little or no capital available for a real estate purchase? There is no opportunity to save money or you have just started to do so? This is exactly when full financing comes into play. The credit institution then takes over the missing equity capital and finances if necessary also the building additional costs. But then you have to keep in mind that the interest rates are higher.

• Little to no capital available
• Credit institution assumes equity
• Financing of ancillary construction costs
• High interest

Advantages and disadvantages of full financing

A property can be financed also quite simply without own capital funds, that can bring advantages, but also disadvantages with itself. First of all, short waiting periods are guaranteed, because you do not have to save until a certain point in time, the dream of owning your own home can be fulfilled directly. In addition, it is always good to finance as early as possible, so that one is free of costs before retirement age. Another advantage is that possible savings can be used for repairs or new furniture. But what are the disadvantages? There is a risk that the repayment can cause problems due to possible changes. This can be, for example, unforeseen unemployment or even incorrect calculation. Another point is high interest rates.

• No long waiting time
• Earlier repayment of the loan
• Equity subject to change

Disadvantages:

• Higher interest rates
• Longer redemption period
• Unforeseen life changes

A number of staff review the current market rate and adjust it to current loans:

Variable loans: Flexibility through variable interest rates

This is a type of financing that is particularly suitable for short-term real estate financing. The good thing about this form of financing is that you do not have to pay fixed debit interest, because the interest rate is always adjusted to the current market interest rates. The interest rates are always based on the Euribor money market rate. But what do you mean by Euribor interest rate? Very simple. It is a key interest rate of the European Central Bank. The interest rates are adjusted every three to six months to the interest rates of the variable loan.

But for whom is this form of financing actually suitable? Clearly for buyers with a willingness to take risks. Likewise for buyers and builders for whom financial security is guaranteed.

• Short-term real estate financing
• No fixed debit interest
• Adjustment to current market interest rate
• Interest is adjusted to the loan every 3 – 6 months

Advantages and disadvantages variable loan

Are you interested in a variable loan? Then you should definitely weigh up the pros and cons beforehand. It is clear that this is a high-risk loan. An unexpected rise in interest rates not only leads to higher costs, but also increases the loan rate. However, the loan also comes with its advantages. If the interest rate level remains the same over time or even decreases, then you save on the real estate loan. In addition, the loan can be terminated with a notice period of 3 months. Alternatively, borrowers also have a right to make unscheduled repayments of up to 100% at any interest rate adjustment.

Advantages:

• At Euribor waste useful, interest rates more favorable
• High security
• Cancelable at any time

Disadvantage:

• Development of interest rates uncertain
• Interest rate fluctuation makes monthly costs unpredictable

Construction financing with a life insurance

Normally, a construction loan is combined with a capital policy. This means that the buyer pays interest only at regular intervals. The repayment of the loan follows with the disbursement of the loan.

Advantages and disadvantages construction financing

As with any financing, there are advantages and disadvantages to financing construction with life insurance. One significant advantage is that a home savings contract with life insurance is more favorable than an annuity loan and the loan is also secured in the event of death. One disadvantage is that the return is very low.

Advantages:

• More favorable than a normal annuity loan
• Credit protection in the event of death

Disadvantages:

• Low return

Connection and interim financing

These types of financing are referred to as financing that is usually only invested for a short period of time. Here you can learn more about the respective interim financing:

Follow-up financing: renegotiation of the loan

This form of financing is a renegotiation of an existing loan. If the previous construction or real estate financing has expired after the fixed-interest period, one must deal with the follow-up financing from this point at the latest. Many buyers take out a loan to fulfill their dream of owning their own property. The fixed interest period for a house financing goes between five and fifteen years. A multiplicity of borrowers do not create it however in this time span the loan back to pay. This is precisely when borrowers can agree on a new arrangement for repaying the remaining debt.

Interim financing: bridging bottlenecks

Interim financing is financing that only runs for a short period of time. This form of financing can be used to bridge financial bottlenecks for a certain period of time. The owners of a property can provide immediate financial resources and then use them as equity.

Refinancing: restructuring of the loan

What is actually meant by refinancing? It means an adjustment or restructuring of a loan. Whether you have a personal or business loan, you should definitely have that loan reviewed every few years to make sure you have the most favorable loan. For example, you may have taken out many small loans that can be combined into one.

When is a building too old?

The commercial audit and the technical audit are followed by the valuation by year of construction. So when does a building have too many years on its back? For you as a buyer of a property, the year of construction is a central factor in the final purchase price. The older and more dilapidated a property, the lower the price, but you have to expect high renovation and maintenance costs. The newer and more modern, the higher. Exceptions are buildings under monument protection.

When buying real estate applies:

• The year of construction and the age of buildings, are always a key value factor for real estate buyers.

If you want to know more about the years a property was built, read our article on properties by year of construction here.

Advantage and disadvantage of old real estate?

Advantage of old real estate:

• Lower purchase price

Disadvantage of old real estate:

• High maintenance costs

Does the age of a property matter?

Maintenance, renovation and modernization play an important role in real estate. If you are the owner of a building or apartment, you should take care of it regularly, so real estate will last for many years. Nowadays, the trend goes in the direction of old buildings, many people are attracted to the charming apartments with high ceilings and stucco. Such an old building is almost always in a good location, so in the city center and thus also cost a lot of money. So you should always weigh whether you buy a new or old building and in what location this property is located.

• Old building in downtown very expensive
• Through maintenance, renovation and modernization, real estate lasts longer
• Trend: old apartments

The next step: Incidental purchase costs

Buying a property is not always cheap. But so that you don’t rush blindly into financing, the final purchase price can be calculated quite easily. Find out how here! Important factors here are the incidental purchase costs, which include the land transfer tax and the broker’s commission. Here you can find out how these costs contribute to the final purchase price of your first home. This way, nothing can go wrong with your first real estate purchase!

Year of construction and condition of real estate: defects, damages & Co.

We know now, about the age of a property must be well thought. You want to invest in an old building? Then you need to consider a few things before buying. Old real estate brings some advantages, but also disadvantages. What defects do buildings from a certain period have? We have compiled a brief overview of all the facts of the different construction years in comparison.

• Year of construction and condition of real estate

Leasehold: What is it actually?

Leasehold, also called hereditary building right, means that the right of ownership and the right of use are permanently separated. When you build on a leasehold land, you do not buy the land, you lease it from the owner for a certain, contractually agreed time. Thus, there are two parties, the ground lease grantor (1st person) and the ground lease taker (2nd person).

The grantor of the ground lease grants the holder of the ground lease a plot of land for development. The former receives a ground rent in return.

Here is the ground lease summarized in brief:

• Ownership and usage rights permanently separated
• 2 parties: ground lease giver and ground lease taker
• Leasehold lender cedes a plot of land for development
• Leasehold owner receives ground rent for it

Advantages and disadvantages of ground lease: costs and purchase price

Here we have listed all the advantages and disadvantages of leasehold.

Advantages of ground lease

A leaseholder only builds or buys the property on the leasehold land. This lowers the purchase price, because you don’t have to pay anything for the land.

• Leasehold reduces purchase price

Disadvantage of ground lease

As a leaseholder, you always have to pay a ground rent, which results in additional costs. In addition, the mortgage lending value of the property at the bank decreases, because due to the fehelenden land value and the ground rent, the hereditary building lease has a negative effect on the determination of the mortgage lending value.

• Permanent payment of the ground rent
• Mortgage lending value of the property decreases at the bank

Tips for capital investors: Tax deductions

As an investor, you cannot pass on the ground rent to the tenant, which increases the monthly charges. On the other hand, the costs are tax-deductible. Since the financing of ground leases is complex, we have briefly summarized here what you should pay attention to when buying:

• Residual term at least 30 years
• Purchase price plus imaginary land share min. 30% cheaper than in the market

The next step: social binding and post-binding

Before looking for your first condominium, you should know everything about social commitment in housing. Here you will learn all the pros and cons and what you need to know about everything from low-interest loans by public authorities for social housing, to obligations, to the post-commitment period.