Old real estate: apartment & house from older decades

Over 2,650,000 properties in Germany were built before the year 1919. And some time later in the middle of the century, there were even almost 7,500,000 houses! Of course, construction technology was different back then. But as the decades passed, the building industry rapidly learned and not only resorted to more efficient building materials, but also focused on the topics of sound and heat insulation, as well as fire protection.

Here is a brief overview:

• Built before 1919: 2,655,042
• 1919 – 1949 Built: 2,374,762
• 1950 – 1979 Built: 7,357,255
• 1980 – 1989 Built: 2,090,142
• 1990 – 1999 built: 2.490.829
• 2000 – 2011 built: 1.954.588

Each decade brought different advantages and disadvantages. Do you want to invest in a condominium built in 1940? Or buy an apartment building built in 1967 as an investment? Before we go into the different defects, here in advance the advantages and disadvantages of such an older existing property:

Existing property: advantages and disadvantages summarized

If you want to invest in an income property, then an existing property from older decades has very clear advantages: The purchase price is low and the rental yield is high. The ancillary purchase costs and the equity capital to be invested are also kept within reasonable limits. At the same time, maintenance costs are comparatively high.

Older existing properties in B and C locations make excellent yield properties!

Here again summarized, the advantages and disadvantages.

Advantage of buying an old property:

• Mostly more favorable purchase price
• Costs are calculable if you are aware of the defects
• Lower purchase price often ensures better return on investment
• Location in grown infrastructure

Disadvantage of buying an old property:

• High costs for maintenance and repairs
• Possible hidden defects

So what distinguishes the properties of different construction years from each other? And what are the respective defects you should expect? So let’s start chronologically – with properties older than 120 years.

Real estate with year of construction 1900

Cracks in the masonry are typical for older properties built before 1900. Due to the outdated construction technology of that time, thermal insulation is either non-existent or inadequate. The windows are usually single-glazed, letting the cold into the house in winter, while moisture accumulates in the attic and basement rooms. And some deficiencies can be found in the bathrooms as well: Lead pipes, which have not been permitted since 1971, can often be found here and usually need to be urgently replaced after purchase.

Typical for 120+ year old properties: energy sufficiency was not an issue back then!

Defects of real estate before 1900

Here is a brief overview:

• Cracks in plaster and masonry
• Lack of thermal insulation on the facade, roof and windows
• Damp basement
• Outdated technology and electronics
• Outdated clay and lead pipes in the bathroom

Real estate with year of construction 1900 – 1939

Similar defects can also be found in properties built between 1900 and 1939. A lack of underlayment lets cold and damp into the house, wooden beam ceilings are plagued by sponge infestation and the walls, which are often constructed far too thinly, are prone to mold. Not only the ceiling is made of wood, but also the stairs – an enormous fire risk!

Characteristic: In the past, no attention was paid to fire protection during construction!

Checklist: Defects of real estate around 1900 – 1939

All shortcomings briefly summarized at a glance:

• Missing underlays
• Condensation problems
• Sponge and mold infestation
• Hardly any fire protection available
• Obsolete clay and lead pipes
• Cracks in the masonry

Real estate with year of construction 1939 – 1945

Typical for real estate built between the years 1939 and 1945 is the poor building fabric. During the war, raw materials, time and energy were put into the war. Building was therefore fast and cost-saving, which is why both building fabric and the statics of some properties suffered. Unsuitable building materials were also used, such as building rubble and summer wood.

Checklist: Defects of real estate around 1939 – 1945

Typical deficiencies include:

• Poor building fabric
• Pest infestation due to wrong building material
• Static problems
• Cracks in the masonry
• Obsolete gas pipes
• Hardly any fire protection

Real estate with year of construction 1945 – 1959

Above all, poor or missing thermal insulation is often found in properties built between 1945 and 1959. Building materials that are now considered questionable were also often used. These include asbestos, tar, formaldehyde paint and lead paint. Still an issue: the lack of fire protection. After the war, houses had to be built quickly and efficiently. As a result, there is usually a lack of access for the fire department, and fire doors are also almost non-existent. Soundproofing was also not considered at the time, which is why old apartments from this period are often very bright.

Checklist: Defects of real estate around 1945 – 1959

Characteristic of real estate from the period are:

• Use of questionable building materials
• Lack of fire protection
• Lack of soundproofing
• Lack of thermal insulation
• Leaking gas pipes
• Cracks in the masonry

Real estate with year of construction 1960 – 1969

In the second half of the 20th century, the construction method improved. Wood was no longer used for stairs and ceiling. Instead, stone and concrete were now used and the windows were insulated with aluminum. Drains prevented moisture from causing mold in the basement and attic, and underlayment was installed. From now on, emphasis was placed on thermal insulation, but harmful substances continued to be used for this purpose.

Checklist: Defects of real estate around 1960 – 1969

Here is a brief overview:

• Building materials of concern
• Insulation harmful to health
• Concrete damage
• Uninsulated roof trusses

Real estate with year of construction 1970 – 1979

In the 1970s, building technology once again improves immensely. The newly adopted requirements for sound insulation lead to more efficient construction. Lead pipes are no longer laid, but copper water pipes, and construction is mainly done with concrete. Despite improved building materials, cold penetrates the living spaces in winter and leads to mold.

Checklist: Defects of real estate around 1970 – 1979

Typical deficiencies include:

• Parquet adhesive containing tar
• In need of renovation
• Concrete as a building material

Real estate with year of construction 1980 – 1999

Properties built in the last 30 to 40 years are usually characterized by their modern construction technology. Nevertheless, some deficiencies can be found here as well. The costs for maintenance are high, the roof connections are broken and the central heating before 1985 often leads to problems.

Checklist: Defects of real estate around 1980 – 1999

Here again the typical defects from 1980 – 1999:

• Connections and terminations for flat roof
• Central heating
• Expensive maintenance

Conclusion: Should you invest in old real estate?

Admittedly: Compared to new buildings of the modern age, properties from older construction years have their very own charm. And depending on the year of construction, they bring their own advantages and disadvantages, and with a little capital, even building services, roof and masonry can be renewed.

You can now find even more about the respective defects by year of construction on my new project for real estate buyers (Immobilien-Erfahrung.de):

• Year of construction property: defects and condition (external)

Obligation to tolerate at a glance

• Anchored in the German Civil Code (BGB)
• Neighbour must tolerate certain encroachments on property e.g. construction crane or superstructure
• Tenants must tolerate modernisation or refurbishment

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Requirement of consent (sale WEG) at a glance: On the sale of the condominium

• Comes into play when a condominium owner wants to sell his residential property
• Requires the consent of an administrator or another condominium owner
• Reason: The condominium has an interest in ensuring that each owner is able to meet his or her obligations with respect to the residential property.

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Rent increase options – what is the landlord allowed to do and what not? Calculate the yield: rental yield calculator.

Rent increases are regulated by law. To be more precise, the German Civil Code, the BGB, is responsible for this. Rent increases can therefore not be arbitrary, but require one of three reasons. These include the local comparative rent, the graduated rent or the index rent.

Comparable rent customary in the locality – comparable properties as a basis

The local comparative rent refers to the amount of rent paid on average for comparable properties in a region over the last four years. The local comparative rent could therefore be a reason for a rent increase. The landlord then states in the letter, for example, rent index, expert opinion, rent database, at least three comparative apartments as a reason for the increase. In the latter case, the comparative apartments must be described very specifically, including location, type, size, condition and price per square metre. The rental databases used to collect the data must be freely accessible. The local comparative rent can be increased by the landlord every fifteen months, as it is stipulated that the rent must remain constant for at least one year. If there is another rent increase after fifteen months, the tenant has two months to agree to it. If he does not, the landlord can take legal action against the tenant and enforce the rent increase, if it is legal.

Graduated rent – planned rent increase

The graduated rent is a safe option for the landlord, but it is subject to strict rules. With graduated rent, the rent increase is determined in advance and is often part of the lease agreement. In order for this graduated rent to become effective, the following rules must be observed:

• The graduated rent must be recorded in writing
• The increases in rent must always be constant for at least one year
• Additional increases, such as the adjustment to the local comparative rent or due to modernizations are not permitted (except for ancillary costs).
• The date and final amount of the rent increase must be clearly stated (in the written version); percentage statements are not permissible.
• An exclusion of termination may have been stipulated in the rental agreement for a maximum of four years
• If the rent exceeds the local comparative rent by 10 percent or more, the increase is inadmissible and can be rejected by the tenant.

If these points are given, the graduated rent is legal and can be stipulated in the rental agreement.

Index rent – dependent on the market

The index rent is based on the price index for the cost of living of all private households in Germany and is therefore a variable rent. The figures for the survey are published by the Federal Statistical Office. Landlords who offer their properties according to local comparative rents take advantage of this opportunity, as they would hardly be able to increase their rent in any other way. Again, some rules are observed. The tenant must be informed of the rent increase in writing and it must remain constant for one year afterwards. In addition, the landlord must be able to transparently present his calculations to the tenant. If the rent is increased with the help of the index rent, increases for modernization are not allowed as long as there are no legal requirements against it. Further rent increases based on local comparative rents are also not permitted. For landlords, this method becomes so attractive because they do not need your tenant’s consent. Once a tenant receives a notice for a rent increase, the increased rent must be paid by the month after next after the notice is served. There is then not much the tenant can do as long as the formalities have been complied with.

Formalities in the rent increase – what is involved

As already described, the rent increase must follow precise formalities, otherwise it becomes ineffective. First of all, the tenant must receive the rent increase in writing. The letter must show a precisely calculated total rent including all operating costs. In addition, the letter must show an exact and detailed reason for the rent increase. This can be a current rent index but also a list of comparable apartments or a copy of an expert opinion. The tenant must agree to such a rent increase within a set period of time, otherwise this is invalid and cannot be carried out on the set date. If the tenant refuses, the landlord has three months to enforce the increase in court, as long as the increase is legal.

Modernizations for sustainable improvements permissible

The Civil Code again provides some rules that are necessary to increase the rent. Namely, § 559 of the BGB states that the work on the property must actually increase the value of the property. Literally, it says: “If the landlord has carried out modernization measures within the meaning of § 555b number 1, 3, 4, 5 or 6, he may increase the annual rent by 11 percent of the costs spent on the apartment.″ This includes a wide variety of things. For example, such modernizations, in which sustainable energy or water is saved but also structural measures that increase the utility value or generally provide for improved living conditions, are included. Modernisation work prescribed by the authorities also falls under this category, whereby the landlord must inform the tenant three months before the start of the construction work, but the increase may only take place after completion. If such a case exists, the rent increase with the reason of modernization is quite permissible and must be accepted by the tenant. This is probably still the most pleasant reason for tenants, as the quality of life increases.

Operating costs – advance payments or flat rate?

An increase in operating costs is also possible. As soon as these increase, the landlord has the right to pass on the increase to the tenant. The prerequisite for this is the written agreement of both parties regarding a flat rate for operating costs or advance payments for operating costs. If the costs increase, the landlord must inform the tenant of the increase despite this written agreement. However, a justification for the increase is only required by law in the case of an operating cost flat rate. In the case of advance payments for operating costs, a statement of reasons is not mandatory. The adjustment or increase usually results from an operating costs statement. If the advance payment was not sufficient and additional payments are due, these must be adjusted to the annual costs incurred.

Capping limit – the rent brake

Of course, tenants should also be protected from a rent increase, which is why landlords cannot increase rents indiscriminately. Certain rules are intended to protect against inadmissible increases. These include that in a tenancy the rent may be increased by a maximum of twenty percent within three years up to the local comparable rent. In countries with a housing shortage, it is possible to reduce the cap to a maximum of fifteen percent. If your rent is increased, check in advance whether all important formal and substantive rules have been observed and whether the increase is really legal.