Germany

17 Replies

Does anyone have any experience investing in Germany? 

Thanks,

Richard

hi Richard 

Take a look at safebox-selfstorage.Gmbh thats what i do develop self storage in Germany 

as of this date we have three but looking to expand  as there is lots of room for growth out there .

Justin

I´m from Germany, so just ask what you want to know about the German RE market.

Hi Flo,

I'll be traveling trough Germany beginning tomorrow for two weeks and would love to hear from you about the German RE market. I may be moving to Berlin in about a year, or so, and would like to soften my REI landing as much as possible.

Here in Denton, TX I buy houses, rehab them and rent to students.

What areas do you recommend for investing? I know people investing in refugee housing and are doing very well. 

Thanks,

Salomon

Greetings Salomon,

I have been in Germany for over 10 years and recently began investing myself. Up until this point I have manged English Speaking properties in the Wiesbaden area, built new construction and rented myself. While refugee housing was certainly a booming market, I would not say it is due to expand a whole lot more in the near future. The political environment may not be prime for this type of thinking/investing. 

Germany's housing market, historically, has been very stable and increased at a very meager pace. However, more recently, as in the states, we are all waiting for the bubble to burst, [rock bottom] interest rates are driving the cost of homes up so high, money is cheap and everywhere and the only thing in which is slowing purchasing now, is the raising cost of transfer tax throughout the country. (perhaps more stringent loan requirements as well)

Germany is a country full of organized, frugal, buy and hold investors. It is certainly a sellers market and the deals a few and far between in large metro areas. Certainly in my area of interest the return are no where near the 2% rule everyone would like to achieve, but buy and hold strategy/equity, as we all know is always a wealth builder. 

Personally, I keep my eyes open for deals, but I think capital creation is really the key at the moment. Wait for prices to drop a bit and then when interest rates go back up and homes come on the market, buy them up...

What type of property are you thinking of investing in? Berlin is a very rapid growing city with more and more international investors coming. Good luck and hope for some success!

Hello Shane,

I see you own properties in Wiesbaden, are most of your tenants Military? I say that because I am Military living in Stuttgart. I am looking into buying the flat i currently live in, which is at 350,000 euro. However, I would like to do through a LLC, but it has been a challenge to get financing. Is there anyway to make this work?

Hello everyone,

I would love to connect with active investors living in Berlin! My plan is to buy my own personal residence (w. rooms for 1 student rental and 1 vacation home rental). My long term plan is to purchase multi-tenant apartments that would be rented by students/younger adults.

Nina

US expat living in Germany. 

The German real estate market makes no sence for anyone to invest in for neither ROI nor cash flow when compared to the US market.

Example. 

Apartment here in Nurnberg 4 bedroom would cost around 350-400 Thousan Euro, and would rent for 800-1000 Euro. 

A similar Priced property in San Diego ( not the best price to rent ratio) would rent for 2000-2500 USD. 

The asset appreciation over time would also not keep up with US markets. 

It would make more sense for a German who has Cash to buy property in the USA for cash flow. 

Generally speaking, I would have to agree with @Latif A.  

Compared to the US market (assuming you have some knowledge of both markets), Germany is not nearly as interesting in terms of scalability, wealth growth timeline, and ROI. Some of it has to do with last century small thinking and the cultural attitude towards money. Not that other countries or cultures are free of that notion ;-)

Don't get me wrong, my intention is not to sound judgemental or condescending; I am, as most of us, from a low to mid middle-class background, but why do you think Europeans left for a better word and communism and socialism was invented in Europe? This stuff goes very deep and waaaaay back.

I don't know about you guys, but I don't have 30 years to wait for appreciation nor are the local tax laws and regulations (capital gains, property tax, just to name a few) favorable to investors in Germany. 

This is unfortunately also true for many other European countries, in some cases, like Spain or Italy, the game rules are even worse. I know this because I property manage a luxury vacation rental in Tuscany and my family has or had RE in Mallorca/Spain.

This doesn't mean Europe is off limits, it just means you need a very longterm REI strategy, and best to combine it with US and other RE investments if you want to make any returns here.

A whole nother discussion could be about the incredible stability this continent has had for decades compared to the rest of the world including the US.

Starting with you guys, I'd like to set up a European Bigger Pockets Master Mind group. Connect with me to hash out a plan.

Cheers, Ken

P.S. Ich spreche auch fliessend Deutsch ;-)

@Richard Rheker @Jacobus Bor @Flo Schn @Salomon Gamero @Shane Barone @Tevin Howell @Nina Atenburger

@Ken Breeze ,  I see you've made multiple posts recently regarding Germany. Would you have any gems to share regarding buying in Germany? I'm looking at a 6-plex below market value because it needs a few renovations. Any pitfalls, unique considerations, things that I might not have considered that I should ask about?

@Kirsten Wolfford nice to meet you ;-)

Making money with real estate in Germany or Europe is generally tougher and takes much longer than in the US. Much less investor-friendly tax laws, and costly code regulations just to name a few.

In your case, I'd always run your deals through the awesome BRRR, calculators and other analysis tools Bigger Pockets has to offer here.

Be aware of the high property- and capital gains taxes. Unlike the US, where we have a 1013 tax exchange for like-kind purchases (business or real estate) you will need many years to ride them out and make the deal worthwhile your investment.

Feel free to send me a PM and connect on other social channels so I can send you an invitaton to the European Real Estate Maser Mind Group.

@Ken Breeze good to meet you too!

Yes, I understand the time limitations, I believe it's 10 years of holding onto a property before you can sell if you're not owner-occupying?

Love the calculators!

I'm interested to know more about the less investor-friendly tax laws, and costly code regulations. Haven't bumped up against that yet. I can just as easily sink my money into something back in the states and, possibly from what you're saying, that might be a better investment.

Kirsten

Hi Tevin, 

1. Price seems steep. 360k buy you 10 units in a secondary German city with a "net cold rent" (a term as German as it could be "Nettokaltmiete" ) above 28k. 

2. You intend to obtain financing with a US LLC or the German equivalent? 

Originally posted by @Tevin Howell :

Hello Shane,

I see you own properties in Wiesbaden, are most of your tenants Military? I say that because I am Military living in Stuttgart. I am looking into buying the flat i currently live in, which is at 350,000 euro. However, I would like to do through a LLC, but it has been a challenge to get financing. Is there anyway to make this work?

Hi Kirsten, 

the 10 y you refer to are correct, if property is bought in an individuals name/civil liability company/partnership

If you buy the property with corporation/ltd/llc or german/foreign equivalent, taxation is a completely different topic and definitely worth a separate discussion. 

Contrary to what is stipulated here, I do - from own experience - consider taxation on German property to be investor-friendly. 

Regards, 
Max

Originally posted by @Kirsten Wolfford :

@Ken Breeze good to meet you too!

Yes, I understand the time limitations, I believe it's 10 years of holding onto a property before you can sell if you're not owner-occupying?

Love the calculators!

I'm interested to know more about the less investor-friendly tax laws, and costly code regulations. Haven't bumped up against that yet. I can just as easily sink my money into something back in the states and, possibly from what you're saying, that might be a better investment.

Kirsten

Hi Ken,

having done deals in multiple jurisdictions I disagree with your statements on scalability, wealth growth timeline and ROI (which in the end come down to one item: ability of assets to produce net cash flows).

Neither was it the "small thinking" that shaped the socioeconomic/polital landscape in the last century Germany - in fact the megalomania (or its consequences) of a small, inhuman self-called elite. 

Taxation in Germany is as investor-friendly as in the US. 

Also the stability you refer to doesn't exist. Neither in local, national nor pan-european markets. I have bought property for less than 15 percent of its value at peak market - not only in the periphery of Europe, but right in its heart: Germany. 

Regard, 
Max



Originally posted by @Ken Breeze :

Generally speaking, I would have to agree with @Latif A.  

Compared to the US market (assuming you have some knowledge of both markets), Germany is not nearly as interesting in terms of scalability, wealth growth timeline, and ROI. Some of it has to do with last century small thinking and the cultural attitude towards money. Not that other countries or cultures are free of that notion ;-)

Don't get me wrong, my intention is not to sound judgemental or condescending; I am, as most of us, from a low to mid middle-class background, but why do you think Europeans left for a better word and communism and socialism was invented in Europe? This stuff goes very deep and waaaaay back.

I don't know about you guys, but I don't have 30 years to wait for appreciation nor are the local tax laws and regulations (capital gains, property tax, just to name a few) favorable to investors in Germany. 

This is unfortunately also true for many other European countries, in some cases, like Spain or Italy, the game rules are even worse. I know this because I property manage a luxury vacation rental in Tuscany and my family has or had RE in Mallorca/Spain.

This doesn't mean Europe is off limits, it just means you need a very longterm REI strategy, and best to combine it with US and other RE investments if you want to make any returns here.

A whole nother discussion could be about the incredible stability this continent has had for decades compared to the rest of the world including the US.

Starting with you guys, I'd like to set up a European Bigger Pockets Master Mind group. Connect with me to hash out a plan.

Cheers, Ken

P.S. Ich spreche auch fliessend Deutsch ;-)

@Richard Rheker @Jacobus Bor @Flo Schn @Salomon Gamero @Shane Barone @Tevin Howell @Nina Atenburger

Hello @Maximilian,

either you are not aware of the investment world in the USA or your thinking process is flawed. 
  
sorry but Germany absolutely does NOT have the same investor friendly atmosphere as USA. 
  
there is a 25% capital gains tax on any property sold within 10 years of purchase, which is why there are no flips, and gentrification.
  
also in USA mortgage interest is deductable. 
also income tax in Germany is extremely high so you will pay a lot of rental income to tax... what is it like 45%? 

couple that with the EXTREMELY  low rent to price ratio, means that only old people who don't have access to technology are better off buying real estate in Germany.
  
I can take my 450k euros but a property in the worst price to rent area in USA, and still rent a place in Germany worth at least double that.
that means not only is it a bad investment as an investment property, but even for my own residence it makes no sense. 
  
yeah the interest rate are very low 1-2 percent on German mortgages , but that means  the appreciation is also at German speed.
   

  

 
Originally posted by @Maximilian C. Herget :
Hi Ken,

having done deals in multiple jurisdictions I disagree with your statements on scalability, wealth growth timeline and ROI (which in the end come down to one item: ability of assets to produce net cash flows).

Neither was it the "small thinking" that shaped the socioeconomic/polital landscape in the last century Germany - in fact the megalomania (or its consequences) of a small, inhuman self-called elite. 

Taxation in Germany is as investor-friendly as in the US. 

Also the stability you refer to doesn't exist. Neither in local, national nor pan-european markets. I have bought property for less than 15 percent of its value at peak market - not only in the periphery of Europe, but right in its heart: Germany. 

Regard, 
Max



Originally posted by @Ken Breeze:

Generally speaking, I would have to agree with @Latif A. 

Compared to the US market (assuming you have some knowledge of both markets), Germany is not nearly as interesting in terms of scalability, wealth growth timeline, and ROI. Some of it has to do with last century small thinking and the cultural attitude towards money. Not that other countries or cultures are free of that notion ;-)

Don't get me wrong, my intention is not to sound judgemental or condescending; I am, as most of us, from a low to mid middle-class background, but why do you think Europeans left for a better word and communism and socialism was invented in Europe? This stuff goes very deep and waaaaay back.

I don't know about you guys, but I don't have 30 years to wait for appreciation nor are the local tax laws and regulations (capital gains, property tax, just to name a few) favorable to investors in Germany. 

This is unfortunately also true for many other European countries, in some cases, like Spain or Italy, the game rules are even worse. I know this because I property manage a luxury vacation rental in Tuscany and my family has or had RE in Mallorca/Spain.

This doesn't mean Europe is off limits, it just means you need a very longterm REI strategy, and best to combine it with US and other RE investments if you want to make any returns here.

A whole nother discussion could be about the incredible stability this continent has had for decades compared to the rest of the world including the US.

Starting with you guys, I'd like to set up a European Bigger Pockets Master Mind group. Connect with me to hash out a plan.

Cheers, Ken

P.S. Ich spreche auch fliessend Deutsch ;-)

@Richard Rheker @Jacobus Bor @Flo Schn @Salomon Gamero @Shane Barone @Tevin Howell @Nina Atenburger

 @Maximilian C. Herget ,
Would you care to start the thread about corporate taxes?

If you buy the property with corporation/ltd/llc or german/foreign equivalent, taxation is a completely different topic and definitely worth a separate discussion. 
Hi Latif,

1. No gentrification? Go to places like St. Georg/Hamburg, Neukoelln/Berlin or many others where you have seen complete neighborhoods changing both in investor and tenant perception (with the corresponding hikes in rentals and sales prices). This phenomenon can also be seen in secondary German cities like Bochum, Oldenburg, Muenster - in which I have been investing heavily in the last couple of years and enjoyed the benefits of such development. 
2. 25% Capital gains tax? I admit: German tax code is not a pleasant read. Nevertheless its worth a study. There are several ways to reduce or even avoid CGT. CG from the disposal of land or buildings can be rolled over to other land or buildings bought in the year of the sale, the year before the sale, or in the following four years after the sale (under certain circumstances, six years after the sale) through a tax-exempt reserve. Further, the German Reorganisation Tax Act may allow for a tax book roll-over under certain conditions. For details please either contact your CPA or feel free to ask. 
3. Non-deductibility of interest expenses?  This only applies to owner-occupied property.  However, if you rent your property, any expense incurred for generating your rental income can be offset against your taxable rental income, including mortgage expense, maintenance, repairs and improvements. Please be aware of eventual interest deduction limitations when using a corporation for your ventures. Details upon request. 
4. 45% tax rates? I hold my rental property in a German GmbH (Vermoegensverwaltende GmbH) and enjoy an “extended trade tax exemption” (erweiterte Kuerrzung) laid down in Section 9 No. 1 sentence 2 of the German Trade Tax Act (Gewerbesteuergesetz – GewStG) - in numbers: my tax rate is 15.85 % on taxable income. My properties that I intend to trade I hold in another GmbH, where the max. tax rate is 29.xx percent. 
5. Low rent to price ratio? Wouldn't it have been easier to just say "low returns"? In any case: I disagree. I buy property in secondary cities from as low as 200 €/m2 (average ca. 650-750 €/m2), with net cold rents normally exceeding 60 €/year.  Haven't seen better cap rates in the states so far...(happy to hear your suggestions where to look - I have been looking as far as investing in Ohio (proof of me desperation...)). Also market conditions differ significantly e.g. I find tenant turnover in my properties in the US to be much higher than in Germany, having a big effect on my bottom line. 
6. Appreciation rates of 1-2%? Appreciation is mostly a function of your efforts. I follow a "forced appreciation" strategy anduse multiple levers to create value. I have seem my properties appreciating at rates of not seldom 10-20 % p.a. 

Regards, 
Max

Originally posted by @Latif A. :
Hello @Maximilian,

either you are not aware of the investment world in the USA or your thinking process is flawed. 
  
sorry but Germany absolutely does NOT have the same investor friendly atmosphere as USA. 
  
there is a 25% capital gains tax on any property sold within 10 years of purchase, which is why there are no flips, and gentrification.
  
also in USA mortgage interest is deductable. 
also income tax in Germany is extremely high so you will pay a lot of rental income to tax... what is it like 45%? 

couple that with the EXTREMELY  low rent to price ratio, means that only old people who don't have access to technology are better off buying real estate in Germany.
  
I can take my 450k euros but a property in the worst price to rent area in USA, and still rent a place in Germany worth at least double that.
that means not only is it a bad investment as an investment property, but even for my own residence it makes no sense. 
  
yeah the interest rate are very low 1-2 percent on German mortgages , but that means  the appreciation is also at German speed.
   

  

 
Originally posted by @Maximilian C. Herget:
Hi Ken,

having done deals in multiple jurisdictions I disagree with your statements on scalability, wealth growth timeline and ROI (which in the end come down to one item: ability of assets to produce net cash flows).

Neither was it the "small thinking" that shaped the socioeconomic/polital landscape in the last century Germany - in fact the megalomania (or its consequences) of a small, inhuman self-called elite. 

Taxation in Germany is as investor-friendly as in the US. 

Also the stability you refer to doesn't exist. Neither in local, national nor pan-european markets. I have bought property for less than 15 percent of its value at peak market - not only in the periphery of Europe, but right in its heart: Germany. 

Regard, 
Max



Originally posted by @Ken Breeze:

Generally speaking, I would have to agree with @Latif A. 

Compared to the US market (assuming you have some knowledge of both markets), Germany is not nearly as interesting in terms of scalability, wealth growth timeline, and ROI. Some of it has to do with last century small thinking and the cultural attitude towards money. Not that other countries or cultures are free of that notion ;-)

Don't get me wrong, my intention is not to sound judgemental or condescending; I am, as most of us, from a low to mid middle-class background, but why do you think Europeans left for a better word and communism and socialism was invented in Europe? This stuff goes very deep and waaaaay back.

I don't know about you guys, but I don't have 30 years to wait for appreciation nor are the local tax laws and regulations (capital gains, property tax, just to name a few) favorable to investors in Germany. 

This is unfortunately also true for many other European countries, in some cases, like Spain or Italy, the game rules are even worse. I know this because I property manage a luxury vacation rental in Tuscany and my family has or had RE in Mallorca/Spain.

This doesn't mean Europe is off limits, it just means you need a very longterm REI strategy, and best to combine it with US and other RE investments if you want to make any returns here.

A whole nother discussion could be about the incredible stability this continent has had for decades compared to the rest of the world including the US.

Starting with you guys, I'd like to set up a European Bigger Pockets Master Mind group. Connect with me to hash out a plan.

Cheers, Ken

P.S. Ich spreche auch fliessend Deutsch ;-)

@Richard Rheker @Jacobus Bor @Flo Schn @Salomon Gamero @Shane Barone @Tevin Howell @Nina Atenburger

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