Real estate for own use: location

So if you want to buy a property and move in directly, you should like it first and foremost! Compared to real estate as an investment, the rental yield is therefore unimportant. Instead, it is important to think about what you want from the environment of your property. After all, your personal goals and ideas are in the foreground.

Your personal goals are important for the choice of the location

Maintain or increase resale value

In addition, you should always keep the resale value of the property in mind. After all, you may one day decide to sell your dream property again. A professional reorientation, family growth, old age or illness are often reasons for a resale. Our tip: When buying your property, always opt for a (very) good location to prevent any loss of value in the future.

(very) good location = preservation or increase of resale value

A, B & C location: buy dream property outside the city?

Above all, avoid real estate in C-location here. This location is defined primarily by negative economic development, weak infrastructure and low demand. Even if a property in the middle of the countryside far away from the hustle and bustle of the big city sounds tempting, you have to expect a strong loss of value in the future. In the worst case, your property will only be worth the price of the land in a few years.

• Read more here: A-, B- & C-Lage

Important criteria: Infrastructure, cultural offerings & Co.

City or country? Big city or small town? Once you have defined the rough location for yourself, the next step is to determine the exact neighborhood. How good are the connections to public transportation? Are there many cultural offerings? Is the neighborhood safe and quiet? Where is the nearest hospital? These criteria of the micro-location of your property are also important.

Here are some other important criteria:

• Infrastructure
• Security
• Cultural offers
• Proximity to public facilities
• Security
• Cleanliness

Real estate as an investment: Location

You would like to acquire a yield or investment property? In this case, the criteria already mentioned, such as infrastructure, security, etc., are also important, but take a back seat depending on the strategy and goal. While you should definitely look around in B and C locations for a yield property in order to generate direct cash flow through a high rental yield, properties in A locations are particularly worthwhile for investment properties.

Conclusion: Individual goals & personal strategy

So the location of your property depends on both its goals and your strategy. Thus, depending on the type of property, different factors are important. While personal preferences and an increase in resale value are the most important factors for owner-occupied property, the rental yield is the main consideration for income property. And in the case of investment property, it pays to look in A-locations in particular.

If you want to know even more about the respective investment strategies and the perfect locations, then take a look at our guide:

• The perfect location of a property (external)

Different layer types explained: A, B & C layer

In principle, a distinction is made between three types of location when searching for real estate:

• A-location (metropolis)
• B-location (large city / city with positive development)
• C-location (small town / city with stagnant development)

Why are location types important? It’s simple: As a real estate buyer, you have ideally thought about your goals before buying the property. Do you want to buy the property for personal use or as an investment? Is this a yield or investment property? Depending on the answer to this question, the location you should look at also differs.

So now let’s look at the different definitions.

A-location: coveted metropolises, such as Berlin and Hamburg

As a rule, metropolises and capitals are considered A-locations. They are sought-after places to live, as they are often home to internationally based companies. The economy is thriving, the education system has a lot to offer and life is never boring. Germany’s metropolises are also home to the most beautiful and historic neighborhoods. If you buy a property here, you can expect a high purchase price but a low return.

Typical for A-locations: expensive purchase price & low yields

Investment property purchase: Low risk & high purchase price

Due to the high purchase price and the low return, we advise you to look for investment properties in A-locations. After all, the high prices per square meter are hardly covered by rental income. In other words, due to the coveted demand in metropolitan areas, you can enjoy an increase in the value of your property at a low risk. Why low risk? The popularity of locations such as Munich, Berlin and Hamburg is highly unlikely to wane in the next few years – after all, more and more young people are drawn to these very cities.

Aim of a property in A-location: Later & profitable resale

If you do not expect a direct cash flow shortly after the purchase of the property, then real estate in an A-location is exactly the right thing for you. Yielding properties, on the other hand, are less likely to be found here. So here is a brief summary:

• Purchase price: High
• Yield: Low
• Advantage: Low risk
• Property type: Investment property
• Goal: Later, profitable resale

A-location in Germany: Examples

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

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

B-location: economically strong major cities, such as Nuremberg and Leipzig

Properties in B locations, on the other hand, are characterized by their high returns. After all, B locations are close to popular metropolitan areas and are thus also considered popular places to live.

Typical for B-location: moderate purchase price & high returns

Yield property purchase: Moderate purchase prices & cost-covering rent

While the high price per square meter in A locations means that rents cannot cover these costs, this problem does not exist for properties in B and C locations. Thus, properties in B-locations are considered perfect yield properties.

Here are the advantages at a glance:

• Purchase price: Moderate
• Yield: High
• Advantage: Cost-covering rent
• Property type: Yield property
• Goal: Immediate cash flow

B-location in Germany: Examples

B locations include:

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

Somewhat outside the major metropolises are sought-after B locations:

C-location: Low-cost real estate with high risk

C locations are therefore also suitable for investment properties. These are locations with weak infrastructure and only low or moderate economic strength. Here you can enjoy a lower purchase price, but must also expect higher risks, such as vacancy, rent arrears & Co. The yield properties here are therefore characterized by a high risk.

Real estate in C location briefly summarized:

• Purchase price: Low
• Advantage: Real estate bargain
• Property type: High risk return property
• Goal: Immediate cash flow

Here a typical prefabricated building in C-location:

Conclusion: Decide depending on the type of property

While A-locations are sought-after metropolitan areas, B-locations are characterized by their economic strength. C-locations are less desirable and have a weak infrastructure, but even here it can be worthwhile to invest in an investment property. It is best to consider in advance what goal you are pursuing with your property purchase and what type of property you are interested in. Then the choice of location will be much easier for you. Once you have decided on an A, B or C location, the second step is to analyze the macro, meso and micro location.

Learn more here: Macro, Meso & Microlocation

Tip. Read here the complete comparison between A-location, B-location and C-location including examples on my new project for real estate buyers (Immobilien-Erfahrung.de):

• Property location: A-, B-, C-location – external

New! Especially for real estate buyers

Buying real estate from A-Z: preparation, search criteria, buying process and all that, free of charge and online, from experts.

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Buying an apartment, buying a house, owner-occupation or capital investment, yield or investment property? On my new project Immobilien-Erfahrung.de you will now find everything you need to know for your successful real estate purchase! Learn everything you need to know about setting goals when buying real estate, types of locations(A, B and C locations), types of real estate, their yields and more – all online and free of charge! Now on Immobilien-Erfahrung.de:

• Return vs. real estate investment

Definition: Investment property or yield property?

So what is an investment property? And what is an investment property? Very important here is the objective. Do you want to generate a direct income through yield or rent? Or is a long-term increase in value more important to you?

Investment real estate: value enhancement over the long term

With an investment property, the aim is to achieve an increase in value over the long term. This also means that you first invest and only then sell your property at a profit and thus capitalize on it. It is not about an immediate return or renting.

The location of the apartment or house is the most important factor for the value of the property. Redevelopment and renovation also have a value-increasing effect on your property.

Here is an overview of the goals of an investment property:

• Primary: Increase in value of the property, profit from sale
• Real estate with corresponding A-location

Return on investment in real estate: Direct cash flow through letting

The primary goal of a yield property is the immediate profit after the acquisition of such a property. Ideally, these properties generate a rental return. Properties in good C-locations carry higher risks than properties in very good B-locations.

Here is an overview of all destinations:

• Primary: profit from renting
• Real estate with a rental yield of over 6%
• Real estate in C+ to B+ location

Tip: Yield real estate – advantages & disadvantages

Both the yield real estate and the investment real estate bring both their individual advantages and disadvantages. While the investment property requires a particularly large amount of capital, a yield property provides a direct income. Therefore, we recommend investing in a yield property especially in the beginning.

Advantages: Direct income & surpluses

The most obvious advantage of a yield property is the immediate income from renting it out. In addition, if there are any surpluses left over, they can be used to cover other properties in the portfolio.

• Instant cash flow
• Surpluses can offset other properties with shortfalls

Disadvantages: Higher taxes & temporary in B locations.

However, there are also two disadvantages that bring a return real estate. The first is taxes. Thus, the tax burden increases due to the additional surpluses. On the other hand, yield properties can be found only very rarely in A-locations.

• Tax burden increases
• Property rarely found in A-locations

Conclusion: Tips for beginners & advanced users

So if this is one of the first investments in real estate, we recommend a yield property. Once a solid real estate profile has been established, a combination of investment and return is recommended later.

For advanced investors: A mix of both types of investment

Pets at a glance

• Small animals may always be kept
• Animals like dogs & cats basically allowed, can be banned
• Always consult with landlord

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