IS IT POSSIBLE TO BUY AN APARTMENT IN MUNICH, GERMANY AT THE OFF-PLAN STAGE? DOES THE COST OF A SQUARE METER GROW AS THE BUILDING IS READY? IN WHAT KIND DO GERMAN DEVELOPERS RENT HOUSES INTO OPERATION? PRIAN.RU’S QUESTIONS ARE ANSWERED BY VLADIMIR FROM PENZA, WHO BOUGHT TWO APARTMENTS IN MUNICH.

Buyer: Vladimir from Penza
Management company: WIP Immobilien GmbH
Region: Germany, Munich
Object: two two-room apartments
Price: €250,000 and €350,000
Deal: 2012 (secondary market) and 2014 (new building)

Their rates were loyal – from 2.5% to 4.5% per annum.

A typical practice for us – we sold ten apartments, which means we are building a foundation, found more clients, moving on – is impossible in Germany.

They can fulfill any whim, but for your money.

— Vladimir, why did you choose Germany? Did you have business connections there? Or maybe relatives?

– No, for the first time I came to Munich to conduct a medical examination. He successfully solved those cases and began to look at Bavaria from a tourist position. I immediately liked it there. Then I came back several times – Munich always lived up to expectations. At that time, there were no crises yet, the Russian economy was stable, business was also going well … All these factors came together, and a desire to invest in real estate appeared in Munich.

– Did you immediately plan to buy an apartment for rent?

– The ways of the Lord are inscrutable … Thoughts were different. First of all, I bought high-quality real estate in a good location, and what to do with it, I planned to figure it out along the way.

— What object did you choose in 2012? And what was his fate in the end?

– We bought a two-room apartment in a quiet, calm area of Munich, not in the center, for 250,000 euros. At that time, there were no free funds for the transaction, so we decided to take a loan. And so that the apartment does not pull extra money from the pocket, they came to the conclusion that it was necessary to rent it out. All these years she has been successfully renting, and now the loan has almost been paid off.

– Under what conditions did German banks issue mortgages at that time?

– Their rates were loyal – from 2.5% to 4.5% per annum. In theory, in all civilized countries such should be. I’m glad I got the loan.

Note! To date, foreigners can take a mortgage in Germany at 2-3.5% per annum. The rate depends on the solvency of the client and the quality of the object. Typically, loans are issued for up to 15 years.

– How profitable is it possible to rent such an apartment?

— Each case is individual. The rates depend on the location, the quality of the apartment, the presence or absence of furniture … An experienced manager will explain to you how they are formed. In my case, the rent fully covered the main payment and interest on the loan, and there were still about 200 euros left.

– Apparently, this result suited you, since you decided to buy another apartment …

– Yes, in the future I want to leave the first apartment to my daughter, and I bought the second one for my son.

– That is, you were counting not so much on earnings from rent today, but on making a contribution to the future of the family?

– Exactly.

— Tell us about the second, more recent deal. What task did you set? How was the object chosen?

— At that time, Regina Borger, director of WIP Immobilien GmbH, had already established an informal relationship. The first transaction was successful, then all these years they were engaged in renting out an apartment, in a word, we understood each other, and I completely trusted them. So I just voiced the idea and asked for something to pick up.

On one of my trips to Germany, I was offered to buy an apartment in a new building, they showed me the booklets of the developer. We went to the site where the house was supposed to appear. At that time there was a wasteland, they were only taken for a foundation pit. And while I was far from the first buyer! It was important for me to see the area – so that it was calm, without immigrants, so that there was a subway nearby. Then we studied the design of the house. I liked everything. True, they asked for an apartment a little expensive – 350,000 euros. But still, this is a new building, and in Germany they are highly valued.

They began to think what to do. I was offered a loan from another bank. To be honest, I thought that they would refuse me, because. I had another outstanding loan hanging on me. But the specialists studied my credit history, noticed that we regularly paid on the first mortgage, that the matter had almost come to an end, and approved the loan. When I found out about this, I immediately signed the contract, almost blindly.

Was it not scary to buy real estate at the very first stage, when there was not even a “box” yet?

– No, these are the Germans, not our Russian developers, who will take the money, and then run after them, look. Everything is clear there.

– I wonder if the cost of apartments in Germany varies depending on the stage of construction? In Russia, for example, you can save 30-40% if you are not afraid and take the object at the stage of excavation.

“There is no such thing in Germany. If it does change, it is very small. Local builders do not have an urgent need for urgent money from buyers. These are powerful organizations with solid budgets, and lending for them is more than affordable. I am sure that the developer can easily take a loan at 1-2%.

For them, money from buyers is just a guarantee that the object will be sold. Naturally, they use them, but this is not a decisive factor in construction. A typical practice for us – we sold ten apartments, which means we are building a foundation, found more clients, moving on – is impossible in Germany. There, buyers pay in stages, only for what has already been done in the house.

– How long did it take to build? And how did you follow the process while in another country?

– A couple of times during our visits to Germany, we drove past the facility, saw how it was being built. But in general, there was never any doubt. Firstly, my German partners, whom I already trusted, recommended this developer. Secondly, I have already managed to make sure that in Germany all systems work well.

As a result, the house was handed over even faster than planned. They were going to finish in October of this year, but last year they forced the process and reached the finish line in May. For me, it was not even very convenient – I knew in advance when the next tranches were due, and then I had to change plans.

— Vladimir, maybe due to the fact that you were buying an apartment in the first stages, the developer offered you to change something for yourself – to make the layout or finish to your liking?

– The price of real estate they had included a standard package – ie. typical finishes and equipment (in the kitchen – built-in wardrobes and appliances, in the bathroom and toilet – plumbing). If we wanted to change something, we would have to pay extra for it. They can fulfill any whim, but for your money.

We didn’t spend money on it. The child is still small, it will not be long to live there. Immediately assumed to take, why in this case to excel. Anyway, when the time comes to use the property ourselves, we will make repairs. No matter how careful the tenant is, the situation will need to be updated.

– How did you solve the issue of renting? Where are you looking for tenants? How did you make contracts with them?

– I had one criterion – that my apartment would not be killed. In Russia, this happens all the time, we have already gone through it. Therefore, I shifted all the worries to the management company. Let them, being in Germany, look for people, monitor the situation, and resolve issues. I know that the choice of WIP Immobilien tenants was approached very carefully – they checked their reliability, solvency, the reasons why they came to Munich. I did not delve into contracts with tenants – in order to understand this, one must not only know German well, but also understand local law.

– Have you even seen the tenants who live there?

– I saw the tenant from the first apartment. When we arrived in Germany, we called her and warned her that we would come. I just wanted to see with my own eyes how the apartment is maintained. Of course, over the years, equipment wears out … The plate had to be changed. But there it was not new, after all, the apartment was bought on the “secondary”. This is natural wear and tear, we counted on it. But in general, everything is in order, the condition is good.

What about the second tenant?

– I have not seen him yet – the apartment was only recently handed over.

– And what are the current rates for new “kopeck pieces” in quiet areas of Munich?

– About 1100-1200 euros

– If you were approached by a person who is in the same situation as you in 2011 – then you were just thinking whether or not to buy your first apartment in Munich – what would you advise him? What to look for in order to be satisfied with the deal?

– If he came to me in 2011, I would definitely say: be sure to buy property abroad, and especially in Munich, if there is a financial opportunity.

— What has changed now?

Now, the future is unknown. Look at the European Union, the UK is leaving it, our relations with Europe, the whipping up of military hysteria… Where is the world heading in general? Somewhere before 2014, until the conflict in Ukraine began, everything was wonderful. What now? I don’t know… Probably, even the President does not fully understand what will happen next.

– Of all the countries in Europe, it is Germany, at least in terms of the economy and the situation on the real estate market, that seems to be the most certain. And probably Switzerland…

— Yes, I learned about Switzerland, it is much more expensive there. And Germany is not all, but only Munich. It was possible, for example, to buy real estate in the Bavarian Augsburg. It’s even cheaper there – for the price of a one-room apartment in the center of Munich, you could take a three-ruble note there. But that’s not it.

It is important that Munich is a major manufacturing center, the most powerful city in Germany. In my understanding, this is the center of Europe. As we did, for example: we got on the train, and in the morning we ended up in Rome. Vienna, Paris are also nearby, and Barcelona, the Canary Islands, Monte Carlo are easily accessible by plane.

I certainly do not regret that I bought a property there. If only now the situation in the world has gone in the direction of detente. The sanctions were lifted, the visa regime was abolished … Then three hours on the plane – and you are there. It would be just wonderful!

Interviewed by Anastasia Faley, Prian.ru
Photos courtesy of WIP Immobilien GmbH

Business apartments in Munich with a yield of 4-7% per annum?

Probably everyone who is even slightly interested in investing in overseas real estate has thought about Munich. This is the most liquid local market in Germany, where housing prices rose by 13.7% in 2017 alone. The reverse side of the reliability of investments is low profitability, up to 3% per annum. And a high entry threshold – usually from half a million euros. If this is what stopped you, read our article. The idea of investing in a business apartment should appeal to you.
Prerequisites

Munich is the most prosperous city in Germany. There is extremely low unemployment, high salaries and… offices of large international companies. Millions of tourists come here every year – not only for recreation, but also for business. Guests who stay in Munich for a couple of days – a week choose hotels. But what about those who need to stay for a month or two?

Living in a hotel for so long is expensive and not always convenient. And renting an apartment, according to the law, is impossible. Daily rent of residential real estate is prohibited in Munich.

“If you own a residential property, you cannot rent it out for a short period of time,” says Regina Borger, CEO of the management company WiP Immobilien GmbH. “The authorities are tightening control over this. Last year, the mayor’s office allocated 16 people just to keep track of apartments that are rented out on specialized portals. The penalties for this are huge. Up to €500,000 per owner.”

The solution is the so-called boarding houses (business apartments or apart-hotels). This is a type of commercial property. It is an apartment building with elements of hotel infrastructure. Apartments in such complexes are small (20-35 sq. m), furnished, equipped with everything you need. By law, they can be rented daily or long-term, but not more than six months to one client.

The target audience of boarding houses is businessmen who come to Munich on business trips, foreigners who are treated in local clinics, students of correspondence programs … Plus, many locals settle in the surrounding cities for economic reasons, while the head of the family travels to Munich to work. In such cases, companies rent housing for their employees in the capital of Bavaria.

The essence of the scheme

For an investor, the advantage of a room in an apart-hotel compared to buying an ordinary apartment is the ability to rent for a short time, which means increasing profitability by 2-3 times.

Rental prices here are lower than in hotels: if a night in a hotel costs an average of €100, then in a boarding house it costs €60. But this is still much more than an apartment rented for a long time will bring in a day. At the same time, the owner of a business apartment can flexibly manage pricing by raising rates for important events, such as international exhibitions. And the owner of an ordinary apartment is limited by the contract and does not have the right to arbitrarily raise the rent.
Legally, buying a room in such a hotel is no different from buying a home. The investor becomes the full owner of a particular object.

After the purchase, the owner decides how to manage the property. For example, in a 50-apartment building there may be several dozen owners. They unite, create (or hire) a management company that rents the entire building, keeps order, resolves issues of residents, etc. The more options, the more expensive such services.

You can rent a business apartment on your own or through your representative in Germany. In this regard, the owner has freedom of choice. The amount of his profit will depend on how much the room actually rented, minus the cost of maintenance and management.

“We were recently at the Munich Real Estate Show,” adds Regina Borger. – They presented a different type of boarding houses – with guaranteed rent. The investor immediately concludes two contracts – for the purchase of real estate and for the long-term delivery of an object (for example, 10 years) to one company. And all these years the company guarantees you a profit of 4.5% per annum from the cost of the apartment, regardless of how much the object will actually be leased.

Read also: Real estate management in Germany: useful tips
Entry threshold

Another advantage of boarding houses for investors is relatively low prices. From €150,000 to €260,000.

For this money you will get a small apartment, most likely a one-room apartment. Moreover, furnished and furnished with everything you need, ie. you won’t have to spend extra money on repairs, except to buy dishes and bed linen.

In the vast majority of cases, existing proposals are under construction. By the time of commissioning, all buildings in Munich have already been sold out, so you need to buy at the stage of excavation.

It will take about a year to wait for the readiness of a house for 50-100 apartments, for a larger one – up to 20 months.

“Boarding houses are initially built for a specific target audience. And they are not located in the old town, closer to Marienplatz, where tourists like to settle. For example, they recently sold out the last apartments in the area of an international exhibition, an analogue of VDNKh in Moscow. Events are held there 240 days a year,” says Regina Borger. – This is a very interesting place, because. the investor will be able to rent apartments at higher prices 240 days a year. These are the places to look for when choosing such objects.

Yield

Munich is the most expensive major city in Germany to buy real estate. A “square” in prestigious central locations costs more than €10,000, and an ordinary apartment in a residential area is cheaper than €6,000 per sq. m hard to find.

As a result – low profitability from long-term lease. Apartments in the vicinity of Marienplatz bring owners a little more than 0% per annum, but they are still bought, because the potential for price increases is great. In other areas, you can get 2-3% of the rental income.

In the case of buying boarding houses, experts predict a yield of 4-7% per annum.

“Business apartments are a new real estate format for Germany. In Munich, they began to actively build a few years ago. And judging by the fact that interest is growing, new projects are appearing, this idea justifies itself,” says Regina Borger. “We manage several such facilities ourselves. Due to flexible planning, low entry threshold and higher rental prices compared to conventional apartments, it is possible to achieve such profitability. But keep in mind that these figures do not take into account additional costs.

Expenses that await the owner of a business apartment:

Land tax. It is calculated individually for each apartment. For such apartments, the annual tax will be €100-200.
Utilities (electricity, water, internet, insurance, cleaning, etc.) – approximately €5 per sq. m. per month. As in a hotel, these costs are borne by the owner, but they are included in the amount paid by tenants for each day.
The management company, depending on the volume of services provided, will take 3-7% of the rental rate.
Tax on rental income in Germany. Calculated according to the table. The tax base is income minus expenses. The rate is from 0% to 35%, depending on the amount of profit, as well as the owner (individual or legal entity).

Boarding houses are initially built for a specific target audience. And they are not located in the old town, closer to Marienplatz, where tourists like to settle. For example, they recently sold out the last apartments in the area of an international exhibition, an analogue of VDNKh in Moscow. Events are held there 240 days a year,” says Regina Borger. – This is a very interesting place, because. the investor will be able to rent apartments at higher prices 240 days a year. These are the places to look for when choosing such objects.

Yield

Munich is the most expensive major city in Germany to buy real estate. A “square” in prestigious central locations costs more than €10,000, and an ordinary apartment in a residential area is cheaper than €6,000 per sq. m hard to find.

As a result – low profitability from long-term lease. Apartments in the vicinity of Marienplatz bring owners a little more than 0% per annum, but they are still bought, because the potential for price increases is great. In other areas, you can get 2-3% of the rental income.

In the case of buying boarding houses, experts predict a yield of 4-7% per annum.

“Business apartments are a new real estate format for Germany. In Munich, they began to actively build a few years ago. And judging by the fact that interest is growing, new projects are appearing, this idea justifies itself,” says Regina Borger. “We manage several such facilities ourselves. Due to flexible planning, low entry threshold and higher rental prices compared to conventional apartments, it is possible to achieve such profitability. But keep in mind that these figures do not take into account additional costs.

Expenses that await the owner of a business apartment:

Land tax. It is calculated individually for each apartment. For such apartments, the annual tax will be €100-200.
Utilities (electricity, water, internet, insurance, cleaning, etc.) – approximately €5 per sq. m. per month. As in a hotel, these costs are borne by the owner, but they are included in the amount paid by tenants for each day.
The management company, depending on the volume of services provided, will take 3-7% of the rental rate.
Tax on rental income in Germany. Calculated according to the table. The tax base is income minus expenses. The rate is from 0% to 35%, depending on the amount of profit, as well as the owner (individual or legal entity).

Example: apartments in Munich for short-term rental

• Type of property: guest business
• Location: Munich, Riem district (international exhibition venue)
• Cost: €227,400
• Number of bathrooms: 1
• Number of balconies / terraces: 2
• Commercial area: 32.35 sq. m
• Furnishing type: standard
• Total number of floors: 5
• Type of heating: central heating
• Barrier-free environment: suitable for wheelchair users
• Elevator: yes
• Construction phase: under construction
• Year of construction: planned commissioning – November, 201

Regina Borger: “Is this business idea popular among Russian investors? Not yet. Boarding houses are a new phenomenon, few people know about it. All available proposals are either under construction or were launched just a year or two ago. But someday, probably, there will be a glut of the market with similar objects, because of which the current profitability will decrease. Therefore, it is now important to pay attention to the location of the object so that it is in demand among tenants. Moreover, to evaluate it precisely from the point of view of the target audience, and these are not typical tourists, but those who come to Germany to work, be treated or study.”

April 24, 2018
Text: Anastasia Faley

We are afraid of mortgages. There are no official statistics, but realtors say that nine out of ten clients from Russia who are considering buying a home do not initially think about a mortgage in Germany. Either they do not trust banks, or they are afraid to get into bondage. In vain! What is “Mortgage in Germany for foreigners”?
FACTS-2018 – MORTGAGE IN GERMANY FOR FOREIGNERS.

Yes, mortgages are issued in Germany. And more and more active. The annual growth in the level of mortgage lending in the country is about 4%. In 2016, the volume of issued mortgage loans in Germany amounted to €231.6 billion. This is a quarter more than in 2009. Germany is the largest mortgage market in the EU after the UK; when Brexit is over, it will become the largest.

Mortgages in Germany are usually issued at a fixed percentage, which is fixed for 5-10, and in rare cases for 15 years. Loans with a floating interest rate are not popular in the country: they are 1% in total (in the UK 72%, in Spain – 75%, according to a Research Gate report).

Now it’s good. Why? A floating interest rate is beneficial to the borrower when it starts to decline – the longer the better. In Germany, the change in the floating rate is carried out on the basis of fluctuations in the European Interbank Offered Rate (EURIBOR). But at the moment it is at a very low level, and there is nowhere for the floating rate to fall, only to grow. And it will obviously begin to grow, the question is when exactly.

From 2009 to 2018, mortgage interest rates in Germany fell by 40%. Now the average rate is about 1.65%, but it is better for the Germans themselves to be guided by this figure. Foreigners receive loans on less favorable terms. “For example, this year we received loans for our clients at 1.83–2.06%,” says Regina Borger.
Regina Borger, WIP Immobilien GmbH: Mortgages in Germany for foreigners.

“Low mortgage rates lead to paradoxes. In Germany, one of the important players in the mortgage market is Landesbank, which, through government assistance, traditionally provides more favorable conditions for poor Germans, single mothers and fathers. So, in recent years, the number of people who applied to this organization for a mortgage loan has decreased – conditions in ordinary banks have become more attractive than preferential ones from Landesbank. And the allocated funds became unclaimed, which led to a glut of funds. Now they have started issuing loans at 0.5–0.8%.”

In Germany, the loan-to-value ratio (LTV) is the lowest in Europe. According to this indicator, stricter rules are only in South Korea, where the maximum cost of a loan is 75%. In Germany, it can be 80%, but only for residents. If you do not work in the country, then the maximum that you can count on is 60% of the property value, but in reality – half.

The question of whether or not to take out a mortgage in Germany is partly emotional (if you don’t like living on credit in principle, nothing will convince you), but mostly economic and mathematical. In simple terms, by investing €100,000, you can make a 200,000th investment and make a profit of 2 times more from the invested €100,000.

Conditionally: taking a loan for €250,000 at 7-8% per annum (such rates were 10 years ago), you will repay about €17,000 annually (excluding the loan body). Having received a mortgage at 2% – only € 5 thousand. The calculation is rough, even very, but in this case it is important to understand the order.

Communication with the bank

The interest rate and loan amount depend on two factors. The first is your ability to pay, which will be assessed according to the submitted documents. The second is the state of the object. The minimum amount that can be received depends on the particular bank and the place where the housing is located.

Regina Borger, WIP Immobilien GmbH: Mortgages in Germany for foreigners.

“The option in Munich and its environs, where it is very difficult to buy “the wrong thing”, will be considered more willingly. On the other hand, in Bavaria it hardly makes sense to apply for a mortgage of less than €100,000. Most banks do not even bother with such figures, but in general they issue loans only from €250,000. But, I repeat, this is a Munich story. In northern Germany, the situation is different.”

There is no official confirmation that Russians or citizens of other countries have recently been denied mortgages when buying a home. Single examples and the hype around them only confirm that there are no mass failures. They were before, they are now. What has definitely changed is that banks have become more picky, more often request additional documents.

It is worth contacting several banks, especially since they have about the same set of documents. The initial set: a 2-NDFL certificate translated into German, a passport and documents for the property being purchased. Of course, it is good if you have a positive credit history. You will also have to fill out a questionnaire to show how you will repay the loan with current income. The bank will begin reviewing the request and will almost certainly require additional documents from you. And do not flatter yourself until the contract is signed.

“My advice: provide exactly as many securities as the bank requests, no more and no less. You will conduct the initial communication with the credit institution in absentia – usually by e-mail. Only when signing a financing agreement is a visit to the bank with a passport required,” says the specialist.

It usually takes four to six weeks for the bank to process a request, but no timelines are guaranteed. In case of refusal, the bank will inform about it by phone. Even if he sends a written answer, under no circumstances will he indicate the reason.

Do you need a partner

Why do they usually turn to a partner to get a loan and what is his mission? The main problem with the first contact is that the bank does not know you. So, a loan refusal is more than likely. Appeal through an assistant is designed to “melt the ice.”

Regina Borger, WIP Immobilien GmbH​: Mortgages in Germany for foreigners.

“Banks know us, and not only as buyers of real estate, but also as a management company. We are developing, last year we received four more houses for management. Two of them had accounts opened in banks with which we had not worked before. Accordingly, now two more organizations know us from the best side. And when a request from a client comes through us, and the bank understands that we will also control mortgage payments, there is complete confidence.

We cannot guarantee that the bank will give a loan. If one bank refuses, we turn to another. Each client has received a loan from us.