Selling an apartment with a tenant: What you need to know

The sale of a rented apartment is significantly more complex than the sale of an empty property. From the protection against termination under § 566 BGB to the tenant’s right of first refusal (§ 577 BGB) and up to the waiting periods for termination due to personal need (§ 577a BGB), there are numerous legal hurdles. Moreover: The buyer pool shrinks – end-users are out, investors become the main target group. Let’s take a closer look at the most important points.

Protection against termination: Sale does not end the lease (§ 566 BGB)

Selling the apartment does not terminate the rental agreement. The central principle “sale does not end the lease” is enshrined in § 566 BGB: The new owner assumes all rights and obligations of the existing lease agreement. Rent price, notice periods, clauses regarding cosmetic repairs, modernization agreements – everything remains unchanged. The tenant still has a right to undisturbed possession of the apartment as long as they fulfill their contractual obligations.

Practically speaking: Even though the rent has been below market level for years, the new owner cannot simply adjust the contract. Rent increases are only possible within the capping limit (15–20 percent over three years) and the local comparative rent. Exactly this point leads to significant price discounts for properties that are heavily under-let.

The most important facts at a glance:

• § 566 BGB: Purchase does not terminate the lease
• Buyer takes over the lease agreement including all clauses
• Security deposit also transfers to the buyer (§ 566a BGB)
• Rent increases are only possible within the legal framework
• Seller remains responsible for outstanding rent up to the handover

Rentaler’s right of first refusal (§ 577 BGB)

When an apartment building is first divided into individual condominiums and sold to third parties, the tenant is entitled to a statutory right of first refusal. This protective mechanism is intended to prevent tenants from being evicted from their apartments through conversion and sale. Important: The right of first refusal applies only to the first sale after division – not to every subsequent resale.

This is how the right of first refusal works in practice:

• Seller must inform the tenant in writing about the content of the purchase agreement
• Tenant has two months to exercise the right of first refusal
• Exercise of the right must be done in notarial form
• Tenant enters into the same conditions as the third-party buyer
• Exception: Sale to family members or household members – no right of first refusal applies here

What other special considerations should be taken into account when dividing a multi-family house, you can find out here: Selling apartments individually.

Notice protection period after conversion (§ 577a BGB)

An often underestimated point: If a rental apartment is converted into a condominium and sold, the new owner is subject to a notice protection period for personal use and value-based termination. During this period, the buyer may not terminate the lease for personal use.

Overview of the protection periods:

• Federal minimum protection: 3 years from the transfer of ownership
• In tight housing markets (by state regulation): up to 10 years
• Applies to major cities such as Munich, Berlin, Hamburg, Cologne, Frankfurt
• The period begins with the registration of the new owner in the land register

For investors, this is neutral to positive – they want to keep the property rented out anyway. For self-occupying buyers, this lockout period can be a deal-breaker and effectively excludes this buyer group.

Lease termination agreement: The expensive, but clean solution

If you want to sell the apartment empty in order to achieve the higher self-occupying price, the lease termination agreement is often the only legally secure way. The tenant voluntarily waives his tenancy rights in exchange for a lump sum and moves out at an agreed time.

Market-standard compensation amounts:

• Standard: 6 to 12 net cold rents
• In tight markets: 12 to 24 net cold rents
• Approximate range: 10,000 € to 50,000 €, in prime locations also significantly more
• Rule of thumb: Compensation should be below the price difference between rented out and empty

Calculation example: An apartment in Munich with a cold rent of 1,200 € generates 480,000 € when rented out, and 620,000 € when vacant. Difference: 140,000 €. A severance payment of 30,000–50,000 € is economically sensible here, as net additional revenue of 90,000–110,000 € remains.

Landlord’s Right to View

Whether it’s a duplex apartment or a micro apartment – if you want to sell your apartment, you are allowed to arrange viewings. However, the right to view is clearly limited. The landlord must respect the tenant’s privacy, notify appointments in good time (usual: at least 3–4 days notice) and state the purpose.

What the courts consider reasonable:

• Maximum one viewing per week
• Weekdays between 10 and 7 pm, limited on Saturdays
• Notice period: at least 24 hours, better 3–7 days
• Viewing duration: max. 30–45 minutes per appointment
• Group viewings with multiple interested parties are allowed, but not mandatory

Tip from practice: Offer the tenant a small reimbursement (e.g. 50–100 € per appointment) or a one-time compensation. This significantly reduces conflicts and ensures cooperative appointments.

Private users: Termination due to personal need

Requirements for a valid termination due to personal need

If the landlord needs the apartment for themselves or close relatives, a termination due to personal need is possible – but only under strict conditions. A general statement is not sufficient; the need must be specifically and verifiable.

Who counts as “close relatives”:

• Spouses, registered life partners, children, parents
• Siblings, grandparents, grandchildren
• In-laws, in-law children (under certain circumstances)
• Caregivers for family members in the household

Notice periods in case of personal need

The statutory notice periods depend on the rental duration:

• Rental duration up to 5 years: 3 months notice period
• Rental duration 5 to 8 years: 6 months
• Rental duration over 8 years: 9 months
• In case of conversion: additional 3–10 year waiting period (§ 577a BGB)

Hardship clause and risks

The tenant can file an objection under § 574 BGB if the termination would cause particular hardship – for example, in cases of old age, serious illness, pregnancy or lack of alternative accommodation. In addition, caution is advised: if the stated personal need is not subsequently implemented (“fabricated personal need”), claims for damages in the five- or six-figure range may arise.

Requirements for an effective personal need termination at a glance:

• Lawful, specific interest of the landlord
• Personal use for themselves or close relatives
• Written justification with name and reason for the need
• Compliance with legal notice periods
• Observance of the blackout period after conversion
• Actual implementation after moving out is mandatory

Rented vs. vacant: The direct comparison

The decision “sell rented or sell vacant” has significant financial consequences. Here is a direct comparison of the most important factors:

Investors as target group: How investors think

Evaluation via the rent multiplier

While end-users buy emotionally and use comparative prices as a benchmark, investors evaluate real estate purely numerically via the rent multiplier (also: multiplier). The formula: purchase price ÷ annual net cold rent = factor.

Market factors per location:

• A-locations (Munich, Hamburg city center): factor 30–45
• B-locations (Dusseldorf, Stuttgart, Cologne): factor 22–32
• C-locations (medium-sized cities): factor 16–24
• D-locations (medium towns): factor 12–18

Example calculation: An apartment with a cold rent of 1,000 € (12,000 € per year) achieves a selling price of 420,000 € in Munich with a factor of 35, but only 264,000 € in Leipzig with a factor of 22. Anyone who is subletting should check before selling whether a legally secure rent increase is possible – every additional euro of monthly rent increases the selling price by the factor × 12.

Which types of investors are suitable?

• Private investor: Seeks 1–3 properties for retirement, factor-oriented
• Owner / Family Office: Buys portfolios, focuses on cash flow and location quality
• Fix-and-Flip Investor: Seeks properties with potential for value increase, often with expiring rental agreements
• Institutional investors: Relevant only from portfolio sizes upwards, high return requirements

Tax aspects when selling

Speculation tax (§ 23 EStG)

If an rented apartment is sold within 10 years after acquisition, speculation tax at the rate of your personal income tax rate (up to 45 % plus solidarity surcharge) applies to the profit. The period begins with the date of the notarized purchase contract – not with handover or land register entry.

Important points regarding the speculation period:

• 10 year holding period for rented properties</li
  ]]> https://lukinski.com/apartment-for-sale-without-a-real-estate-agent-checklist-tips-process-costs/ Mon, 20 Feb 2023 10:20:19 +0000 https://lukinski.de/selling-an-apartment-without-a-real-estate-agent-checklist-and-tips-on-the-process-costs-co/ Sell your apartment without a real estate agent — those who take the sale of their condominium into their own hands can save several thousand to ten thousand euros in agent commissions. With a selling price of 400,000 euros, this can quickly amount to 7,140 euros savings (half the rate) or 14,280 euros (full rate, old regulation). However: Private sale also means full responsibility for rating, marketing, credit check, contract drafting, and tax aspects. In this guide, you will learn everything about the process, costs, documents, and typical pitfalls — including specific numbers, professional checklists, and FAQs. More basics can also be found in the main guide Sell your apartment as well as on agent costs.

  Selling an apartment without a real estate agent: advantages and disadvantages

  Selling a condominium privately is legally entirely possible — the question is whether it makes sense for your individual situation. For a standard apartment in a mid-range location, it can be very worthwhile. For a high-priced premium property worth more than a million euros, experienced real estate agents usually advise against it — discretion, an international network, and qualified buyer communication are decisive factors here.

  Advantages of Private Sales

  The most important advantage by far is saving on the real estate agent’s commission. Since the introduction of the buyer’s principle in apartment sales (December 2020), the commission is usually split equally between buyer and seller. A seller who hires a real estate agent typically pays 3.57 percent including VAT.

  • Savings on real estate agent commission — typically 3.57 % including VAT (regionally up to 3.57 % per side)
  • Full control over price, buyer selection, and negotiations
  • Direct buyer contact without phone silence or mail
  • Personal insider information about the apartment appears more authentic
  • Flexible appointment planning for viewings

  Disadvantages and Risks

  Private sales require time, market knowledge, and a basic legal understanding. An overly high price setting leads to months of standing still, while an overly low price results in noticeable financial loss. In addition, liability risks under § 444 BGB apply in the case of concealed defects — a professional real estate agent would have a filtering function here.

  • High time investment (on average 60–120 hours per sale)
  • No professional valuation — risk of incorrect pricing
  • Lack of buyer network, longer marketing period
  • Own creditworthiness check of interested parties required
  • Liability risk in case of defects and description errors
  • Bargaining pressure without a neutral intermediary

  Real estate agent vs. private sale: Direct comparison

  Criterium	With real estate agent	Without real estate agent (Private)
  Seller’s commission costs	approx. 3.57 % including VAT	0 €
  Seller’s time investment	approx. 10–20 hours	approx. 60–120 hours
  Average marketing duration	2–4 months	4–8 months
  Valuation	Professional, market-oriented	Self-research or appraiser
  Buyer’s credit check	Standard	Self-responsible
  Liability risk for defects	Reduced	High
  Suitable for	Premium & complex properties	Standard apartments, well-known locations

  Process: From Valuation to Handover of Keys

  Those who sell without a real estate agent go through the same steps as a professional — just on their own. The order determines success or frustration.

  1. Have the apartment professionally valued
  2. Compile all documents completely
  3. Create an exposé and advertisement for sale
  4. Organize viewings
  5. Check the creditworthiness of potential buyers
  6. Negotiate the purchase price
  7. Notary appointment and purchase contract
  8. Handover and transfer of ownership

  Step 1: Have your apartment appraised

  A realistic property valuation is the most important factor. Three options are available: Online valuation (free, +/- 15% accuracy), on-site valuation by a real estate agent (often free, more precise) or a certified appraisal (500–2,000 €, court-admissible). Supplement this with your own research on comparable offers in your area. Find out more in the guide Appraising an apartment.

  Step 2: Create a sales listing and exposé

  A professional exposé is your digital business card. Studies show: Listings with at least 15 high-quality photos are clicked up to three times more often than those with fewer than five images. Use daylight (morning or late afternoon), remove personal items, and photograph from the corner of the room.

  • At least 15 photos: every room, exterior view, elevator, basement, parking space
  • Compelling headline: e.g. “Bright 3-room apartment on the ground floor with south balcony, quiet location, move-in ready”
  • Mandatory information: living area, rooms, year of construction, energy certificate data (otherwise fines up to 15,000 €)
  • Platforms: ImmoScout24 (premium reach), Immowelt, eBay Kleinanzeigen (free, more scattered exposure)
  • Floor plan: not optional — listings with a floor plan convert significantly better

  Step 3: Organize viewings

  Pro tip: Schedule group viewings with three to five interested parties within a time window to create subtle competitive pressure and save time. For premium properties, however, individual viewings are mandatory — discretion matters. More in the guide Viewing appointments.

  • Before the viewing, air out the space, let it be neutrally scented (no air freshener)
  • Turn on all lights, raise the roller shutters — brightness sells
  • Order: strong room first (usually living room), weak room last
  • Remove personal items (photos, religious, political items)
  • Show energy certificate already at the first appointment (mandatory)
  • Answer questions openly — silence about defects is a liability trap

  Step 4: Check the buyer’s creditworthiness

  Many private sales fail here — and exactly here is where a real estate agent earns their commission. Demand a bank financing confirmation compulsorily before signing the contract (not just a “advisor’s letter”). For buyers with equity: bank statement or tax advisor confirmation. Never accept reservation fees in cash — and be cautious of buyers who make full offers without viewing (classic fraud pattern).

  Step 5: Negotiate the purchase price

  A standard negotiation room is usually 5–10 % on the offer price — include this buffer in your calculations. Do not react immediately to the first counteroffer, let 24–48 hours pass. If there are several interested parties, a bidding period can be set (“We accept offers until Sunday”) — this works especially well in city center locations.

  Step 6: Purchase Contract and Notary Appointment

  The purchase contract must be notarized in Germany (§ 311b BGB). The buyer usually chooses the notary (he bears the notary costs). Receive the draft contract at least 14 days before the appointment — this period is legally prescribed (consumer protection). Read it carefully or have it reviewed by a lawyer (300–600 € well invested). More information on this in the guide Creating a Purchase Contract and Notary Appointment.

  Step 7: Handover and Transfer of Ownership

  After receipt of payment (usually 4–8 weeks after notarization) the handover of keys takes place. A complete handover protocol with meter readings, photos of each room and the number of keys protects against future disputes. Only after this does ownership transfer finally occur (land register entry).

  

  Costs in Private Sales in Detail

  Even without a real estate agent, additional costs arise. Although most are borne by the buyer, some are definitely the seller’s responsibility. Here are the typical items for a condominium worth 350,000 euros as an example calculation.

  Seller’s Costs

  Item	Example 350,000 € Apartment
  Energy certificate (consumption/requirement certificate)	50–500 €
  Land register extract	10–20 €
  Current cadastral map	15–60 €
  Living space calculation (if needed)	200–500 €
  Advert (Premium)	50–250 € / Month
  Professional photos / floor plan	200–500 €
  Legal contract review (optional)	300–600 €
  Prepayment compensation (if there is remaining loan)	variable, 1–10 % remaining debt
  Total without prepayment	approx. 800–2,500 €

  Buyer’s costs (for information)

  • Land transfer tax: 3.5–6.5 % per federal state
  • Notary and land register costs: approx. 1.5–2 % of the purchase price
  • Real estate agent commission (if commissioned): half of 3.57 % including VAT

  Capital gains tax — the forgotten item

  Watch out for the tax trap: If you sell the apartment within ten years of purchase and have not lived in it yourself (at least the year of sale and the two preceding calendar years of personal use), speculation tax applies to the capital gain — taxed at your personal income tax rate (up to 45%). Example: 50,000 € profit at a 42% tax rate = 21,000 € in taxes. Always check before selling or consult a tax advisor. A rough calculation of your net profit is possible with the Net Proceeds Calculator.

  Important Documents at a Glance

  Complete documents are the basis for quick negotiations and notary appointments. Put them together before your first listing — buyers with financing will need them compulsorily for the bank.

  Mandatory Documents

  • Land register extract (no older than 3 months)
  • Energy certificate (statutory requirement!)
  • Parcel map / floor plan
  • Floor plan with living area calculation
  • Partition declaration (mandatory for condominiums)
  • Last 3 protocols of the homeowners’ meeting
  • Financial plan and maintenance fee statements (3 years)
  • Statement of the reserve fund for maintenance

  Recommended additional documents

  • Building
    ]]> https://lukinski.com/broker-seo-tips-search-engine-optimization-for-brokers-google-bing-co/ Fri, 04 Nov 2022 16:17:17 +0000 https://lukinski.de/broker-seo-tips-search-engine-optimization-for-brokers-google-bing-co/ Realtor SEO – Search Engine Optimization for Realtors in Google, Bing & Co. Explore Real Estate Berlin. If someone is looking for you, you should “be there”. When it comes to search engine optimization (SEO for short), that means page 1 in the search results on search engines like Google, Bing and others. Regional SEO in particular pays off as a real estate agent and gives you a strategic advantage (SEO is long term) over your local competition. Everything important about your website as a real estate agent.

    Search engine optimization for brokers

    Traffic means reach, i.e. visitors who are on your website. SEO Tip from professionals, for professionals! First, let’s start with the definition of search engine optimization.

    What does SEO mean? 5 Basics

    Search engine optimization (SEO) includes all measures that serve to increase the visibility of one of your website in search engines (such as Google, Bing & Co.). These are:

    1. Page structure and keywords
    2. Page content with structure, keywords, text length and links
    3. Visualizing (photo) and explaining media (infographic, explanatory video, etc.)
    4. Internal links (increases page dwell time)
    5. External links (increases page relevance)

    Goals in SEO: High placement in search results

    There are two crucial aspects for you:

    1. If someone is looking for you, you should “be there” – just learned already
    2. When someone searches for topics relevant to you, you should “be there”

    There will be to the 1) search queries that revolve around you. Typical are

    • “Sample broker city” – General search
    • “Sample Broker Reviews”
    • “Sample Broker Valuation”
    • “Sample Broker Experience”
    • “Sample Broker Experience”
    • “Sample broker reputable”
    • “Sample broker unserious”
    • …

    Now, if you do not have your own website, you will not have any influence on the search results. If you have too small a web page, for example, only home page, About us and Contact, it also happens that others (competitors) appear before you. Or even portals like Gutefrage.net, where someone has asked this question about your name.

    The stronger your page, the more present (visible) you are

    There are millions of searches in Germany every day, just for the context “real estate”. Sell, rent, manage, buy, finance, … that’s why you should 2) “be there” when someone searches for topics relevant to you.

    You will now learn the basis for this: the structure.

    No matter where and when someone searches for you, they have the “sovereignty” on the first page (to be seen right away in example graphic).

    SEO Advantages: More visitors, new customers

    • Here you also achieve the acquisition of new customers via search engines
    • More visitors on the website
    • Additional sales channel
    • Targeted marketing activity (through search terms / active “demand”)
    • Once set up, you get “free” visitors, every day

    SEO Disadvantages: Long-term and initial costs without ROI

    • Long-term build-up necessary, especially in the real estate sector (high competition)
    • Build up time: At least 1 year
    • ROI (return of invest) will be achieved late (comparison: SEA quasi immediately)
    • Costs for content creation and website

    SEO, SEA, what’s the difference?

    SEO deals with your website, its content and structure. SEA (search engine advertising) on the other hand, is a “direct” placement in search engines through paid advertisements. These ads are displayed above the organic search results (SEO).

    

    Real Estate SEO for Beginners: How it works

    Simply put:

    • Creating a website for desktop / mobile devices
    • Plan topics (keywords) in a structured way
    • Create individual pages (company pages and blog posts)
    • Each blog post has 300 – 1,000 words, links to other posts
    • Goal: Good quality and more content than the direct competition

    By individual topics / keywords:

    • House for sale Berlin
    • Sell house after inheritance Berlin
    • Sell house after divorce Berlin
    • …

    your “platform” becomes strong. Your subtopics (such as house selling divorce Berlin) thereby link to the parent page (house selling Berlin).

    As a result, the visitors you have collected in the search engines will stay longer and longer on your website.

    Why SEO! Advantages for real estate agents

    Advantages of SEO – When person X learns about you as a realtor, through recommendation, advertising, by chance, person X will in almost all cases search for you as a realtor. Mostly in search engines, mostly on Google. There are 10 places in the search results (away from advertising), the more channels you serve, the more you determine the information that is here.

    In short:

    • 85% search for information first on search engines
    • Page 1 has 10 results (away from advertising > SEA)
    • No digital media = No influence

    SEO offers the ultimate advantage:

    • Once on page 1, it will be hard to oust you (sustainable)
    • Users have a need, they already want something
    • You give users “something” for free, without anything in return (positive image)
    • Users recommend your good content
    • SEO works for you 24 hours a day, 7 days a week
    • You passively (after work) collect new leads

    Disadvantages of SEO: You have to be that honest

    SEO is long-term marketing, you will achieve results (visitors) only after weeks and months, depending on how hard you work on it and how high the competition is (C-location easy, A-location hard).

    • Long-term online marketing
    • Results by weeks, months
    • Time intensive (article creation)

    For this, your search engine rankings are very sustainable and often stay for years once you have made it. Because, the competition must first become better than you. Compared to advertising in search engines, you do not pay for each click (about 4 – 16 euros / click in the real estate segment).

    

    Checklist! The 3 SEO basics for brokers + example

    To be visible (as seen in the example in a moment) you basically need only 3 things:

    1. Google Business Entry
    2. Website
    3. Social media channel, example Facebook, Instagram and LinkedIn

    … you have already taken a certain part of the first page. Here you can see how effective the mix of these 3 components is, for all those who are looking for you.

    1. Internet site in the first place of the search results
    2. Google Business Entry
    3. Own photos, direct, visual understanding
    4. Map and directions
    5. Address, contact details and opening hours
    6. Social media (Facebook)
    7. Reviews on the web (Facebook)

    Almost all roads, lead to the broker (not third parties or even competitors).

    How does SEO work, so right?

    Let’s get back to your brokerage website and the question: How does SEO work, so right?

    Create theme construction: “Keywords” – What do you want?

    You build individual blog posts for individual so-called keywords. For example, one keyword could be “renting”, another “renting tips”, yet another “renting process” and yet another “first renting”. Depending on what users are looking for in a search engine, you have the right content for it.

    Here again the example of the introduction for our real estate agent in Berlin, with the focus object acquisition:

    • House for sale Berlin
    • Sell house after inheritance Berlin
    • Sell house after divorce Berlin
    • …

    Create SEO texts: 1-2-3 formula – checklist

    On the Internet you will find thousands of guidebooks that will tell you a lot about SEO, in principle, means good optimization.

    The little 1-2-3 formula:

    1. Create individual pages (company pages and blog posts)
    2. Each blog post has 300 – 1,000 words
    3. Articles link to other posts (Sale > Divorce > Separation year and back).

    The most important, most important (!) in SEO – added value

    Now the most important thing:

    Importantly, these articles should contain added value!

    Therefore directly tip 2:

    It’s not about creating 1,000 articles, better are 50, 100 focused (topic) and dotted (region)

    Added value means that your visitors take something with them, ideally stay on your website for a long time and thus increase the value of your website (domain value). This way you get more and more visitors, thus also new customers.

    2 SEO example for object acquisition

    Are you looking for existing properties in your region (real estate acquisition)? Help sellers with problems, landlords, heirs. Almost everyone will want to sell sooner or later.

    The first SEO text

    You now know the process you need to follow to advance your website. SEO is long-term marketing, you will achieve results (visitors) only after weeks and months, depending on how hard you work on it and how high the competition is (C-location easy, A-location hard).

    SEO summarized

    SEO means quickly explained

    • Structure – contents and texts
    • Added value – texts must “give something” to readers
    • Links – Links provide further information
    • Goal – Good content ensures high placement in search results

    Agencies like Model Agency One offer holistic online marketing solutions for maximum visibility.

    ]]> https://lukinski.com/buy-and-rent-a-villa-yield-season-service-charges-renovation-financing/ Sun, 27 Feb 2022 14:08:50 +0000 https://lukinski.de/buy-and-rent-a-villa-yield-season-service-charges-renovation-financing/ Buy and rent villa – A popular model among many owners, especially villas located in places where others go on vacation. For example, Spain as a hotspot, especially Mallorca, Ibiza but also Marbella, depending on the personal ties you have to one of the places. If you want to rent out your villa, you buy not only for personal use, but also classically as an investment with the goal that the property generates income. So much (yield) that the costs are covered (loan repayment, interest and maintenance of the villa). Learn here everything you need to know about the return on investment, the seasonal rental of a villa, your utilities from maintenance to pool service and facts about financing. Also, the Spanish property tax when buying real estate.

    Renting a villa: return and increase in value

    Is it worth renting in Spain? Yes! As you will see later in the example, some generate 5%-10% of the purchase amount per year, just by renting in and around peak season. The remaining 3-6 months you use your villa yourself.

    Are you planning to rent for the first time?

    Profitable is not only the renting, also the increase in value of the property in special places like Mallorca or Ibiza, you should not disregard. More about this, after the yield calculation.

    Learn everything you need to know here in the guide!

    Renting: return of a villa

    In Germany, real estate is rarely used as a vacation home and rented out during off times. If they do, the calculation works a little differently than the typical fully rented property. In a long-term lease, tenant X pays sum Y every month. Vacation rental also means a bit of speculation, depending on off-peak and peak seasons. In principle, however, the calculation of real estate return is the same.

    Rental yield target: tenant pays your villa

    Let’s summarize the simple goal of a good real estate return:

    The return should be so high that your tenants, pay off your villa

    The value varies, currently a good yield is at least 6% (in Germany). With higher interest rates for financing abroad, the value increases accordingly. 1% more interest requires directly 1% more yield – simplified.

    Calculate return on investment: Example of how to get started

    The usual yield calculation works in such a way that the annual cold rent (i.e. monthly rent * 12) is calculated. In the case of partial renting, the possible annual cold rent is just as important, but focused on a few weeks or months in the year in which you do not use the property yourself.

    Simply calculated:

    Return = annual income (cold rent) / investment (purchase price and ancillary costs)

    Quick example:

    • 6,7 % = 80.000 / 1.200.000

    Tip! Decisive for good rental prices are, in addition to the villa (extras such as swimming pool) and good location, always the number of bedrooms / bathrooms.

    But from the principle everything remains the same. Yield calculation.

    Yield of a villa summarized

    Fact 1) The calculation of the return on a property becomes important whenever you want to rent out your property. Fact 2) It simply puts the income of the rent in relation to your inventories (purchase price and service charges), with the aim that your tenants, pay your villa.

    Fact 3) The result of the real estate yield is a percentage. If this is (currently) above 6%, all running costs (financing [repayment, interest] and maintenance) are covered, so to speak. If the yield is (currently) below 6%, you pay monthly.

    Here again, for illustration purposes, the calculation of the “usual” return (when a capital investment is fully rented) and adjusted, the return of a rented property abroad (vacation home), which you also use.

    Formula

    The formula to calculation:

    Fully leased:

    Return = annual cold rent (cold rent * 12) / investment (purchase price and ancillary costs)

    Partial leasing:

    Return = annual cold rent / investment (purchase price and ancillary costs)

    So, in principle, the same calculation.

    

    Rent: How much rent for which villa?

    Tip. Wondering how much a property worth X can be rented out for? Compare offers on platforms for vacation homes or also on AirBnb. Use similar parameters (location, condition, living space, bedrooms).

    This way you can also benefit from the experiences of other landlords in the location without having to do a lot of rental experimentation yourself.

    Example: Renting in the main season – 2.6% return!

    For example, an acquaintance rents out his property worth 2,100,000 euros for 54,000 euros in the month of July alone.

    Yield for this month:

    2.57 % from the purchase price

    In Germany, investors focus on real estate for their capital investment, with an annual return of 6%, so in hotspots like Ibiza you can earn almost half of the necessary minimum return in one month. Of course, the year does not have 12x the month of July on offer (hot temperatures, summer vacations in many countries). But the main season alone, May to September, generates a decent amount of return.

    Unfortunately, you pay a little more interest and also the rental must be organized.

    Fees: Rental and House Service + Advantage

    Those who rent in hotspots like Mallorca, Ibiza or Marbella, of course, do not take care of it themselves. But there are excellent contacts on the spot, who take over everything directly for 20-25% of the rental income: Rental, house cleaning, maintenance to garden and pool maintenance. Of course, you could hire everything separately, but everything from one source is the best way to rent stress-free to serious tenants.

    Renting through agency:

    20% – 25% of the rental income

    Once again the great advantage:

    • Villa renting
    • Communication with tenants
    • Handover of the villa (moving in and moving out)
    • Maintenance
    • Outdoor facilities like garden, pool, tennis court, etc.
    • Everything without stress

    Let’s now look directly at a practical example with concrete figures.

    

    Advantages: Return from rental and increase in value (land).

    Real estate in the Spanish hotspots are of course somewhat more costly than buying “at home”. This brings the yield advantage, not everyone “dares to take the step”. In addition, you need more equity abroad, a whole 50-60% of the purchase price. More about this in a moment.

    1. Good returns, often over 10%
    2. In addition, increase in value of the property

    Purchase price incl. refurbishment for example calculation

    In the example, you buy a property including ancillary costs for 1.9 million euros and invest another 240,000 euros for the refurbishment to the final touches.

    • Purchase price: 1.90.000 Euro
    • Redevelopment: 240,000 euros
    • Investment: 2.140.000 Euro

    In peak months like June, July and August you can get 50.000 to 60.000 Euro / month, realistically and with pre-booking in January, February, March. We calculate 14.000 Euro / week in peak season +/- 1 month before and after peak season; also we consider realistic vacancy and your own use, for example over the winter months.

    Calculation: Income from rental

    The months then differ. Example:

    • January – March: Self-interest
    • April: Empty
    • May: 12.000 Euro / week
    • June – August: 14.000 Euro / week
    • September: 11.000 Euro / week
    • October – November: Empty
    • December: Self-interest

    Your return on investment is then calculated from the purchase price, rental/house service and the income:

    • Annual cold rent: 260,000 euros / year
    • House service (20%): 26,000 euros / year
    • Annual rent (net): 234,000 euros / year

    In sum:

    • Investment: 2.140.000 Euro / year
    • Yield: 10.9 % Yield

    In Germany you can find real estate with yields over 10% only extremely rarely or in C-locations, which bring risks with them. Here you buy in the best location, villas with pool and sea view.

    Increase in value of the property

    Then, on top of the real estate yield, there is the general increase in land prices. Do you know what advantages places like Ibiza and Mallorca offer? Space is not infinite. Just like in Switzerland, for example, building space is limited and accordingly the real land price increases are higher compared to a capital investment you make “at home” nearby.

    Here is an excerpt from the Frankfurter Rundschau, current from last year:

    “On average, prices for island properties increased by 27.2 percent, with the highest rate of increase recorded by market researchers in the city of Palma, 42.1 percent, followed by the southwest, where vacation properties now cost 37.8 percent more than five years ago.”

    Let’s calculate “only” with the 27.2% average.

    • 27.2 % / 5 = 5.45 % p.a.

    

    What are the incidental costs of buying real estate?

    The cost block of incidental expenses is relatively extensive if you really consider all aspects. But there are a few differences.

    Costs for the broker

    Brokerage costs – In Germany, brokerage costs (for private purchases) are split 50% each between seller and buyer (by law). If a property is sold from company to company, the distribution of the brokerage costs is freely divisible between buyer and seller. In Spain (i.e. also Ibiza, Mallorca or Marbella) the brokerage costs are already included in the purchase price of the property (5% for standard properties).

    Property tax on the purchase of a villa

    Wealth Tax – If you buy a property in Spain and put over 700,000 euros of the purchase price from equity (not financing), you will have to pay tax on everything above the 700,000 euro exemption amount. Spanish wealth tax is between 0.2% to 2.5% of the net assets you bring in.

    Tip. The exemption amount differs in the municipalities. In Catalonia and Valencia, the tax-free amount is only 500,000. In Madrid, the tax-free amount is unlimited.

    Example:

    • Total purchase price of the villa: 1.8 million euros
    • Equity share (60%): : 1.08 Mio Euro
    • Allowance: 700,000 euros
    • Taxable assets: 308,000 euros
    • Tax rate: 0.3%
    • Tax amount: 924,00 Euro

    Property tax: table

    Here are all tax rates with assessment limits:

    Source: WF Salinas.

    With assets of EUR	If the tax is in EUR	From assets of EUR	If the tax on this amounts to
    0,00	0,00	167.129,45	0,2
    167.129,45	334,26	167.123,43	0,3
    334.252,88	835,63	334.246,87	0,5
    668.499,75	2.506,86	668.499,76	0,9
    1.336.999,51	8.523,36	1.336.999,50	1,3
    2.673.999,01	25.904,35	2.673.999,02	1,7
    5.347.998,03	71.362,33	5.347.998,03	2,1
    10.695.996,06	183.670,29	And more	3,5

     

    Refurbishment for existing properties

    Refurbishment and upgrading – Surely you still want to design your villa according to your wishes and ideas. For this you have to calculate at least with costs for the upgrading and depending on the year of construction of the house, or the last renovation, also with renovation costs (garden, pool to bedrooms, kitchen, bathrooms).

    Typical ancillary costs at a glance:

    1. Theoretical travel expenses (site visit)
    2. Brokerage costs – pays seller
    3. Notary fees – contract of sale
    4. Land register costs – change of ownership
    5. Refurbishment / upgrading (for existing buildings)
    6. Wealth tax (from 700,000 euros)
    7. Property tax (after purchase)

    

    Conclusion: buy and rent villa

    You have now really learned a lot. About the return on rent in seasonal times. You have learned the taxes, but also the incidental costs from the purchase with real estate agent, to the rental in maintenance of your property.

    With this knowledge, you can find a profitable villa for rent in Spain.

    Here I have 2 extra tips for you!

    Real estate agents: Villa Portfolio Ibiza, Mallorca & Marbella

    As a real estate agent I am on canvassing for clients, we provide exposés, schedule viewings and help with the buying process on site, from notary to financing if needed. A small selection and choice of my villas in Mallorca, Marbella and also Ibiza, you can find here:

    • Lukinski: Villas

    Financing abroad: equity and interest rate

    You want to buy a villa in Spain? Whether Mallorca, Marbella or Ibiza, the conditions for real estate financing differ significantly. If you do not buy your villa for 100% personal use, but rent the villa partially or even completely as an investment, then you should know the special conditions in Spain. In addition, I also give you a few insights from the USA, as a comparison. So you can see how cheap a financing in the home country and how expensive loans as a foreigner in other countries become, in relation to your interest rate and your equity. In the end, it’s always about return on investment.

    • Financing abroad

    

    ]]> https://lukinski.com/villa-finance-abroad-credit-equity-and-interest-effects-rental-yield-examples/ Sat, 26 Feb 2022 14:11:14 +0000 https://lukinski.de/villa-finance-abroad-credit-equity-and-interest-effects-rental-yield-examples/ You want to buy a villa in Spain? Whether Mallorca, Marbella or Ibiza, the conditions for real estate financing differ significantly. If you do not buy your villa for 100% personal use, but rent the villa partially or even completely as an investment, then you should know the special conditions in Spain. In addition, I also give you a few insights from the USA, as a comparison. So you can see how cheap a financing in the home country and how expensive loans as a foreigner in other countries become, in relation to your interest rate and your equity. In the end, it’s always about return on investment.

    Return leverage: equity and interest

    The biggest levers within the return are 1) equity share, 2) interest rate and 3) fixed interest period. The “higher the costs” the worse the return.

    A complementary guide to buying and renting a villa.

    What does yield mean?

    Return, simply put, compares your capital investment to what you earn from your property (renting). If the return (income / investment) is 6% or more annually, your villa is generating enough for the tenant(s) to pay for your villa.

    Negative return effects due to interest rate & Co.

    The higher the monthly costs (repayment, interest and maintenance), the lower the return. So if the interest rate you have to pay for a loan increases, this has a negative impact on the return.

    Negative effects at a glance:

    1. Equity investment
    2. Repayment
    3. Interest
    4. Maintenance

    It’s the same with equity, of course. Because, as you will learn in a moment, you have to provide significantly more equity as collateral abroad. The more equity you have to provide, the more assets are tied up in your property.

    Rentals and extras in the south: pool, garden & co.

    In addition, there are the typical maintenance costs, of course extended and aspects such as garden service and pool service. For example, if you use your villa only 2, 3 or 4 months a year yourself and rent it out the other time.

    Learn here everything first and important about financing a villa in Spain.

    

    Equity investment abroad: Spain

    The use of equity capital differs considerably abroad. The main reason for this is that, in case of doubt (default), banks can only access the property with increased effort. Accordingly, German banks rarely finance foreign real estate and refer you to a local partner.

    Equity comparison: Germany, Spain and USA

    For a real estate financing in Germany you need, for the first, second and also third real estate about 15% equity.

    In Spain, whether Mallorca, Ibiza, Marbella or other hotspots, the bank charges significantly more, usually 50-60%.

    • Equity in Germany: 10-15
    • Equity in Spain: 50-60%
    • Equity in USA: 100%

    If you want to buy your property in the USA, you have to expect even more. Often you even have to buy with 100%. Why is that?

    Security, access and legal systems

    As already described in the introduction: Equity serves as collateral for the bank. The more “risky” the loan, the worse the conditions. In this country, a good credit rating is sufficient to obtain the usual conditions of 10-15%. Abroad, many factors are added, for example, the legal system. Within Europe, or the European community, it is still a little easier than with third countries, such as the USA.

    Lending factors:

    • Interest rate
    • Fixed-interest period
    • Equity share

    Interest rate and fixed interest rate

    Interest rate and fixed interest rate – The fact is, as a foreigner you get worse conditions in other countries, after all the risk increases. Interest rates, or higher interest rates, have an extreme effect on profitability.

    Interest effect: cost increase at only 1% plus

    Let’s say you borrow 500,000 euros as a loan for financing. Every year (every month) you pay off a little of the loan amount. The smaller this remaining debt, the smaller the amount you pay for interest.

    Interest rate example in 1st year:

    • 500.000 Euro at 1% pa. = 5.000 Euro / 1st year
    • 500.000 Euro at 2% pa. = 10.000 Euro / 1st year
    • …

    Remaining debt and interest calculation p.a. (per year)

    Let’s say that after year 1 you have repaid 5% of the loan amount, i.e. 25,000 euros. This leaves a remaining loan of 475,000 euros. The basis for the interest calculation in the following year.

    Interest rate example in the 2nd year:

    • 475.000 Euro at 1% pa. = 4.750 Euro / 2nd year
    • 475.000 Euro at 2% pa. = 9.500 Euro / 2nd year

    Conclusion: 1% more interest adds up

    The difference adds up with each year your loan runs.

    • 1st + 2nd year at 1% pa = 9,750 euros interest
    • 1st + 2nd year at 2% pa. = 19,500 euros interest

    

    Fixed interest rate briefly explained

    At 5% repayment pa. you assume (without unscheduled repayment) a loan with a term of 20 years. This is where the fixed interest rate comes into play.

    That is why the fixed interest rate (borrowing rate) is so important. Here, the interest rate is fixed for period X and remains unchanged within the period. After X years, you then have to look for follow-up financing.

    So you know more about the required equity, repayment and your interest block. On the subject of maintenance of villas, in countries like Spain, I have written an extra guide.

    Negative effects at a glance:

    1. Equity investment
    2. Repayment
    3. Interest
    4. Maintenance – more in the guidebook:

    Buy and rent villa abroad

    Yield, season, service charges, renovation, financing… Villa buy and rent – A popular model among many owners, especially villas located in places where others go on vacation. For example, Spain as a hotspot, especially Mallorca, Ibiza but also Marbella, depending on the personal ties you have to one of the places.

    Who wants to rent out his villa, buys not only for personal use, but also classically as an investment with the goal that the property generates income. So much (yield) that the costs are covered (loan repayment, interest and maintenance of the villa). Learn here everything you need to know about the return on investment, the seasonal rental of a villa, your utilities from maintenance to pool service and facts about financing. Also, the Spanish property tax when buying real estate.

    • Buy and rent villa

    

    Real estate agents: Villa Portfolio Ibiza, Mallorca & Marbella

    As a real estate agent I am on canvassing for clients, we provide exposés, schedule viewings and help with the buying process on site, from notary to financing if needed. A small selection and choice of my villas in Mallorca, Marbella and also Ibiza, you can find here:

    • Lukinski: Villas
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