Definition: What is a ground lease?

You have found a house or an apartment building you are interested in, but it is located on a leasehold land? Or you have found a suitable property and it is subject to a ground lease? What does this mean? Simply explained, hereditary building rights mean that the right of ownership and the right of use are permanently separated. A distinction is made here between two parties: The ground lease provider and the ground lease taker. The ground lease holder leases the land and is then allowed to use the land in return for an annual ground rent.

Here is a summary of the ground lease:

• Ownership and usage rights permanently separated
• 2 parties: ground lease grantor and ground lease taker
• Leasehold in return for building rights

Advantage of a ground lease: Favorable purchase price

Of course, a ground lease has both advantages and disadvantages. Probably the biggest advantage is that the purchase price here is significantly lower than usual, since the purchase price for the land itself is omitted. Leaseholders also benefit from reduced ancillary purchase costs.

The purchase price of a property on leasehold land is significantly lower

Disadvantage: Monthly ground rent

In return for being allowed to use the land, you have to pay a monthly or annual ground rent to the owner of the land. In addition, the mortgage lending value of your property decreases significantly because the value of the land is constantly decreasing while the ground rent incurs costs.

The two disadvantages of a ground lease at a glance:

• Payment of the ground rent causes costs
• Collateral value of the property decreases

Conclusion: Is a ground lease worth it?

Buying or building a property on leasehold land therefore brings different advantages and disadvantages. While you can enjoy a low purchase price, a regular ground rent is incurred at the same time. And the mortgage lending value of the property also decreases.

You can now find even more facts and tips about ground leases on my new project for real estate buyers (Immobilien-Erfahrung.de):

• Ground lease (external)

If you want to learn even more on the subject of buying a property, whether owner-occupied or capital investment, numerous articles, guides on the subject of rented vs unrented, as well as checklists, all free and 24 hours online available, with us!

Apartment, house, apartment building, everything for real estate beginners!

Now new on Immobilien-Erfahrung.de:

• Buy property: learn – external

Der Beitrag Leasehold and ground rent: definition, advantages and disadvantages for owner-occupiers & capital investors explained erschien zuerst auf ℄ Real Estates.

Old real estate: apartment & house from older decades

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

Here is a brief overview:

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

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

Existing property: advantages and disadvantages summarized

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

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

Here again summarized, the advantages and disadvantages.

Advantage of buying an old property:

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

Disadvantage of buying an old property:

• High costs for maintenance and repairs
• Possible hidden defects

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

Real estate with year of construction 1900

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

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

Defects of real estate before 1900

Here is a brief overview:

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

Real estate with year of construction 1900 – 1939

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

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

Checklist: Defects of real estate around 1900 – 1939

All shortcomings briefly summarized at a glance:

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

Real estate with year of construction 1939 – 1945

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

Checklist: Defects of real estate around 1939 – 1945

Typical deficiencies include:

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

Real estate with year of construction 1945 – 1959

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

Checklist: Defects of real estate around 1945 – 1959

Characteristic of real estate from the period are:

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

Real estate with year of construction 1960 – 1969

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

Checklist: Defects of real estate around 1960 – 1969

Here is a brief overview:

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

Real estate with year of construction 1970 – 1979

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

Checklist: Defects of real estate around 1970 – 1979

Typical deficiencies include:

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

Real estate with year of construction 1980 – 1999

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

Checklist: Defects of real estate around 1980 – 1999

Here again the typical defects from 1980 – 1999:

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

Conclusion: Should you invest in old real estate?

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

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

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

Der Beitrag Real estate defects by year of construction: building fabric, masonry, insulation & Co. – Valuation erschien zuerst auf ℄ Real Estates.

Building forms of the houses

As soon as you take a closer look at buying a house, you will notice that there are different types of construction. The classic detached house has a lower floor and a peaked roof under which one or two more floors can be added. However, there are variations on this design. These involve the upper floors of the house. There are properties that are one and a half storey or two storey. The two-storey construction method has become increasingly popular in recent years. The reason for this is that there are no more sloping rooms on the upper floor. The living space increases while the footprint of the house remains the same. Since large lots are no longer desired by many owners, the two-story home offers more living space in a small area. Another advantage of two-storey detached houses is that the cost of the land becomes cheaper. An average living area of 140 m², which a detached single-family house has, can be realized on a smaller plot of land with a two-storey house than if it is a single-storey building. As a result, many residential areas are created that are predominantly built with two-story houses. Even with terraced houses and semi-detached houses, the two-storey construction method has prevailed due to the smaller area to be built on. A speciality is the bungalow. Here it concerns single-family houses, which are established in single-storey building method. Depending on the roof construction, a further floor can be built directly under the roof truss. Here, however, there are only rooms with sloping walls. The classical bungalow construction knows no stairs. Thus, the construction method is preferred by older people or by people with handicaps. The disadvantage is that larger plots of land are required for this type of construction, as bungalows have a fairly large floor area.

The detached single family house

By buying a detached single-family home, you are opting for the most modern, but also the most expensive possible form of housing. As the name suggests, these detached houses stand on their own plot of land. They have four exterior walls. The nearest neighbor may live within sight or may be a few feet away. You can get detached single family homes in central or secluded locations. It is important that you do not start looking for a suitable property until you have analysed your ideas of the form of housing for yourself. There are very many variants of the detached single-family house. It is advisable if they look at different properties before making a final decision. Check the detached houses you are shortlisting on various criteria. You should compare the size of the plot, the infrastructure, the available living space and the possibilities for later extensions or other changes to each property. You should also find out how you will get to work and whether there is an airport or railway station nearby. This is especially important if you need to be mobile for work or leisure. Detached single family homes are built in many different sizes. The living space of classically used houses ranges from 80 to 250 m². City villas and country houses, which are built according to the planning of an architect in individual construction, can be much larger. The prices for these properties, depending on location and equipment, often exceed the million mark. Lukinski – Ihr Hausverkauf will be happy to advise you if you wish to obtain comprehensive information about the characteristics of the various types of houses.

Terraced houses and semi-detached houses

For several decades, this form of housing was not so popular because of the close proximity to the neighbor. In recent years, this has changed. It is due to the fact that many city dwellers prefer living in a quiet suburb or outskirts instead of the vibrant city. Due to the longer commute time to work and taking care of other interests, semi-detached and terraced houses with low-maintenance gardens are now very popular to buy. In addition, the houses are more affordable in terms of purchase price. This also relates to maintenance. Since terraced and semi-detached houses have only two or three external walls, the cost of energy requirements is not too high. More on efficiency: energy efficiency. Smaller living spaces make these types of houses ideal for young families and for singles and couples living alone. When a large living space is not needed or the budget is tight, townhomes and duplexes are considered the ideal alternative to renting or owning a home. For these reasons, many of these properties do not sit for sale for long, as an interested party can quickly be found who decides to buy and is able to finance it in the short term. Terraced houses and semi-detached houses have an average floor area of 100 m² and are therefore smaller than detached single-family houses. The range is between 80 and 160 m², whereby large terraced houses and semi-detached houses are considered a rarity and are often older.

Buy a house for your own use

Most prospective buyers who are looking into purchasing a home want to occupy the property themselves. If you want to buy a house for your own use, it is advisable to choose a property that will be vacant when you sell it. As a general rule, even if you buy a detached house, the lease remains valid when the owner changes. If you want to live in the house yourself, you must declare your own needs. You have to prove this own need. You should know that the tenant is allowed to doubt the own need. This means that he has the right to object to your notice of termination because of own need. In this case, a court will decide whether the own need is admissible or not. In practice, it is easier to register your own needs when you buy a detached house than when you buy an apartment. Nevertheless, you should expect resistance from the landlord. In principle, you cannot assume that you will be able to move into the detached house immediately after the purchase.

Contact the tenant

If you have found a property that is currently still rented out, it is advisable to contact the tenant and register your own needs with the landlord before buying. In this case, you will find out before you buy what the tenant’s position is and whether they are willing to accept the owner occupation and move out of the property. If so, you should get this intention confirmed in writing. In the event that the tenant announces that they do not want to release the house, it is a good recommendation that you look for another property. Lawsuits for own use often drag on for a long time and lead to resentment on the part of both parties. We will be happy to advise you on owner occupation and introduce you to properties that are not rented or that are vacant for your occupation. Buying such a property is often more satisfying for the new owner than dealing with a tenant who is not prepared to vacate the property by the deadline set for him.

Buy a house for rent

In particularly attractive locations, buying a house for the purpose of renting it out is a lucrative investment. If you would like to invest in this area and buy a house, we will be happy to introduce you to various properties in prime locations. Here it is an advantage if the property is already rented. In this case, you do not need to look for a tenant. It is important to know that you have to take over an already existing lease. You are obliged to do so by law. Rent increases are also only possible within the limits of the law. If you buy a property that you rent out yourself, you are free to set the rent and agree it with your new tenant. After that, however, you must also comply with the legal regulations regarding rent increases. This also applies to renovations, which you as a landlord are obliged to carry out in single-family houses.

Buying a house – costs and procedure simply explained

If you have found a house that you want to buy, it is necessary that a notary contract is drawn up. The costs are usually borne by the buyer. The same applies to the fees for the estate agent. However, it is also possible to share the costs with the seller. In addition to the purchase price, there is a land transfer tax, which is determined by the city or municipality. Be sure to include these additional costs in your calculations. The modalities around the payment of the purchase price are set out in the notary contract. It is customary to deposit the money in a notary’s escrow account to confirm the intention to purchase. The buyer only receives the money once the purchase has been completed and a transfer can take place in the land register. Only after the transfer in the land register is completed, you are considered the new owner of the house. You also have to include the costs for the land register entry in the total costs for your new home.

Conclusion

If you are planning to buy a house, it is important that you define your individual requirements in the first step. You can choose from many different house types and property sizes. You should also decide whether you would like to live in the property yourself or whether you would prefer to rent it out. The purchase of a property comes about through the drawing up of a notary contract. Only with the transfer of the land register you are considered as the new owner. Lukinski – Ihr Hausverkauf will be happy to advise you and present you with properties that suit your budget and your individual ideas. Please feel free to make an appointment. We look forward to your first non-binding contact.

Der Beitrag How do I buy a house? erschien zuerst auf ℄ Real Estates.