Checklist: Goals and criteria of the first condominium

When buying your first property, you should make a well-considered decision. You should set a goal for yourself, which criteria play the biggest role for you in a property and in no case buy for emotional reasons. Make your decision based on business facts and figures that compare well.

In the following post, we’ve broken down for you the points for setting goals when buying a property. Here are our eleven points summarized in short questions:

1. Self-interest or capital investment?
2. What is the maximum purchase price?
3. How low is the maximum gross rental yield?
4. Should I buy rented or unrented?
5. Which cities are eligible?
6. What is the perfect location?
7. Invest in existing or new buildings?
8. How old can a property be?
9. How big does a property need to be?
10. Ground lease?
11. Social binding or post-binding?

Step 1 – Self-interest or rather capital investment?

As already explained in our article on the subject of owner-occupation vs. capital investment, it is always better to use the first property as a capital investment. Because, with owner-occupancy, you always pay 100% of the running costs yourself. Capital investors, on the other hand, primarily let the tenant and the tax office pay.

• Here you will find everything on the topic of self-interest vs. capital investment

Here in brief what self-interest and capital investment mean:

• Self-interest: 100% responsible for costs
• Capital investment: Tenant and tax office pay

Step 2 – What should be the maximum purchase price?

This question depends on many factors. However, the most important criterion is probably the creditworthiness in terms of assets, as well as the monthly balance of assets and equity. These are all decisive factors for your bank when it comes to deciding on financing.

• Read more about maximum purchase price here.

Here is a brief overview of the most important factors:

• Credit rating
• Monthly balance sheet
• Equity

Step 3 – How low can the minimum gross rental yield be?

You want to make the biggest possible profit from your apartment. How high must the rental yield be at least so that the tenant ideally pays off the property and you yourself do not have to pay for repayment and interest?

• Read more about minimum gross rental yield here.

Here, in brief, is the formula for calculating the gross rental yield:

Formula: Annual rent / purchase price x 100 = gross rental return

This goal is also called efficient asset accumulation. Accordingly, the gross rental yield of an investment property should also be high.

Step 4 – Buy a property rented or unrented?

When buying an apartment for personal use, it is always advisable to buy unrented. The exception: notice of termination for personal use. For capital investors, however, an unrented property would be much more time-consuming, since you have to look for new tenants.

• Read all about buying rented or unrented here.

Buy unrented as an investment:

Here in brief the advantages and disadvantages!

Advantages:

• Renovation work: Immediately feasible and deductible
• Use of own lease
• Market rent

Disadvantages:

• Vacancy at the beginning: loss of rent
• Renovation expense

Buy rented as an investment:

Advantages:

• No time required for new leasing
• Payment behavior and behavior of existing tenants is known
• Low risk of vacancy

Disadvantages:

• Rental mostly below current market value
• Existing rental agreements must be taken over

Step 5 – Which cities are eligible?

A-, B- or C- location, where is the best place to buy my property? The central question here is whether I choose an investment property or a yield property.

• Read more about layer types here.

A, B or C position

Here is a brief overview of how which of the three layer types is defined:

• A-location (simply: metropolis)
• B-location (simple: large city / city with positive development)
• C-location (simple: small town / country in stagnation)

Where do I buy which property?

The different location types compare areas. Higher yields go hand in hand with lower appreciation. Therefore, depending on the location, one chooses between yield or investment property.

• Investment property: Only to be found in A-location
• Yield property: Good B- or also C- location

Macro, meso, micro location

After the comparison of the A-, B- or C- location, districts and the concrete neighborhood are compared.

• Read all about macro- meso- micro- location here.

Here is a brief overview:

• Macro location (A, B and C location, i.e. where in the country / which city?)
• Meso location (where in the city)
• Micro-location (exact location)

Step 6 – What is the perfect location?

Where exactly should I buy my first property? Owner-occupiers and capital investors, as well as yield properties or investors with the goal of value appreciation, accordingly, the decision of the perfect location is different. Here we go into the analysis again to help you find the best location for your goals!

• The perfect location

Step 7 – Invest in existing or new buildings?

When buying a home, in addition to the question of owner-occupancy or capital investment and return or investment property, one wonders whether to invest in existing or new construction. Both forms have their advantages and disadvantages. In this article, you will learn what they are.

• Read all about existing or new construction here.

Advantages of new construction

• Current state of the art
• Low risk for maintenance and repairs
• Co-determination in interior design

Disadvantages of new construction

• Higher purchase price and incidental purchase costs
• Lower rental yield
• High value loss at the beginning
• Other costs for public development

Step 8 – How old can a property be?

You want to invest in an old building? Then you need to consider a few things before buying. Old properties have some advantages, but also disadvantages. We have compiled a brief overview of all the facts of the different construction years in comparison.

The age of a property is a decisive factor when it comes to buying a property. But what are the differences and defects depending on the age and year of construction of a property? Is it worth investing in an aging house or apartment?

• Year of manufacture and condition

Step 9 – How big does a property need to be?

How big should my first property be? Micro-apartment, 2, 3 or even more rooms? This question is answered here by comparing living space for owner-occupancy and investment. In general, the number of square meters and the room layout is particularly important.

• Read all about the maximum size of a property here.

Here is a brief summary of the criteria for owner-occupants:

• Well-being has priority
• Plan sufficient living space for the future, e.g. family planning
• Area not too oversized > Purchase price, ancillary costs
• Equipment can be improved later

Here is an overview of the three goals for capital investors:

1. High rental yield
2. Good rentability
3. Few vacancies

Step 10 – Is a ground lease necessary?

When dealing with the topic of ground leases for the first time, many questions arise. What is a ground lease and does it make sense? Also one wants to know whether one can deduct the costs of the ground lease, the ground rent from the tax? All your questions will be answered here.

• Read more about ground leases here.

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

Step 11 – Social binding & post-binding?

Before looking for housing, you should know everything about the topic of social commitment in housing. Here you will learn all the pros and cons and what you can do everything from low-interest loans by public authorities for social housing, to obligations, to the grace period.

• Here you will find everything else about social binding and post-binding.

Social binding summarized in brief:

• Affordable housing through public funding
• Very good conditions for loans or grants
• Rent for persons with a certificate of eligibility for housing

The rebinding in a nutshell:

• Commitment to social housing until loan is repaid

Living space for owner-occupiers: criteria

Here, the focus is clearly on one’s own well-being. Also, one should have a view on the future, personal development, such as offspring. In no case should you think too “big”, because the larger the area, the higher the purchase price. Another point; The equipment you can always expand, the living space itself only in rare cases.

Here is a brief summary of the criteria for owner-occupants:

• Well-being has priority
• Plan sufficient living space for the future, e.g. family planning
• Area not too oversized > Purchase price, ancillary costs
• Equipment can be improved later

Living space for capital investors: criteria

When you buy a property as an investment, your main goal is to rent it out in order to generate sufficient cash flow. This is achieved by setting three goals. Firstly, a high rental yield, good rentability and low vacancy.

Here is an overview of the three goals:

1. High rental yield
2. Good rentability
3. Few vacancies

4 Tips for Investors: Exclusive Insiders

Here we have for you four exclusive tips for buying your condo.

Tip 1: Relation of size and number of rooms

At the beginning, the relation of size and number of rooms is very important. Example: A 120 m² apartment with 2 rooms is just as difficult to rent as a 60 m² apartment with 5 rooms.

Tip 2: Division of an apartment

Large apartments are more difficult to rent than small and medium-sized apartments, which is why their vacancy rate is also lower. In the long run, you can earn a good return on these apartments. So if you are offered a larger property in an A-location, you should think about renting it out as a shared apartment. Here, too, a high return can be expected.

With a four-room apartment that you rent to a family, the return is lower, but the tenant turnover is not as high.

Tip 3: Number of rooms and square meters

In the long term, typical apartments around 50 to 80 m² with 2 to 3 rooms have proven themselves.

Tip 4: Go for one-bedroom apartments

If you buy in a good A or B location, you should rather go for 20 to 40 m² one-bedroom apartments, because there are more and more singles on the market. With a smaller living space you achieve a higher rent per square meter.

The next step: ground lease

When dealing with the topic of ground leases for the first time, many questions arise. What is a ground lease and does it make sense? Also one wants to know whether one can deduct the costs of the ground lease, the ground rent from the tax? All your questions will be answered here. Learn in this article the advantages and disadvantages on the subject of ground lease for personal use and capital investment.

Existing or new building: advantages and disadvantages

When buying a home, in addition to the question of owner-occupancy or capital investment and return or investment property, one wonders whether to invest in existing or new construction. Both forms have their advantages and disadvantages. In this article, you will learn what they are.

• Existing or new construction

Buying new construction: Is New Always Better?

New construction refers exclusively to completely, newly built objects. On the one hand, they are uncomplicated because everything is state of the art, resulting in a low risk of maintenance and repair costs. On the other hand, you have to expect significantly higher investment costs here, which means a low return on investment and a higher incidental purchase price payment.

Advantages of new construction

• Current state of the art
• Low risk for maintenance and repairs
• Co-determination in interior design

Disadvantages of new construction

• Higher purchase price and incidental purchase costs
• Lower rental yield
• High value loss at the beginning
• Other costs for public development

Buy stock: Old also has its advantages

Existing real estate has many advantages. In addition to a lower purchase price, you only have to pay a low amount of incidental purchase costs. However, due to the age of the building, there is a higher risk for maintenance and repairs.

Advantages of stock

• Low purchase price and incidental purchase costs
• Low use of equity capital
• Higher rental yield
• No costs for public development

Disadvantages of stock

• Higher risk for maintenance and repairs

Read more about existing or new building/ Immobilien-Erfahrung.de

Conclusion: Invest in new or existing buildings?

Whether new construction or existing depends on your individual goals. Nevertheless, existing properties with a higher return and a low purchase price and ancillary purchase costs are the more sensible investment to buy your first property.

The next step: Year of construction and condition of a property

You want to invest in an old building? Then you need to consider a few things before buying. Old properties have some advantages, but also disadvantages. We have compiled a brief overview of all the facts of the different construction years in comparison.

Owner-occupiers: what matters to me?

Real estate for personal use is often associated with an emotional value, you have to like it. Accordingly, the property is preferred to the locality. Factors such as the route to work or kindergarten then take priority; in short, the micro-location becomes decisive.

Here again in short:

• Property that pleases personally
• Proximity to work/ kindergarten/ school/ …
• Micro location/quality of life is priority

Resale value: location is decisive

However, you should always keep in mind that it could still be that you have to sell your dream property again later. Reasons for this can be age justice, job change or the growth of the family. Therefore, one should always have a look at the location of the property when buying, because this determines the resale value.

C-location: The dream of the country

If you want to buy your dream property in the countryside, in a C-location, you have to expect possible losses. Here, briefly, the factors that are responsible for a decrease in property value.

• Declining population figures
• Negative development of the economy
• Tight local market, little demand

Capital investment: yield and investment property in comparison

Capital investors always choose the location with the goal of investment or yield property in mind.

Yield real estate as an investment

The aim here is to generate direct cash flow through rental income. This is achieved through low purchase prices and a high rental yield, which covers the costs incurred such as repayment, interest and operating costs. It is best suited as a B or C location here.

• Direct cash flow
• B- or C- position

Investment real estate as a capital investment

Investment properties pursue the goal of value appreciation in the long term. This is usually only found in A- locations or even less in good B- locations. The reason: The purchase prices are enormously high, so the running costs cannot be covered by the rental income.

• Value enhancement in the long term
• A- Location

The next step: Determine maximum purchase price

How much real estate can I afford at all? This question is asked at the beginning of the process of buying what may be your first home and depends on many factors. These include your creditworthiness and self-disclosure, in terms of assets, the monthly asset balance (repayment), the equity capital and the mortgage lending value of the property to be financed. Here you will learn everything you need to know to determine the maximum purchase price.

A- B- C- position: (basic) positions

The classification into A-, B- and C- location is a great help in identifying cities and regions where real estate is offered for sale. The different location types thus compare areas. Higher yields go hand in hand with lower appreciation. Therefore, depending on the location, one chooses between yield or investment property.

Here in short:

• A-location (simply: metropolis)
• B-location (simple: large city / city with positive development)
• C-location (simple: small town / country in stagnation)

A- Location: Germany’s metropolises

Properties in desirable metropolitan locations, with high purchase prices and low returns, in short, this is where you will find investment properties.

Investment property: high costs, low return

If you want to buy a property in A-location, you need to have a good starting capital available, because real estate in A-location is expensive. Investment properties bring no or almost no cash flow through rental income, because the square meter prices are enormously high. Although the value of the property will increase in the long run, the increase in value of the property can only be assumed through speculation.

Here briefly summarized the advantages and disadvantages of a property in A- location:

• Very expensive
• High square meter prices as well as operating costs cannot be covered by rental income
• No immediate cash flow from rental income
• Value appreciation very speculative
• But: Value of the property increases in the long term, because A-locations are in demand.

A-locations in Germany

Which cities generally count as A-locations? Here according to population:

• Berlin
• Hamburg
• Munich
• Cologne
• Frankfurt on the Main
• Stuttgart
• Düsseldorf

Here you can find more information to Lagearten/ Immobilien-Erfahrung.de

B- Location: Germany’s best pieces

Properties in B-location are called properties in cities that are close to metropolitan locations and / or cities of regional importance, with moderate purchase price and good yield, in short, here you will find yield properties.

Real estate yield: steady cash flow, moderate prices

These are cities close to metropolitan areas (A locations), such as Bonn for Cologne or Essen for Düsseldorf, as well as cities of regional importance. Moderate purchase prices and good rental yields can be found here. This means that you can cover all your costs, be it repayment, operating costs or reserves, through the rents without any problems. Again, tenants and tax office pay off the property almost without your intervention!

Here is a brief overview of properties in B- location:

• Moderate purchase prices
• Rental income covers costs, ideally with surplus
• Lower increase in value than properties in A-location
• Direct cash flow from rental income

B location in Germany

B locations include:

• Leipzig
• Dortmund
• Food
• Bremen
• Hanover
• Nuremberg
• Wuppertal
• …

C- Location: Small but fine – It becomes rural

C-location properties describe real estate in cities, close to metropolitan locations, with moderate purchase price and good yield, which means yield properties with higher risk.

Real estate returns: higher risk due to vacancies

C-locations are cities with a weak structure and / or cities and towns in rural areas. Nowadays, many people move to the big cities, which is why the risk of vacancy is significantly higher for a property in a C-location. The increase in value of the property is also more difficult to calculate in the long term.

Here briefly summarized real estate in C- location:

• Low purchase price
• Rental income covers all costs
• Risk of vacancy and dilapidation
• “Good bargains”

A- B- C- position in comparison: How much is in it for me?

On this infographic you can easily see a summary of the three types of locations. Properties in A- location bring the least return, but have the lowest risk and the highest appreciation. B- Location properties are in the middle, with an acceptable return, low risk, and medium appreciation. C-location properties, on the other hand, pay the highest return, but have a very high risk and a high loss in value.

More about A- B- C – Location/ Immobilien-Erfahrung.de

In the end, you decide what is the most profitable location for your real estate purchase!

Next step: Macro- Meso- Micro- Location

You are already fully in the topic of buying your first own apartment? Great, because once you’ve made a rough choice between A-, B- or C-location, you now move on to the analysis of the location. This involves comparing city districts and the specific neighborhood. You want to know how this works? Then you’ve come to the right place!

Return vs. investment real estate

Yield vs. investment property – What is it anyway? What is the basic difference between these two types of investment? And what exactly is an A, B or C location? The most important thing is that both types of investment yield a profit for you. In which form, you can read here. Here you can find out everything you need to know about the yield and the investment of a property.

• Return vs. investment real estate

Rented property: termination due to own need

Owners have the right to terminate because of own need, as long as the notice of own need meets all legal deadlines, which are 3 to 9 months. In general, you as landlord and owner must really need the apartment for yourself or a family member, there must be understandable and valid reasons.

Here are the facts in brief:

• Legal deadlines between 3-9 months
• Comprehensible reason

Read here everything about the law on own use/ Immobilien-Erfahrung.de

Own need: reasons and beneficiaries

Own use must always be justifiable and may only be available for the closest family members.

Reasons for own use: examples

The desire to own must always have a long-term component; A short or temporary use as a transitional phase would not be a justification.

• Desire to live in own apartment / house
• Desire to have children, housing expansion
• Second home or house, absolutely necessary for professional reasons
• …

Beneficiaries: Examples

You can use personal use for yourself or for “beneficiaries”. But, who is included? Recognized are:

• Children
• Parents
• Grandparents
• Siblings
• Grandson
• Nieces and nephews
• Children-in-law and parents-in-law (if marriage still exists)
• Separated spouses (without divorce petition)
• Registered civil partner (without current request for annulment)

Next step: comparison of layer types

You have the necessary change together and have decided to invest in a property. But where exactly do I buy this property? First of all, the question arises: yield or investment property? This question plays a major role in the choice of location of a property for capital investors but also owner-occupiers. What exactly does A, B or C location mean and what are the differences? Read here everything about the location of real estate with its advantages, disadvantages and risks.

Owner occupation: Unrented for immediate move in

If you buy a property such as a condominium for your own use, you probably want to move in immediately. In this case, it is less worthwhile to buy a property that is already rented. If you buy a property that is rented out at the time, you can terminate the tenant’s lease on the basis of personal need.

Termination for own use

Owners have the right to terminate due to own need, as long as the notice of own need meets all legal deadlines, which are 3 to 9 months. This only applies if you really urgently need the property yourself or for a family member.

Here is a brief overview:

• Termination for own use possible
• Legal deadlines between 3-9 months
• Comprehensible reason (you or beneficiary move in)

Real estate as an investment: Buy rented

Buying rented or unrented always depends on the given situation. There are advantages and disadvantages for both options, which must be considered in the respective situation.

Advantages and disadvantages of rented objects

Advantages:

• No time required for new leasing
• Payment behavior and behavior of existing tenants is known
• Low risk of vacancy at the beginning

Disadvantages:

• Rental mostly below current market value
• Existing leases must be taken over in most cases

Real estate as an investment: Buy unrented

Again, you will find certain advantages and disadvantages to buying unrented properties. What you end up buying still depends on the circumstances of the property you are buying.

Advantages and disadvantages of unrented properties

Advantages:

• Immediate renovation work possible and deductible
• Market rent for new leases
• Own lease can be used

Disadvantages:

• Vacancy at the beginning: loss of rent
• Expenses for renovation and new leasing

Conclusion for investors

Decide for yourself which factors add the most value to your goals. Depending on that, an unrented or rented property will fit better into your personal strategy.

Next step: termination of own use

Buy a rented property and terminate the tenant’s lease due to personal need? No problem, if you as a landlord have comprehensible, valid reasons why you need the property. Regardless of whether it’s a house or an apartment, here you’ll learn everything you need to know about owner occupancy.

Mistake 1 – The location is decisive

A property in a poor location without high demand quickly becomes a problem. Therefore, one should always buy in an attractive location.

Property in a bad location:

• Low demand
• Renting becomes difficult
• Consequence: Vacancy

Therefore our tip: Pay attention to A- B- and C- layers!

Real estate in good location:

• Buying in large cities (not metropolises in top A locations), example Bonn or Leipzig
• Conurbations, the famous Speckgürtel, with good B-location like everything around Munich, Darmstadt near Frankfurt
• B-location cities in demand, such as Kassel, Braunschweig or Heidelberg

Mistake 2 – A property that is too specific

Special real estate requires a special group of buyers – and this group is not easy to find. That’s why you should always go for real estate whose utility and use covers the needs of the broad masses. In our article on real estate types you can learn everything about apartment, house and co. So what are you looking for on the real estate market?

So what’s there to keep your hands off of?

• Loft/ Villa/ Apartment, everything that exceeds the normal consumer
• This type of property must be in a top A location in order to sell/rent it.

Our tip: 1-2 room apartment

In all locations, be it A, B, or even C, 1-2 room apartments can be found and the demand is constantly increasing. Since more and more people live alone, a look at the single apartments is always worthwhile.

An example of a special property in C- location: hard to sell.

Mistake 3 – Self-interest instead of investment

You can read a lot about owner-occupation in our article on the subject. Here you will learn again in a nutshell why it is not advisable to use your first property for personal use. Therefore, our tip: Do not buy an owner-occupied property without capital investment, because you are responsible for 100% of the operating costs, neither tenants nor the tax office comes to your financial aid.

Reasons against self-interest

• Self-interest is the most expensive way to live
• One will never be completely rent free due to ongoing costs
• You pay off the property yourself
• Self-interest reduces credit rating
• Property is not suitable for old age later

Mistake 4 – A house as a first property

If you choose a house as your first property, you must also be aware that this means that you will have to bear 100% of the costs. Therefore our tip: Buy a condominium as your first property.

Condominium: Cost allocation made easy

As soon as you acquire an apartment in a multi-party building as your property, you become part of a community of owners. Thus, all running costs incurred for repair, maintenance and modernization are divided among all parties of the house.

Here is a small example:

• Homeowner (100%): 12,000 euros
• 4-party house (25%): 3,000 euros (-9,000 euros)
• 8-apartment house (12.5%): 1,500 euros (-10,500 euros)

Mistake 5 – Let the emotions flow in

Real estate should always be viewed rationally instead of emotionally. Therefore, our tip: Never buy a property out of emotion. Even if you find the property at first sight insanely beautiful, think again well about it. Often such buildings are due to the year of construction and the condition dilapidated or in need of modernization, whereby for you in the end much more costs than actually jump out.

So what should you do?

• Avoid impulse buying!
• Testing at commercial and technical level
• Examination of yield, purchase and resale value

A typical property that is bought out of emotion: A lot of charm, little profit.

Mistake 6 – No attention to resale value

A really great purchase price! – And now? How much do you get out of it in the end? Many people don’t pay attention to the resale price when buying a property, but you definitely should!

The decisive factors for the resale value are:

• Property type
• Location of the property (see return or investment)

Comparison: location and increase in value

Let’s compare the 3 types of location and the increase in value:

• A- location: value increase at 4-6% per year
• B- location: value increase at 1-2% per year
• C- location: no increase in value

As a beginner, they opt for a condominium in a good C- location or B- location.

Mistake 7 – Top equipment- bad property

Great kitchen, great furniture, you bought the property only because of its great equipment? That’s bad for you, because you’ll make less profit. What you are looking for are properties in need of renovation, because this way you can renovate them yourself and then sell them, making a profit.

Mistake 8 – Paying in huge installments

You want to pay off your loan as quickly as possible and think large sums will help you? Unfortunately, this is wrong. Here’s our tip: It’s better to agree on small repayment installments with the bank.

• The tenant pays off the property, all surpluses are direct asset accumulation
• Inflation reduces the loan for a long time
• The higher you set the repayment, the less is left at the end of the month
• The faster a property brings cash flow, the higher the surplus

Next step: criteria to the condominium

The property for first-time buyers. Want to buy a condo as your first property, but don’t know where to start? Here we’ve created a checklist of 11 items for you to determine the basics and criteria of your real estate search. Whether determining the maximum purchase price, the question of owner-occupancy or capital investment, yield or investment property as well as existing or new construction – here you will get all the answers to your questions.

Owner-occupation vs. real estate as an investment: advantages and disadvantages of owning a home

The dream of owning a home is a goal that many people have in mind. But does it make sense to choose a house for personal use as the first type of property? Or is it not perhaps more sensible to use the first property as an investment? Living rent-free in old age will never quite come true, even with a home of your own, because you are always 100% responsible for all running costs. Therefore, in this article you will find a comparison between owner-occupancy and a property as an investment, which should help you make the decision to use your first property.

• Personal use vs. real estate as an investment

Expensive housing: Self-interest becomes a disadvantage

Financially, the personal use of a property is certainly not the best idea. In order to secure one’s financial situation with real estate, it is better to consider the property as an investment – unless a property has a special emotional value for you for personal use! Why this is so, you will learn here.

Disadvantage Self-interest: Negative cash flow

To begin, what does self-interest mean to me?

• As an owner and owner-occupier, you always pay 100% of the operating costs yourself.
• You get neither money from the tax office, nor from potential tenants
• So self-interest means constant expenses and no income
• Credit rating decreases due to higher risk

Advantage of real estate as an investment: Positive cash flow

Real estate as an investment brings you clear advantages. Find out what they are here:

• All costs and expenses are borne primarily by the tenant and the tax office
• With a good return, the investment property almost pays for itself
• Interest is tax deductible
• Credit rating increases already after the 1st year

Buy and rent real estate: Security for old age

You have bought your first property and decided to invest. Great, then almost everything runs by itself! Here we have an example for you.

Example: Purchase of a condominium for 250,000 euros

• Property is purchased with financing from bank
• Tenant pays 1,000 euros a month
• Tenants pay thereby: Interest, redemption, modernization
• Tax office helps through deductible costs and tax relief
• Gross rental yield (annual rental income divided by purchase price) becomes a steady source of income
• This increases the credit rating, which favors the purchase of a 2nd and 3rd property

Still not quite convinced? Read more about owner-occupation and capital investment here/ Immobilien-Erfahrung.de

Conclusion: Personal use vs. real estate as an investment

In this article, you have learned a lot about what it means to invest in self-interest or in a capital investment. Here we’ve put together our conclusion on what we think is the sunniest way to invest in real estate.

• Self-interest – Negative cash flow; you pay all ongoing operating and maintenance costs yourself, no one participates in them
• Capital investment – Primarily tenants and the tax office pay off your expenses, your credit rating increases and thus provides you with a basis for your real estate portfolio.

On both sides, increases in value can be seen, but once the purchased real estate is paid off, you have a constantly running source of income with it. For you, this means a carefree and, above all, rent-free life in old age!

Next step: return on investment or investment property?

You have decided: Finally buy your first own property! But am I buying an income property or an investment property? But what is it anyway? What is the basic difference between these two types of investment? And what exactly is an A, B or C location? The most important thing is that both types of investment generate profit for you. In which form, you can read here. Here you will learn everything you need to know about the return and the investment of a property.

Buying a house: High cost, high risk

The dream of owning your own home – for many, this is a life goal that needs to be achieved. Besides many positive aspects, owning your own home also has its downsides. When you buy a family home, whether for your own use or as an investment, you are always 100% responsible for the costs incurred. Read more about the risk of buying a house here.

(Alb) – Dream: The pitfall of home ownership

For many, the former dream of owning their own home often quickly becomes a nightmare. Many use a building savings contract to pay off a house until retirement age, with the intention of living rent-free. However, the assumption is usually deceptive and you still get into debt, as you are responsible for 100% of the costs incurred. So one is never completely rent-free.

• 100% investment costs
• 100% self-responsibility for costs
• Even after paying off the loan not quite rent-free

3 mistakes when buying a house

There is a lot to consider when buying a house. What many people forget are the mistakes that can be made when buying a house. Here we have the most important points for you, why we advise against a house as a first property.

Error 1

The costs incurred for the house always remain, for which you yourself are 100% responsible. You are never really rent-free with a property for pure personal use.

• Management and maintenance costs of the house remain forever

Solution – For a truly carefree life, it is advisable to maintain a second and third property that you rent out. With the proceeds from these properties you can pay the management and maintenance costs of your own property and, depending on the return, pocket the rest as profit.

Error 2

The property you bought when you were young is not suitable for your old age later on. Sooner or later, the property will have to be remodeled to meet the needs of the elderly, which will incur additional costs.

• Property is not suitable for old age later
• Costs for age-appropriate conversion
• Property sooner or later becomes too big

Error 3

Your credit rating at the bank is reduced by a property with owner-occupancy and without an additional capital investment. Through the self-use of the property, you suddenly have more current expenses than income, the running costs are also always 100% your responsibility. In the event of a job loss, the bank of you additionally has no coverage, because this means loss of income and rent for you and thus a higher risk for you and the bank.

• More running costs, less spending
• Costs 100% personal responsibility
• Job loss means loss of income and rent – risk

Source: Real Estate Types/ Real Estate Experience.com

Multi-family house: high equity, high costs

So owner-occupancy is the most expensive way to live. The situation is different with investment property. Here the tenant and the tax office more or less pay off your debts. Therefore, we now come to a multi-family / multi-party house. But real estate beginners are warned! This area is more for experienced people.

So when should you think about buying an apartment building? When you have enough equity to cover the purchase price, management costs, maintenance costs and modernization costs. Despite the ongoing rental income, here, as with owner-occupation, they are 100% responsible for all costs incurred.

Here again in brief summarizes the disadvantages of a multi-family house:

• High equity required to cover costs
• 100% of the costs must be borne by the owner himself as the owner

Residential and commercial buildings (WGH)

WHGs behave similarly to multi-family houses, but are nevertheless much riskier to invest in. Since they are equipped with commercial space in addition to residential units, they are vacant more often than residential units. The area must be maintained nevertheless, whereby additional costs result. This in turn means that you have to raise more equity.

• High risk due to vacancy
• Even higher equity required
• Vacancy must be kept in operation – More costs

Condominium: High yield & cost sharing

The solution for your first property? A condominium! The big advantage? When you buy a condominium, you are part of a community of owners, so you don’t have to bear the costs of a house all by yourself. The costs for maintenance, repair and modernization are shared among all owners. Regardless of whether it is for your own use or an investment property, the running costs are always lower than in a house where you are the sole owner.

• Part of a community of owners
• All costs incurred are divided by the number of owners

A short example: Let’s say we are talking about a heating system for 16,000 euros. You are part of an 8-part apartment building, with 1 condominium. The costs are divided by 8, so you pay -14,000 less and only 2,000 euros for the new, modern heating system.

Commercial, special real estate and monument protection

You should take a closer look at properties with commercial use, listed buildings or properties for a special purpose before buying. Why, you will learn here in a short overview!

Commercial property

• Nothing for beginners
• Subject to different legal framework than residential
• More frequent vacancies than for residential space (fluctuation)

Special real estate

Villa, farm, winery or even workshop and shopping center, all these are special real estate.

• More difficult financing due to high risk for banks
• Rather buy in A- and B- locations, as a rural location carries too high a risk

Real estate under monument protection

Real estate with historical value and special status (rights, obligations, taxes and subsidies).

• Tax incentives
• Higher costs for repair
• Restrictions on structural changes

Conclusion: What should I invest in at the beginning?

If you look at our comparison, you can clearly see that every property, except condominium, has disadvantages. Therefore, our conclusion is: condominiums are the easiest way to get started in real estate. Here again briefly our most important points at a glance:

• Self-use is the most expensive way to live – you are responsible for 100% of the costs yourself
• Ideal case for entry: condominium, for rent (investment), with good return!
• If it is to be owner-occupied, then directly with 2nd or 3rd property as an investment.

The next step: how to build your assets?

Are you interested in real estate to secure and build up your assets? Then read on here: Everything on the subject of investment, value investment and inflation.