Does anyone has experience in investing in Duisburg, Germany or surroundings (Düsseldorf, Cologne, Bonn)?

Yes, I do.

what's the question? 

Hey thanks! I am traveling to Duisburg to check on some properties and I would like to know about the area called Hochfeld. Also, I see lots of discrepancies in the prices of the m2. Any tip you could give in terms of "don't buy there"?

Last, what's the best or bigger real estate agent there? 

Are you German? I0m looking forward to check the expat scene there!

Dear M,

The area is simply a disaster zone; I suggest you check the crime rates / Unemployment figures for Hochfeld before you step foot, let alone invest a single €. I personally wouldn't touch the place, but it's a matter of opinion - some people would buy in the "Hood" but I wouldn't, certainly if you are not a local! It's cheap for a very good reason.

Other areas of Duisburg are much better, but if you are a beginner I would suggest you to look for less industrial cities in the area (Essen, Dusseldorf, Köln & Bonn). More expensive, less yield but a much safer play.... Remember Germany is unique (vs US etc) in terms of tenant protection, so if you make a mistake it could be costly afterwards. And I would never touch a apartment, Multi family only (only way to keep expenses in check).

The biggest agent doesn't mean the best.... Most of the times the small local outfit is the best choice, both for service & costs.

Expat connection? Aim for the more established cities above, Dusseldorf Köln would be a good idea.

I'm not German but speak a fluent German, and have close to 2 decades of experience in the field.

Glad to help if needed!

Dear Israel,

I find it so difficult to understand how come EUR 1Mio houses can be sold just 1-2 km from such disaster zone. Exactly because I am a beginner I was considering it due to the low investment cost. Düsseldorf and Essen are already pretty inflated.

I also heard some buildings are being demolished to bring new ones and renovate the area. 

What would be other "better" zones in Duisburg? I wanted to rent it furnished.

Can you elaborate about the multi family? 

Many thanks!

Dear M,

To your first point - this happens everywhere, sometimes inner city expensive areas can be just near the "Hood" (Harlem few years ago? South side of Chicago? Just a few of many).

Low investment costs, usually, have a good reason. Duisburg is a industrial city with all the problems that come with it, and I can't elaborate too much here but in private I can explain the dynamics why Duisburg is problematic. Plans for revitalization are on the table, but these will - if at all - materialize only in the long term.

The mistake of entering a cheap investment as a beginner will be a expensive lesson down the road - and I have paid for the lesson in the distant past and happy to save you those costs and anguish.... Rather join a experienced investor, or get friends / partners and make a syndicate headed by a pro, that will give you purchase power.

You want to rent it furnished? Define your target audience first. Student accommodation might work (a lot to talk about it), Short term lets are not really for Duisburg (Business or Airbnb) and will just be a waste of time & resources.

Re Multifamily: one of the biggest mistakes I see foreigners are doing when investing in a market like Germany, is the lack of cost control. If you are 1 apartment out of 10, you are liable for 10% of the running costs for the building without having any control over decision making (WEG, Wohneigentumsgemeinschaft) and this can be crazy. 

Look, bottom line - there are many ways where professional investors keep profits at maximum vs expenses (for example: purchase costs can be prohibitively expensive, but if you buy the company holding the asset - there are ways you don't pay the acquisition tax (sometimes 6 and 7% of the pp!).

A lot to discuss, bottom line - money can be made, even nice money, but those walking in blind are simply crazy:-)

All the best,

Israel

Don't use distance as-the-crow-flies in German cities. A single km in a typical German city can be a considerable difference depending on the transport routes.

Cities are very dense, and many people rely on public transport. Also, realtors don't exist in the same form as they do in the US. The closest US equivalents are wholesalers. I.e., there is no MLS and there typically is only the listing agent, so you don't "look for a broker / makler," you look for the property and deal with the broker.

For brokers with the most reliable reputation, look for the IVD deal, which is kind of equivalent to the NAR (a big asterisk on kind-of).

Finally, I wouldn't expect the same sort of gross yields you might expect in the US. Gross yields are much lower. This is driven by the different way RE is taxed in Germany. i.e., holding costs are very low; but transaction costs are very high. 

Excellent comments Daniel.

The role of a broker is indeed different, I think what he was after is more of a Management agency for the property (which is more important, long term). Most brokers on the main portals have IVD or similar, but have seen already guys with every certificate on the wall who are not very honest at all times:-)

Gross yields are mainly cut by maintenance costs & repairs - these rules are mostly tougher than the US and can sometimes turn a attractive initial yield into negative cash flow. Tenant protection gives you some stability (longer term tenancy is common practice) but the upside is limited as well (increased rent by CapEx).

All that being said, as a long term appreciation play, I *do* think Germany has some great deals... it's just harder to find truly distressed assets because of the low holding costs so if something is cheap, as Israel mentioned, it's cheap for a reason (like maybe it needs rehab but is denkmalschutz'd* up the wazoo). 

* that means you that if you rehab, you must rehab to historical standards. No high-efficiency windows for you! No quick drywall job, you have to find a stonemason who has historical craftsman training.

There is room for argument if Germany, with the current immigration / social structure, coupled with the left leaning policies of some Länder (Berlin as a example) which are very tenant friendly, is a place which can be a short to medium term play.

Covid19 will also have a effect, less on low to medium range but certainly on higher end Residential; on commercial (which, by the way, is not a bad idea for a beginner! If he has enough €) it will certainly have.

Denkmal isn't that bad, it does have  a very high/attractive depreciation rate for taxes, which of course affects the bottom line cash flow (and if you know your way around, using non-german workers etc - costs can be not as terrible as you might imagine..).