Equity investment in the purchase of real estate

Whether for personal use or capital investment, equity capital is required for every real estate purchase. Especially when buying your first property, the amount of equity you need to contribute is important. If you are buying a property for your own use, you should contribute as much equity as possible. If you are investing in a property as a capital investment, less is more.

As a basic rule:

• Self-interest = As much equity as possible
• Capital investment = As little equity as possible

Why is that?

Equity as a safety mechanism

In order for the bank to give you a loan for your property, it needs a certain security to get this money back in full later. That is why your creditworthiness is checked in advance. The more liquid your finances are, the less equity is necessary. However, if your expenses outweigh your income, you will need more equity. Once you have received your loan, you pay it back monthly through repayments.

The better your credit rating, the less equity you have

Important: As an owner-occupant, you have to pay back the interest on your loan yourself. Investors, on the other hand, can deduct them from their taxes.

Self-interest: This is how much equity you need

So as an owner-occupier, you need to put in as much equity as possible. In addition, the higher the equity, the lower the interest burden. Because the more equity you bring in, the less risk there is for the financing bank and the lower the interest rates are calculated.

As a general rule: 20% equity for owner-occupiers

Monthly Costs & Income

So how much should you earn each month? Our tip: The monthly cost of your loan should not exceed 40% of your net income.

Here is a calculation example:

• Income (net): 3,000 euros
• 40% = 1.300 Euro

So the monthly repayment including interest should not exceed the 1,300 euros.

Capital investment: This is how little equity you need

While you need as much equity capital as possible for owner-occupation, as an investor you enjoy the advantage of having to contribute far less equity capital. In addition, you can deduct the interest from your taxes. Ideally, even the tenant indirectly pays your interest. As a buyer of a property as an investment, your equity covers only 10-15% of the costs.

These include:

• Incidental purchase costs
• Real estate transfer tax
• Notary fees
• Court costs
• Brokerage costs

Rolling equity: Fast investments

Our pro tip: Make use of your rolling equity. But how does it work? It’s simple: You buy a property and contribute equity. Now this is paid out again through redemption and you can use it directly for your next investment.

Conclusion: This is how much equity you need!

So here is the rule of thumb once again:

• Self-interest = As much equity as possible
• Capital investment = As little equity as possible

In the case of personal use, your equity serves as security for the bank that it will definitely get your money back sooner or later. In principle, the equity you put in should not exceed 40% of your net salary. As an investor, on the other hand, you only need to contribute 10 to 15 percent as equity. The interest is to be borne by the tenant and with the help of rolling equity, you can invest directly in the next property.

You can find more about equity and real estate financing on my new project for real estate buyers (Immobilien-Erfahrung.de):

• Equity (external)

Celebrities, Surf, and Tech

Los Angeles is quintessential for America, and along with New York, perhaps the poster city for the United States. This city is unique for its mix of young, laid-back and progressive people, as well as the glamour of Los Angeles, and big-city downtown. Home to the world’s most famous movie production area with Hollywood, as well as countless cultural icons, this is the city to see and be seen. It is home to some of the most luxurious and high-end real estate in the world, such as this 35$ million Hollywood mansion.

Los Angeles has many neighborhoods, districts and counties within its broader metropolitan area. There are 15 so-called districts which are named 1 through 15, all of which are situated in two counties (Los Angeles County, Orange County). Yet similarly, there are 72 neighborhoods, including Westwood, Venice, or Bel Air. Some divide the metropolitan area into 4 districts: Beverly Hills, Santa Monica, Hollywood, Anaheim, and Los Angeles proper.

Already know you want to move to L.A.? Let us help you with our guides

• Buy Apartment: Los Angeles
• Buy House: Los Angeles

Los Angeles Facts

It has a population of 3.99 million, meaning it makes up 9.9% of California’s massive 39.51 million inhabitants. According to a large sample surveyed, 37% of inhabitants from Los Angeles rated their health care system as good or very good, ranking it 9th in the World, ahead of other Metropolises like Montreal and Berlin. Los Angeles Airport (LAX) is the third busiest airport in the world, and reported a 0.8% increase in the past two years. The housing market is massive in Los Angeles, and popular among real estate investors. Learn more: Luxury Realtor Los Angeles.

Bird’s Eye View of Los Angeles

Want to see how Los Angeles looks from the sky? Check out these drone shots of the City of Angels.

Map of L.A. and Surroundings

Real Estate Investment Los Angeles

Los Angeles is a massive city, spanning multiple counties. It’s near impossible to decide where to live. Generally, there are those that want to live in the famous residential areas of Bel-Air or Beverly Hills, there are also people who want the tumult of downtown LA, or younger people, and those looking for a more comfortable atmosphere will head to e.g. Silver Lake or Mid City. In general, for Los Angeles, it’s a good choice to rent, as opposed to buy. With purchases prices being comparatively high.

• Lowest rent: Jefferson Park $1.355
• Highest rent: North of Montana $4.690

Buy or Rent?

Los Angeles, what type of investment should you make here? You would likely be best served with the choice of a rental property. The median home price somewhere around $630.000, with a 3.5% downpayment translates to monthly mortgage payments of over $3.000, compared to the average renta price for a three-bedroom of $2.600 a month. Although, this calculation turns with time, where if you live in a property longer than four years, ownership is cheaper than renting.

Our full rundown on L.A. real estate investment:

• Real Estate Investment Los Angeles

Is Real Estate Expensive in Los Angeles?

Home prices in the metropolitan area of Los Angeles increase by about 13% annually, with the number of sales also increasing over the past year. The median price of an apartment is now $667.000. On top of this, rental prices have been steady in the past years, when looking at average rent.

• 2017: 2.281 $/m²
• 2018: 2.385 $/m²
• 2019: 2.516 $/m²
• 2020: 2.524 $/m²

Property Taxes – How Much to Pay

California property taxes are not bad compared to the national average. Especially Los Angeles county is good regarding real estate taxes. The property taxes of counties surrounding Los Angeles, of Orange County Los Angeles County, and Fresno county are as follows:

• LA County: 0.75%
• Orange County: 0.68%
• Fresno County: 0.84%

Most Popular Los Angeles Neighborhoods

Everyone knows the luxury of 90210, the Bel Air bluffs or Venice Beach. There are more neighbourhoods in L.A. apart from these.

Culver City – Brooklyn of Los Angeles

Silver Lake, often described as the “Brooklyn of Los Angeles,” is much more than just a hipster’s paradise. This popular downtown L.A. neighborhood has transformed its image over the years from rough and tumble to upscale chic. Today, celebrities, artists, professionals and more and more families live here. Silver Lake is characterized by its diversity and versatility, but above all by its authenticity. It offers one of the best residential locations in L.A.

Silver Lake – Home of Artists

Silver Lake is located east of Hollywood and is one of the hippest neighborhoods in town . It’s hipster like out of a picture book. The place is packed with great bars, hot restaurants, wine stores, one or three art galeries, and it’s teeming with young people, both professionals and artist types. If your idea of a good time includes lots of coffee, cocktails and unique dining experiences and doesn’t include quiet, relaxing nights at home, then Silver Lake is for you. A current average selling price of $1,144,000 for houses means this area is high-end real estate.

Glendale – Best Place to Raise a Family

Glendale is one of the safest areas in LA. If you’re looking for a place where you know you can raise your kids with confidence, safety is more important than anything else. Just a few miles from downtown Glendale, you’ll find the LA Zoo, the Norton Simon Museum, Travel Town, hiking trails in the San Gabriel Mountains and many other places to relax. Glendale is probably best known for its Brand Boulevard, a famous shopping street where a variety of businesses have gathered. Here is The Americana at Brand, a huge outdoor shopping complex. Zillow classifies the Glendale housing market as “very hot”.

Monrovia – Small-Town Charm

This growing city of nearly 40,000 inhabitants differs from other communities by its dynamic small-town charm and the accumulation of high-tech industry. Many amenities are available here: Everything, from world-class cultural facilities and wonderful recreational opportunities to world-class education and health care, is directly available to residents. This is an up-and-coming area with steady growth and many opportunities, meaning it’s the perfect palce for young families. The average list price in Los Angeles is almost $750,000, in Monrovia closer to $650,000 dollars. Monrovia is a good place to buy at the moment.

North Hollywood – Stress-Free Area

North Hollywood is located in the San Fernando Valley, north of the Ventura Freeway and Universal Studios. Here you will find the vibrant NoHo Arts District, a hip enclave where theater – not film – is the big star. What’s great about NoHO – and unusual for the area – is the fact that everything is within walking distance, easy and stress-free. The district is full of local stores, pubs and nearly a dozen performing arts theaters. Call NoHo at home if you want to be surrounded by retro-inspired cocktail lounges, craft beers, vintage stores and casual cafes.

Highland Park – Next Silver Lake

Highland Park is a bit like the up-and-coming, soon-to-be Silver Lake. Since 2013, it is one of the most up and coming neihgborhoods in the whole of the US. Prices for real estate here are skyrocketing. It is also one of the oldest neighbourhoods in Los Angeles, and is inhabited by a very diverse ethnic mix of people.

Venice Beach – Classic and Iconic

This unique beachfront town in Los Angeles County has sand, surf, and a lot of local color, as well as a booming tech scene. This area has earned the title of “Silicon Beach”, but is also home to the stereotypical Californian beach lifestyle. It is known for its community of artists and quirky stores as well as perhaps the most famous street in the country, Venice Beach Boardwalk. Thanks to the booming LA tech scene, the neighborhood is full of young professionals. Rental prices are comparable to those in West Hollywood, and since the beach is within walking distance, the price tag is well worth it.

Special – Buy Apartment Los Angeles

Los Angeles, where dreams come true. The home of celebrities, hollywood, a sprawling cityscape, beach and surf, and everything else you can imagine. From Malibu to Bel Air, Silver Lake and Venice Beach. It’s worth the traffic and chaos of the metropolis, to experiennce the unique atmosphere of this city. So you want to live in Los Angeles, but don’t know where to start? It’s certainly not easy wrapping your head around where and how to live. Do you choose Mid City or and a retail paradise, or Silver Lake, and hang out with the young students? We give you the full run-down below. The Los Angeles real estate market, like so many of U.S.’ super cities, is doing well. Los Angeles is neither a sellers nor a buyers market. Prices are also increasing, taking single-family residences, by over 16%.

We take care of all questions you could have in our full guide on buying an apartment in Los Angeles

Buy Apartment Los Angeles – Full Simple Guide

Real estate tipsters: What is that?

What is a tipster? A tipster (or deal trader) is someone who passes on information about potential property sales to an experienced real estate company. Your role is to make valuable contacts and put us in touch with those looking to sell a property. Your tipster activity can earn you an attractive commission if the sale is successfuly completed.

Why it’s worth becoming a tipster

Why should you become a tipster?

1. Simply earn money
2. No effort for you
3. Win-win situation

Simply earn money – Advantage 1

Your recommendations can turn into cash. If your tip leads to the sale of a property by us, you will receive a percentage of the brokerage fee.

No effort for you – advantage 2

We take personal and comprehensive care of the sales request so that you don’t have to worry about the sales process.

Win-win situation – advantage 3

You help potential sellers find a professional real estate agent to help them with their project. At the same time, you earn a commission for your referral.

Tipster contact: Get in touch with us & me

Simply get in touch with my team and me.

• Contact us

Become a tipster: Real estate sales

How do you become a Tipster? It’s very easy to become a tipster and benefit from our program:

1. Build up your network
2. Get in touch with us
3. Agree on cooperation
4. Benefit from

Build up your network

Talk to friends, family, neighbors and landlords to find out if anyone is thinking about selling their property.

Get in touch with us

Contact us and let us know the information about the property you would like to recommend.

• Contact us

Agree on cooperation

We will check the information and, if we are interested, agree to work with you. The terms of the tipster agreement will be set out in writing.

Benefit from

Once the sale has been successfuly completed, you will receive your tipster credit as a thank you for your recommendation.

Take the first step to becoming a referrer and help your contacts successfuly sell their property while benefiting from our generous referral program. Contact us today and start your referral journey!

Which properties are of interest?

Through our estate agent and investor contacts, our interest in properties for sale is extensive. From condominiums in Berlin to penthouses in Hamburg. Apartment buildings in good inner city locations and exclusive city villas in the suburbs.

As a tipster, you recommend properties such as

• Condominium (micro apartment, loft, penthouse, etc.)
• Villas
• Apartment buildings
• Land (undeveloped)
• Underground garages / parking garages
• Quarters
• Hotels

After checking, we will contact you by e-mail within 72 hours.

How does the commission work?

6 simple basics:

1. You must not be a spouse or partner of the owner.
2. The property must not yet be known to us and must not be publicly for sale.
3. The property must be located in our area of activity (city and district of Siegen, Kreuztal, Olpe).
4. Persons in special relationships of trust with customers/clients are excluded.
5. The tipster commission is paid net to private individuals or companies not subject to VAT; companies subject to VAT receive a gross amount.
6. Avoid anti-competitive canvassing in accordance with the UWG.

Contact: Write or call

Simply get in touch with my team and me.

• Contact us

Become a tipster: Buying real estate

Our goal is to help buyers and sellers alike, ensuring that they have the best possible experience in the real estate market. Join our referral network and help make the perfect real estate connections while benefiting yourself.

Contact us today and start your tipster journey for your real estate purchase!

Become a tipster for:

• Berlin: 10.5 million Villa South/West
• Frankfurt (Mainz, Wiesbaden): 18 million villa
• Hamburg: 1.5 million penthouse

Why should you recommend potential buyers to us?

1. Unique offers
2. Outstanding service
3. Attractive rewards

Unique offers

Our villas and estates are characterized by their exceptional character and high-quality furnishings. If you know someone who is looking for such exclusive properties, you can help them find their dream home.

Outstanding service

As a tipster for buyers, we not only offer unique properties, but also first-class service. We guide buyers every step of the way to ensure they find the perfect property.

Attractive rewards

If your recommendation leads to a successful purchase, you will receive a generous commission as a thank you for your support.

Material value calculation – simply explained with the most important tips

Buildings and outdoor facilities are valued for the asset value. The asset value method is primarily used for properties not traded on the rental market. Tangible values are determined for owner-occupied single-family houses, whereby the property is also valued using the comparative value method.

The calculation first uses the standard land value to determine the market value of the land, then the real value of the building is added.

The real value of the building is calculated on the basis of the building’s production costs less any reductions for age. The real value of the land (market value of the land) and the real value of the building are added together and multiplied by a real value factor.

The calculation of the asset value factor is based on the building type, the preliminary asset value and the standard land value. The total tangible asset value determined in this way indicates the financial resources that would be required to rebuild the property.

Calculation example: tangible value

For the calculation of the tangible value of a property, we assume the following data as an example:

• Land value: 100.000 Euro
• Real value of the building: 150,000 euros
• Material value factor: 0.5

This results in the following calculation:

Value in kind = (100,000 Euro + 150,000 Euro) * 0.5 = 125,000 Euro

When does the asset value method find the most application?

The asset value method is the most frequently used valuation method for owner-occupied real estate. The asset value method is used to determine the value of owner-occupied condominiums, single-family houses and two-family houses separately from the value of the associated share of the land. It is one of the most complicated procedures, because special circumstances, such as damage or the need for renovation, are also included in the determination of the asset value and reduce the value accordingly. The land value is determined using the standard land value table for the respective region.

Valuation for the sale of real estate

All important information about the valuation of real estate sales summarized for you: Valuing a property.

Income approach: Breakdown of market value & building income value

The capitalised earnings value method divides the property into the market value of the land and the building income value.

Land value interest = 7 percent * 100,000 euros = 7,000 euros

Building income value = 5,600 Euro * 12.50 (multiplier) = 70,000 Euro

This includes rental income, maintenance costs and costs for managing the land and building. Accordingly, the rental income less the management costs and the land value including its interest are compared.

• Capitalised earnings method

Comparative value method: Comparison of similar properties

The comparative value method compares your property with similar properties. It is used in particular for the sale of owner-occupied apartments and houses. The comparative value can also be determined for undeveloped land.

Price per square metre of the comparable property = 300,000 Euro / 100 sqm = 3,000 Euro per sqm

Purchase price of the property to be valued = 3,000 Euro * 200 sqm = 600,000 Euro

Only properties in similar locations and with a comparable layout are considered in the comparison. The properties included in the valuation should come from the immediate vicinity of the residential property. The comparative value method is considered to be particularly realistic. It is frequently used to determine the value of properties because the locations are relatively comparable from a regional point of view.

• Comparative value procedure

Value appraisal (costs)

Who prepares appraisals for real estate? What does a house appraiser cost? What does an appraiser for old buildings cost? Unless legal regulations require the appointment of an expert, a real estate appraisal will provide you with a realistic valuation of your property in the regional and national market. We provide timely and accurate valuations of land, residential and commercial properties.

However, if the valuation is to be presented in court, for example in the case of a divorce, experts must be consulted for a fee. The residential or rental property is inspected on site. As a rule, both a written and a digital copy of the appraisal are issued.

• Valuation report