Taxes on the sale of an apartment building

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• Taxes on the sale of an apartment building

Is the sale of an apartment tax-free?

Similar to the purchase of a house, apartment and land, taxes may also be due on the sale. The taxes you have to pay and the amount of tax you have to pay depend on the value of the property as well as on the use of the apartment. Under certain circumstances you can save taxes. The so-called speculation tax plays a major role.

Speculation tax for rental & owner occupancy

As a rule, speculation tax is incurred if a property is resold within a certain period after purchase and was not used as a primary residence. In Germany, this speculation period is generally 10 years. If the sale takes place within this period, the profit generated by the sale is subject to income tax and is referred to as speculation tax.

Tax-free if there are more than 10 years between purchase and sale

If you or your children have lived in the apartment yourself, no speculation tax is due, even if less than 10 years have passed between the purchase and sale. However, if the apartment is a rental property, you should observe the speculation period.

Commercial trade from three-object limit

The three-property limit usually affects real estate dealers and speculators who buy and sell a large number of properties in a short period of time. If a seller sells more than three properties within a five-year period, this may result in the seller being classified as a commercial real estate dealer and thus becoming liable for tax. In this case, the capital gains may be taxed as income, resulting in a higher tax burden.

So, if you have already sold several properties recently, it is recommended that you sell your home only after 5 years to avoid additional taxes.

Taxes on inheritance and donation

But what taxes apply if the apartment is an inherited property? If you decide to sell an inherited apartment, it may well be subject to a speculation period. Here, too, the decisive question is: owner-occupation or rental?

However, a special feature must be taken into account: The start of the speculation period is not the date of inheritance or gift, but the date on which the apartment was acquired by its original owner.

With the inheritance, the speculation period attached to it therefore also passes to the heir

If, for example, you inherit an apartment as a rental property that was purchased 15 years ago, the speculation period is over and you can sell the apartment without having to pay speculation tax.

Conclusion: How to save taxes

In summary, various taxes can be incurred when selling an apartment. The speculation period and the three-object limit play a particularly important role. Special regulations also apply to the sale of an apartment after an inheritance or gift, which require consideration. It is therefore advisable to find out about the relevant tax rules and regulations before selling an apartment and to factor the tax payments involved into your costs.

1. find out about investment options that suit you (goals, risk)

Tip 1 is to thoroughly research the different investment options and choose the ones that best fit your goals and risk tolerance.

This means that you should inform yourself about the various options in which you can invest your inherited money. These include, for example, stocks, bonds, funds, ETFs, real estate as an investment or alternative forms of investment. You should consider which investment options best fit your financial goals and risk tolerance. A financial advisor or expert can help you choose the investment options that are right for you.

Here is a bullet point list with a short summary of the content of tip 1:

• Find out about the different investment options
• Choose the ones that best fit your goals and risk tolerance
• Consider your financial goals and your risk tolerance
• Seek advice from a financial advisor or expert if you are unsure

2. talk to a financial advisor or an expert

Tip 2 is to talk to a financial advisor or an expert who can help you decide.

This means that it can be helpful to seek advice from a financial advisor or an expert if you are unsure how to invest your inherited money wisely. A financial advisor is knowledgeable about different investment options and can help you develop an investment strategy that fits your goals and risk tolerance. An expert in a particular investment area, such as real estate or art, can also give you valuable advice.

Here is a bullet point list with a short summary of the content of tip 2:

• Talk to a financial advisor or expert
• Get advice if you are unsure how to invest your inherited money wisely
• A financial advisor is knowledgeable about the different investment options and can help you develop an investment strategy
• An expert in a particular investment area can give you valuable tips

3. realistic goals and financial plan

Tip 3 is to set realistic goals and create a financial plan to ensure you are investing your money wisely.

This means that it is important to set clear goals and create a financial plan to ensure that you invest your inherited money wisely. For example, your goals may be to save a certain amount of money to buy a property in the future (Tip 8), or to create financial security for your retirement. A financial plan helps you keep track of your goals, expenses and income.

Here is a bullet point list with a short summary of the content of tip 3:

• Set realistic goals
• Create a financial plan
• Helps you track your goals and keep track of your expenses and income

4. diversify your portfolio

Tip 4 is to diversify your portfolio to minimize risk.

This means it’s important to diversify your portfolio to minimize risk. Diversification means that you invest your money in different investment options and industries, rather than putting everything into a single option. By doing this, you can reduce the risk of suffering big losses if one investment performs poorly. It is important to have a balanced portfolio that consists of different investment options.

Here is a bullet point list with a short summary of the content of tip 4:

• Diversify your portfolio
• Invest in different investment options and industries
• Reduce the risk of losses
• Hold a balanced portfolio of different investment options

5. shares with long-term appreciation / less risk

Tip 5 is: Consider investing in stocks to benefit from long-term appreciation.

This means that it may be an option to invest in shares in order to benefit from long-term increases in value. Stocks are shares in companies that are traded on the stock exchange. They can give you an attractive return if the company is successful and increases its value. However, it is also important to note that stocks are speculative and there is a risk of loss. You should therefore carefully consider whether stocks fit your goals and risk tolerance.

Here is a bullet point list with a short summary of the content of tip 5:

• Consider investing in stocks
• Profit from long-term value increases
• Shares are interests in companies that are traded on the stock exchange
• Take into account that shares are speculative and there is a risk of losses

6. think about ETFs (funds and bonds)

Tip 6 is: Also consider investment options such as bonds, funds, ETFs and other securities.

This means it’s important to consider other investment options such as bonds, mutual funds, ETFs and other securities if you want to invest your inherited money wisely. Bonds are debt instruments issued by companies or governments to raise money.

They can be a good way to earn a fixed return. Funds are investment vehicles that pool the money of many investors and invest in a variety of securities. ETFs are exchange-traded funds that track a specific index. There are many different investment options you can consider, and you should think carefully about which ones best fit your goals and risk tolerance.

Here is a bullet point list with a short summary of the content of tip 6:

• Consider investment options such as bonds, funds, ETFs and other securities
• Bonds are debt instruments that are issued by companies or governments
• Funds pool the money of many investors and invest in a variety of securities
• ETFs are exchange-traded funds that track a specific index
• Choose the investment options that best fit your goals and risk tolerance

7. robo advisor instead of asset manager

Tip 7: Consider using a robo advisor as an automated financial tool.

A Robo Advisor is a digital tool that serves as an automated wealth management tool. It uses algorithmic models to develop investment strategies and invest your money automatically. All you have to do is specify your investment goals and risk tolerance, and the robo advisor will create a customized portfolio for you.

You can use the Robo Advisor online at any time and thus have access to your portfolio around the clock. Robo advisors are usually cheaper than traditional asset managers and are therefore particularly suitable for investors who opt for a long-term investment strategy. However, you should keep in mind that robo advisors also have risks and you should therefore carefully consider whether they fit your goals and risk tolerance.

Here is a bullet point list with a short summary of the content of tip 7:

• Consider using a robo advisor as an automated financial tool
• Use algorithmic models to develop investment strategies and invest your money automatically
• Specify your investment goals and risk tolerance and get a customized portfolio
• Use the Robo Advisor online around the clock
• Robo advisors are usually cheaper than traditional asset managers
• Consider that robo advisors also have risks

More about automated trading:

• Robo Advisor: Provider
• Robo Advisor: 20 tips

8. invest in real estate as a capital investment

Tip 8 is: Consider investing in real estate to benefit from appreciation and rental income.

This means that investing in real estate to benefit from appreciation and rental income can be an option. Real estate can be a good way to achieve a stable return.

For example, you can invest in a property and rent it out to tenants to generate regular income. However, it is also important to note that real estate investments require a lot of capital and there is a risk of losses. You should therefore carefully consider whether real estate investments fit your goals and risk tolerance.

Depending on the inherited assets, you could also think about a family foundation with tax benefits.

Here is a bullet point list with a short summary of the content of tip 8:

• Consider investing in real estate
• Profit from appreciation and rental income
• Real estate investments can provide a stable return
• Take into account that real estate investments require a lot of capital and there is a risk of losses
• Choose the investment options that best fit your goals and risk tolerance

More on the topic:

• Real estate as an investment
• Buy first property

9. sustainable, green investments with a future – idea

Tip 9 is to consider investing your inherited money in sustainable investments to have a positive impact and benefit financially.

This means that investing your inherited money in sustainable investment vehicles can be an option to have a positive impact and benefit financially. Sustainable investment vehicles are investments that are guided by social, environmental and governance (ESG) criteria and help create a more sustainable future. For example, you can invest in companies that are committed to climate protection or in funds that invest in sustainable projects.

It is important to note that sustainable investments are not without risk and you should consider whether they fit your goals and risk tolerance. You should also make sure that the sustainable investments you invest in are actually sustainable and not just so-called “green washing” products that only pretend to be sustainable.

Here is a bullet point list with a short summary of the content of tip 9:

• Consider investing your inherited money in sustainable investments
• Invest in a more sustainable future and benefit financially
• Sustainable forms of investment are based on ESG criteria (social, environmental and governance criteria)
• Consider that sustainable forms of investment have risks
• Make sure the sustainable investment vehicles you invest in are actually sustainable

Read more about here:

• Green investments

Conclusion: Investing inheritance wisely

There are many ways in which you can invest your inherited money. It is important that you weigh up the different options and choose the most suitable form of investment for you. You should also consider your goals and how much risk you are willing to take. If you are unsure, you can also hire a financial advisor or a financial planner to help you decide.

Inheritance & Inheritance of Real Estate

Never before has so much been inherited in Germany as this year, reports NDR. It continues, “According to the German Institute for Economic Research (DIW), up to 400 billion euros are inherited or given away every year.”

You can find the report in the NDR media center:

• Dispute over inheritance: How does a good will go?

Dispute in the community of heirs and partition auction

We have already reported on the topic of disputes in the community of heirs in the blog. If a deceased person leaves several heirs and the division of the estate among the heirs is not consensual, the division is determined by law. Since the estate is a joint asset, the co-heirs can only dispose of the inheritance jointly.

If this joint disposition does not work, each co-heir can demand the dissolution of the community of heirs at any time and pursue this independently. In this case, the individual co-heir can dispose of his share in the estate as a whole, but not of his share in individual assets.

• Dispute in the community of heirs

If the heirs are in dispute, a partition auction, a specific form of forced sale, is sometimes held. The aim of the partition auction is to convert the assets into a divisible sum of money and divide them among the co-owners.

An excerpt from Monday, April 25, 2022, 22:00 to 22:45 with our TV expert Jan Rickel.

Image source: 45 Min Reportage / NDR

Read even more on the topic here:

Will, house and compulsory share

The distribution of a deceased person’s assets can be recorded in a written declaration before death, which is the will. Every person is capable of making a will from the age of 16 and does not need a notary in the case of a handwritten will, as the testator draws it up himself by hand.

However, if one wants a notarized will, this must be notarized by a notary public, where the costs for this depend on the value of the estate. For clarification, the document should be labeled “Will” or “Last Will” and at the end it should be signed by the testator and dated. If there are several wills, the will with the most recent date is authoritative.

• Will
• Mandatory share

Inherit without a will?

The law of succession comes into force if there is no will. This regulates who receives the assets of the deceased after a death and how this is done. Communities of heirs may be formed if there are several heirs and the estate passes into their possession.

Communities of heirs are formed automatically after the death of the testator if there are several heirs. These must then divide the estate among themselves and make joint decisions about inherited property, such as real estate. If you want to decide for yourself which relatives inherit which property, you should draw up a will and regulate everything in detail.

• Heirs without a will

Selling property at retirement age

For those who are facing the sale of a property for the first time, today wants to explain the real estate sale, but also two alternatives that you have as a property owner, if you can not yet completely part with your condominium or house. The partial sale and the real estate annuity. In addition, an alternative if it is “only” about liquidity, the mortgage loan.

If you need to sell or need money:

1. Direct sale – Full sale
2. Partial sale – Proportionate, with option for total sale
3. Real estate pension – Full with monthly payment
4. Mortgage loan – financing with credit

In addition, an extra tip on the topic: Bequeath correctly.

Sale of house / apartment – option 1

The final decision would be the direct sale of the property, to a new owner. First of all, let’s talk about the process and then about the question: to sell with or without a real estate agent?

Step by step to the sale

The typical sales process includes (simply explained) 18 steps, divided into 3 phases. First comes the preparation, from the time of sale, through the calculation of the selling price to the exposé.

This is followed by the relatively time-consuming sales phase, starting with the marketing strategy, from personal networks to real estate platforms, through communication with interested parties, the individual credit checks and property inspections. With concrete prospective customers then naturally still the sales discussions and naturally also the negotiation around the final selling price and/or purchase price follow.

Last but not least you come to the sales process, here follows the purchase contract, notary appointment, purchase price transfer and the handover of the property.

• Sell property

Checklist in 18 steps

The 3 phases in the sale of real estate

1. Preparation: prepare property and sale
1. Financial planning and timing of sale
2. Hire real estate agent
3. Records and documents
4. Increase real estate value
5. Determine offer price
6. Create exposé
2. Sales phase: market property and find buyers
1. Market real estate
2. Contact with prospective buyers
3. Filter and select prospective buyers
4. Credit check
5. Viewing dates
6. Sales talk & purchase price negotiation
3. Sales processing: purchase contract until handover
1. Draw up purchase contract with notary
2. Notary appointment
3. Land register entry and payment processing
4. Handover of the property
5. Notary fees & broker commission
6. Pay taxes

Sell with or without a broker?

Without experience in real estate sales, you should resort to the expertise of a real estate agent. As you can see in the sales process, you need time, documents, but also knowledge, e.g. around the credit check of possible prospective customers, so that you do not carry out 30 inspections, which lead to no sold result. In addition it concerns factors such as the real estate evaluation in addition, the care of the advertisements and the Exposés. In addition, there is the emotional burden for one or the other.

As stated initially, if you can’t completely part with your condo or house yet, there are alternatives.

Partial sale: Proportionate sale / right of residence – Option 2

In the case of a partial purchase or partial sale of your property, you have the advantage that you remain the sole occupant and user of the property. The so-called “usufructuary right” means that you have the sole right to live in and use your property despite being the new part owner.

How does the partial sale work?

At the same time, you sell part of your property to a finance company. The finance company thus becomes a co-owner of your property. Financial companies buy shares in pretty much any type of real estate, whether land, condominium, house, apartment building or even commercial and special real estate. The share sold is then usually between 10% and 50%.

Often, in addition to the sold part, a complete sale is discussed directly, which is then completed in 10 years, 15 years or 20 years.

• Partial sale

Quickly described:

• Financial company buys shares of the property
• FU becomes part owner; you have sole right of residence / use
• For this you pay user fee (monthly)

User fee accrues (quasi rent)

In the case of partial sale, you should pay particular attention to the conditions. Explained quickly: Annually, you pay back between 3% and 5% of the amount that was sold pro rata. The so-called user fee. Compared to a mortgage loan that you could also take on your property, 2% to 4% more, because with the mortgage loan you would currently pay only about 1%.

Comparison partial sale / mortgage loan:

• Partial sale: min. 3% – 5% p.a.
• Mortgage loan: currently 1% p.a.

p.a. = per year

Why do some nevertheless opt for the partial sale? The sale to a financial company is relatively quick, no credit check, quick purchase price transfer, especially in case of liquidity shortages in old age, a quick alternative.

Partial sale summarized:

• You sell a part of your property (usually 10-50%)
• Partial purchase house: Yes
• Partial purchase apartment: Yes
• Partial purchase of land: Yes
• Financial company becomes part owner
• You remain the sole user of the property
• You pay monthly usage fee
• Total sales in X years (optional)

10% – 50% sell with option 2: partial sale.

Real estate pension: sale / right to live – option 3

The real estate pension is especially interesting for people who have already reached a higher age, usually from 70, 75 years.

Real estate annuity means: You sell your property (directly) completely, but retain a lifelong right of residence and use. In addition, you receive a small monthly amount. For some, this is a good solution. Because you also no longer have anything to do with maintenance costs, the new owner takes care of that.

Compared to the partial sale, you are relatively carefree in your old age. Let’s summarize the real estate pension once again in brief.

• Real estate pension

Real estate pension simply explained:

• Direct, complete sale
• Lifetime right of residence and use
• Small, monthly “extra pension” from the seller
• No maintenance costs

Carefree old age, in your own property:

Mortgage loan: Liquidity only? – Option 4

Finally, option number 4: If liquidity is the only issue for you.

If you want to sell your property in old age, due to liquidity shortages, a mortgage loan is recommended instead of sale. Such a mortgage loan is significantly cheaper than, for example, the user fee for a partial sale. You also remain 100% owner of the property, without giving shares to a part owner.

Get advice from your local bank and 2, 3 alternatives if necessary.

Extra tip on the topic: Inherit correctly

You still have children, grandchildren, close relatives or other persons to whom they have been bequeathed their real estate? Then it is worth thinking about the earth early! On the one hand you can save taxes, on the other hand you can still experience the joy of giving.

Inheritance in advance: Taxes & Co.

Tip. Before it is too late, talk to your parents and grandparents about the inheritance early on. After all, an early inheritance can save you quite a bit, especially on taxes. Learn more about early inheritance here:

• Bequeath correctly

For heirs:

• Inherit correctly

Inheriting correctly also often means preventing disputes among children.

Take care!