Owner-occupancy: buy rented or unrented?

So let’s assume you want to purchase the property for owner occupancy. That is, you want to buy your property, move in there directly and maybe even redesign it as the case may be. In this case, an unrented property is best suited. You save time, because you do not have to give notice to any tenant, as well as costs and effort.

Advantages with non-rented property: less costs, time and effort

But what do you do when you have found the property of your dreams and it is rented? Then you need to give notice of your own needs.

Termination of own use: Legal deadline, exceptions & Co.

Tenants may therefore be given notice of termination if they require the property for their own use. The only requirement here is to observe the statutory period of 3 to 9 months for terminating a tenant’s own use.

In addition, you must provide comprehensible reasons why you need the house or apartment for personal use. This is also possible if a beneficiary needs to move in for urgent reasons. The mere desire to move in personally is therefore not sufficient. Exceptions also apply in the case of illness, old age or single parents.

Reading tip: Notice of termination of own use

Rented vs unrented for capital investments

If you acquire a property as an investment, both rented property and non-rented property bring their advantages and disadvantages.

Buy rented: No new leases or vacancies

If you want to buy a property that is already rented, this definitely offers some advantages. You don’t have to look for new tenants and thus avoid the risk of a vacancy. Also, the seller can give you some information about the payment behavior of the tenants. At the same time, renting also means that you have to take over all rental agreements. This includes those that are worded incorrectly.

Here again the advantages at a glance:

• No new lease necessary
• Tenants are already known
• Low risk of vacancy

Buy unrented: Current lease and market price

If you buy a property that is not rented out, you will initially have to reckon with vacancies, but you can also renovate and refurbish the property again directly if necessary. You can also formulate your own rental agreements here and can rent out the property for a current, market rent. Speaking of which: renovation work that serves to increase the value of the property is tax deductible – another plus point!

So, you can enjoy these advantages when buying a non-rented property:

• Market price for new rentals
• Independent drafting of a lease agreement
• Enough time for renovation work

Bottom line: should you buy rented or unrented?

When answering this question, it depends not only on the purpose and goal of the property, but also on which advantages can be best combined with it. Would you prefer to move into the new property quickly? Then a non-rented property is associated with significantly less time, cost and effort. If the house or apartment is an investment, you must decide for yourself which next steps are most likely to suit you.

Tip. You can find more advantages and disadvantages of rented and non-rented properties on my new project for real estate buyers (Immobilien-Erfahrung.de):

• Buy rented vs unrented? – external

Trade tax (GewSt) – tax for commercial enterprises

As a rule, trade tax – GewSt for short – is levied on the income of every German commercial enterprise and is therefore based on the objective earning power of the respective company. Since limited liability companies, stock corporations and the like are always regarded as commercial enterprises by virtue of their legal form, trade tax is mandatory for corporations – regardless of the composition of the founding team.

Other taxes for businesses:

• Corporate income tax (KSt)
• Income tax (ESt)
• Capital gains tax (KapESt)
• Value added tax (VAT)

If you want to learn more specifically about taxes for real estate companies, you can learn more here:

• Save taxes on real estate

Trade tax in detail – collection, levy & allowances

As an object or property tax, trade tax is by its nature one of the real taxes. Effectively, it belongs to the municipal taxes and contributes significantly to their financial system. The municipalities are entitled to levy the tax and set the tax rate valid for one year by resolution. Trade tax is payable quarterly in equal instalments on 15 February, 15 May, 15 August and 15 November. As of the 2008 tax period, these taxes are no longer deductible as a business expense, but can be offset as a lump sum against the income tax payable.

Dates for advance payment of business tax:

• February 15
• May 15
• August 15
• November 15

According to the Trade Tax Act (GewStG), natural persons and partnerships may offset their tax burden with an exemption amount – currently 24,500 euros; legal entities may reduce their tax burden by a reduced exemption amount – currently 3,900 euros.

Which companies are subject to GewSt?

Most commercial enterprises are charged with trade tax. Since all corporations are in principle considered to be commercial enterprises, this type of tax is particularly relevant for the limited liability company (GmbH) and the stock corporation (AG).

In addition, the general partnership (OHG) and the civil law partnership (GbR) are usually subject to trade tax – at least insofar as their annual income exceeds 24,500 euros. However, a GbR among freelancers remains exempt from trade tax. The same applies to the freelancers themselves: A sole proprietorship only has to pay trade tax levies if the company founder is a small trader or a registered merchant (e. Kfm.).

Overview of company law forms

You can find more information about the different legal forms under the following links. Starting with the sole proprietorship and the registered traders… to the various partnerships and corporations… to other companies such as the family foundation – all the essential aspects of formation, liability, tax burden and more explained simply and understandably! First of all, an overview of the individual legal forms of companies:

• Sole proprietorship (EU)
  • Freelancer
  • Small business
  • Registered traders (e. K.)
• Silent partnerships
• BGB companies / civil law partnership (GbR)
• Partnerships
  • Limited partnership (KG)
  • General partnership (OHG)
  • Limited Liability Company and Company Limited Partnership(GmbH & Co KG)
  • Limited Liability Company and Compagnie General Partnership(GmbH & Co OHG)
• Corporations
  • Stock corporation (AG)
    • AG & Co KGaA
  • Partnership limited by shares (KGaA)
  • Limited liability company (GmbH)
    • GmbH & Co KGaA
  • Entrepreneurial company / UG (limited liability)
  • European Company / Societas Europaea (SE)
    • SE & Co KGaA
• Other companies
  • Foundations / Family Foundations
  • Insurances
  • Partnerships
  • Registered associations (e. V.)
  • Registered cooperatives (e. G.)

Taxes in Germany: List

Corporation tax (KSt), income tax (ESt), capital gains tax (KapESt), turnover tax (USt), trade tax (GewSt) – who pays what? In this overview of the different types of taxes / tax forms in Germany, you will find relevant taxes for you as an individual and for your business, depending on which legal form you have chosen. Also, after the tax list: How does the tax cycle work around month-end closing, year-end closing and balance sheet? A little insight for those starting their first company. What taxes are there? Simple explanations, definitions, tax optimization, an insight into taxes.

• Taxes: List

Corporate income tax (KSt) – tax for legal entities

Corporate income tax – KSt for short – is usually levied on the income or profit of legal entities domiciled in Germany and is thus complementary to income tax (ESt), which is usually levied on individuals. Taxable persons typically include corporations, associations, cooperatives and foundations. A limitation of corporate income tax comes into play, for example, if the management and headquarters of the legal entity are located abroad. Political entities, federal companies, state banks and social security funds, professional associations and some others are fully exempt from the obligation to pay corporate income tax.

Other taxes for businesses:

• Income tax (ESt)
• Capital gains tax (KapESt)
• Value added tax (VAT)
• Trade tax (GewSt)

If you want to learn more specifically about taxes for real estate companies, you can learn more here:

• Save taxes on real estate

Corporate income tax in detail: collection, levy & allowances

As a corporate tax, corporate income tax counts as a community tax and is levied by both the federal government and the states. The amount of the levy is calculated on the basis of the taxable income, which is the result of the profit less special expenses and extraordinary burdens, and is currently 15 percent plus the solidarity surcharge (SolZ), resulting in an overall tax rate of 15.825 percent. Corporate income tax is payable quarterly on March 10, June 10, September 10 and December 10 in equal instalments as an advance payment and is offset against the actual tax liability at the end of each fiscal year.

Dates for advance payment of corporate income tax:

• March 10
• June 10
• September 10
• December 10

As a rule, the corporate income tax return must be filed by 30 April of the following year at the latest for the preceding tax period. Extensions are possible under certain circumstances. Members of the tax advisory professions are generally subject to different deadlines for filing the corporate income tax return.

Allowances for companies without profit distribution

Companies that do not distribute profits – for example non-profit associations – can benefit from a tax-free allowance of currently 5,000 euros, whereas agricultural and forestry cooperatives and associations may be entitled to a tax-free allowance of 15,000 euros. For companies that record losses within the valid tax period, taxation does not apply at all.

Which companies are subject to corporation tax?

Most legal entities are subject to corporate income tax. All corporations – limited liability companies (GmbH), stock corporations (AG), partnerships limited by shares (KGaA), etc. – as well as cooperatives and business cooperatives are usually affected. In addition, mutual insurance companies and mutual pension fund associations have to meet their corporate income tax obligation, as do institutions, foundations, associations, etc. Commercially active public corporations – for example, transport companies or public utilities – are also affected by corporate income tax.

• Associations
• Institutions
• Foundations
• Corporations
• Acquisition cooperatives
• Business cooperatives
• Mutual insurance companies
• Mutual pension funds
• Commercially active public bodies

Partnerships such as the general partnership (OHG) or the limited partnership (KG) are generally not subject to corporation tax or income tax, but the natural persons and legal entities with partner status belonging to them are. The profit generated by the partnership is subject to uniform and separate determination and is allocated directly to the individual partners in accordance with their legal form: Legal entities must charge their profit shares to corporation tax, natural persons to income tax.

• Partnerships: Legal entities with profit shares

Political parties, professional associations, charitable corporations and federal corporations are generally exempt from corporate income tax.

Overview of company law forms

You can find more information about the different legal forms under the following links. Starting with the sole proprietorship and the registered traders… to the various partnerships and corporations… to other companies such as the family foundation – all the essential aspects of formation, liability, tax burden and more explained simply and understandably! First of all, an overview of the individual legal forms of companies:

• Sole proprietorship (EU)
  • Freelancer
  • Small business
  • Registered traders (e. K.)
• Silent partnerships
• BGB companies / civil law partnership (GbR)
• Partnerships
  • Limited partnership (KG)
  • General partnership (OHG)
  • Limited Liability Company and Company Limited Partnership(GmbH & Co KG)
  • Limited Liability Company and Compagnie General Partnership(GmbH & Co OHG)
• Corporations
  • Stock corporation (AG)
    • AG & Co KGaA
  • Partnership limited by shares (KGaA)
  • Limited liability company (GmbH)
    • GmbH & Co KGaA
  • Entrepreneurial company / UG (limited liability)
  • European Company / Societas Europaea (SE)
    • SE & Co KGaA
• Other companies
  • Foundations / Family Foundations
  • Insurances
  • Partnerships
  • Registered associations (e. V.)
  • Registered cooperatives (e. G.)

Taxes in Germany: List

Corporation tax (KSt), income tax (ESt), capital gains tax (KapESt), turnover tax (USt), trade tax (GewSt) – who pays what? In this overview of the different types of taxes / tax forms in Germany, you will find relevant taxes for you as an individual and for your business, depending on which legal form you have chosen. Also, after the tax list: How does the tax cycle work around month-end closing, year-end closing and balance sheet? A little insight for those starting their first company. What taxes are there? Simple explanations, definitions, tax optimization, an insight into taxes.

• Taxes: List

Financing and its pitfalls – being covered for every eventuality

Even before the construction or purchase of a house, many questions arise that are of high value for the financing. Is the purchase price of the property in line with the local market price? What is the condition of the property? Are there any construction defects or contaminated sites that could lead to renovation or repair costs? When is the building permit from the authorities available and will it be granted in time? Is the construction company reputable and will it be able to complete the house at the desired time? How high will the operating and ancillary costs be in the coming years? But also the question of follow-up financing must be clarified. More information about the possibilities of follow-up financing and debt restructuring.

Identify risks in advance, plan for them and protect against them

Risks can arise faster than you think and quickly you are faced with a financing crisis and are not prepared for it. To counteract this case, you should protect yourself against such risks and include them in the financing. The most typical risks when buying a house or building:

Loss of earnings

The loss of a job or a change of job with a lower salary is an important risk to consider, because such a case occurs faster than you think. But also a further, not planned child can represent a risk, since also here a salary in the family could fall away. For such cases, you should take out a financing with the possibility to change the repayment rate. In such a case, you can adjust the monthly repayment rate to your new situation and lower or, in the best case, increase it.

Major repairs

A case that can occur with anyone. Water damage, a defective heating system, the roof or even the facade must be renewed. Things that happen to even the best house and you have to be prepared for. A building savings contract can be saved with small amounts right from the start of financing. This way you secure a future low-interest loan. But also for smaller purchases, such as a new washing machine or a car repair, a small financial cushion should be set aside.

Death

So that the loss of a parent or partner is not compounded by the loss of the property or a financial crisis, provisions can also be made for this in the financing. It makes sense to take out term life insurance or residual debt insurance. There are attractive contracts for this, where the premiums continue to fall with the remaining debt to be repaid. Even if many do not like to consider this scenario, it is still better to prepare for such a case, so that the situation does not turn out to be a financial crisis.

Parents in the nursing home

If the parents are placed in a nursing home, the children are often called upon to finance the maintenance. Of course, the remaining assets of the parents or saved back, but it often comes to a financial support of the children. A nursing home is not cheap and especially with only children, this can become a financial problem. First of all, however, a deductible is calculated so the personal needs of the children to determine how much can be paid. Here, repayments and costs for financing can also be claimed.

Interest rate rise

Low interest rates naturally tempt buyers to buy a home or take out a construction loan. Buyers who buy a house in such a low interest rate should be aware, however, that the interest rates also rise again, especially with a loan with a short term, there is a risk of high interest rates in the follow-up financing. To prevent this, you should think about a home loan and savings combination as an alternative to the bank loan. With this favorable interest rates can be used and secured over the entire term. In addition, state subsidies are also possible.

In general, it is important to bring in as much equity capital as possible at the beginning of a financing and later to regularly use the possibilities for unscheduled repayment. However, if a risk should occur and your general conditions change, it is always important to talk to your bank advisor. Every bank has the interest to make the financing sustainable. If the framework conditions change, a good advisor will help you in word and deed to solve your problem, as this is also in his interest.

Important questions that you should clarify before the financing discussion

Before you face the conversation with the financier of your bank, you should clarify important questions in advance. This will not only ensure a good conversation where no questions remain unanswered, but you can be sure to find the right loan for you.

• You should have a stress and security check done to determine your ideal loan rate
• Can you include home loan and savings contracts that are ready for allocation?
• How is the mortgage lending value or the mortgage lending limit for your property determined and how high are they? What are the consequences of this?
• What does the effective interest rate mean and is it relevant for my property?
• What fees in their funding are negotiable?
• Can you keep track of the various credit and loan offers and assess them correctly, or are there still unanswered questions that need to be clarified?
• Take into account that you should be debt-free at retirement age
• Find out about KfW loans that offer promotional loan programs
• Pay attention to the fixed interest period and consider the profitability threshold in this step
• How are interest rates at the moment and what are the forecasts for the future?
• What are the criteria for granting loans and how is the interest rate determined?
• What about your own credit rating? Does it give you a negotiating position for your financing project?
• Where can you find cheap construction and real estate financing at all?
• Did you get a good financing plan with an accurate loan history and repayment schedule?

Find the right financing – choose the right financing modules

When financing, you should choose the right financing components to be sure that you find the right financing. To do this, you should ask yourself whether a fixed interest rate has been selected that actually corresponds to the current interest rate market. In addition, a fixed interest rate comparison should also be carried out. Pay close attention to the interest rates when financing, as you will have a major say in their repayment rate. In addition, pay attention to whether you have a loan offer with flexible repayment, as this can reduce risks.