Buying Real Estate Rental Property – Best Investment Strategies

More and more people are choosing to buy rental property as a lucrative way of receiving passive income, with many opportunities for further investments, massive profits, and a life of luxury and opulence. There is much to consider and research before you make any investment in rental property, but you’re likely going to be quickly looking at cash flow and a realtor lifestyle you could only have dreamed of.

Is Buying a House to Rent a Good Investment? Advantages Disadvantages of Rental Property

There is not one clear answer to whether buying rental property is a good investment. It depends on many factors such as location, the behavior of the market, the tenants, unexpected costs, etc. Therefore it is impossible to say whether it is a good investment for you until you inform yourself as best as you can, and make an educated decision.

Advantages of Rental Property Investments – Tax Deductions, Financial Security

Being a landlord often sounds like a dream job. Essentially you’re being paid because people are living somewhere. It is the most famous and infamous source of passive income. This is perhaps its biggest advantage. In terms of how much work you have to put in per dollar earned, it can be extremely lucrative. Another advantage is that the real estate market tends to be quite stable, which means that the majority of properties (bought in good areas) increase in value. That means, while you’re making a passive income, one day the mortgage will be paid, and despite having made money off of your investment, you can sell it at a higher price than you bought it!

Rental Property Taxes – What Taxes do Landlords Pay?

For one, rental income is not subject to social security taxes. The social security tax rate is currently 12,4% split by employer and employee, meaning that when owning rental property you are paying 6,2% less taxes.

Disadvantages of Rental Property Investment – Difficult Tenants

The biggest downside is dealing with difficult tenants. These can be those that are harmful for the atmosphere (e.g. by being loud), those that damage property (high repair costs), and those that do not pay their rent on time. Another downside is also that you are legally bound quite heavily, as renters are strongly protected by the law. That means that difficulties can arise, and cause a lot of stress. Of course it’s important to decide in what real estate to invest, because if you buy a house, these issues tend to be less serious.

• Damaging Tenants
• Tenants who do not Pay Rent

What does a Landlord Do? Tasks, Responsibilities when Owning Rental Property

In short, a landlord is in charge of general upkeep. That means repairs in the house such as plumbing or electricity which the landlord has to fix. Other things include maintaining the more general facilites. For example, if you own rental property you have to make sure common areas are cleaned, the doors, elevator, etc. all work, and more. Then comes the problem of rent. Some tenants can be quite a hassle when they don’t pay rent on time, in which case you have to contact them and collect the rent yourself.

• Repairs in home
• Maintenance of Property
• Collecting Rent

Financial Planning for Becoming a Landlord

That means paying off all debts, making sure you have enough saved up for a downpayment, and securing your finances for the long-term future. It is also probably a good idea to secure a separate business account.

• Save enough for a Downpayment
• Job Security

Six Steps to Purchasing Rental Property – Buy House, Apartment

The five steps to owning rental property begins with your finances. Next, research and strategy. Where do you want to invest, how is the market in that area, what type of real estate you want to invest in, the general turn of the economy and much more! Now your strategy with short-term vs long-term rentals, buying a house or apartment, etc. Step 4 is finding the property you want to purchase. Step 5 means buying the property (and getting a good deal!). And lastly, perhaps most difficult, find tenants!

1. Order your Finances
2. Research
3. Strategy and Investment Planning
4. Find the Property
5. Purchase Property
6. Find Tenants

Step 1: Order your Finances – Landlord Bank Account, Savings

The most important thing before buying a house or buying an apartment is to get your finances in order. That means having paid off all debts, or nearly all, having a good credit score (otherwise get ready for mortgage insurance). Then, you will want to open a separate account. This can of course be done by registering a real estate LLC in which case you would buy the property over the company. Otherwise you will have to open a new account.

Step 2: Research – Where to Buy, When to Buy Rental Property

This is an important step, as you will need to get a lay of the land of where you want to invest and how. There is no universal manual because, e.g. if you buy a house in New York, it’s different than if you buy an apartment and then even more different if you buy an apartment in L.A. It’s also critical to know about the more specific location, there are always up-and-coming neighborhoods in every city. The top USA real estate neighborhoods are spread out all over, and you could be living near one without knowing! We’ve tracked down the best locations for the biggest players in American real estate:

• Top Neighborhoods: New York
• Top Neighborhoods: Los Angeles
• Top Neighborhoods: San Francisco
• Top Neighborhoods: Miami
• Top Neighborhoods: Las Vegas

Step 3: Strategy, Investment Planning – ROI, Value

The typical question for real estate and rental property investment is the ROI. ROI means return on investment, which is typically expressed in a percentage. It just tells you how much money you make in proportion to how much money you spend. You should know that, unlike stocks, or REITs, rental property will not be valuable or a good investment because it is constantly rising in value. Rather it is an additional income on the side, apart from your normal investments.

• ROI = Return on Investment
• Real estate is about cash flow

Step 4: Find the Property – House Hunting, Realtors

Next step is to find property, this can turn out to be quite difficult or quite easy depending on the region. Typically this is also the point where you will decide whether you choose a fixer-upper or a ready house. For experienced investors this is a normal thought, but if you are just starting out, a fixer-upper can be extremely risky and bankrupt you. Unless of course you want to get into flipping houses.

• Fix-Up or ready house?

Step 5: Purchase Property – Mortgage, Cash, Downpayment

Of course with a cash purchase you can circumvent a lot of the additional real estate purchase costs, but not all (think mortgage tax and transfer tax, and moving expenses). Still, as soon as you purchase with a mortgage you will be paying more in the form of mortgage interest. There are different opinions on the specifics, but it is always important that even if you are absolutely in love with a house, to let cooler heads prevail. There are many reasons to buy a house for rental property, but these are all related to finances and strategy.

• Real Estate Closing Costs
• Logic should decide whether you buy

To learn more about what happens when you get to the point of actually buying a house, you can take a look at our article on all the taxes you will pay when you buy a property or real estate.

Real Estate Purchase: All Taxes

Step 6: Find Tenants – Advertising, Location

This is the point that it can get very very frustrating, or very comfortable. If you’re living in a place like L.A., this can be quite easy with very high demand making a good tenant easy to find. In other places you may have to wait for the right one. Important though, if you get the feeling that the fit isn’t right, don’t sign a contract! It is near impossible to force a tenant out legally, and one more month without the extra income won’t make the difference.

• Don’t rush the search
• Easier in bigger cities, with higher demand

Top 5 Tips for Buying Rental Property! LLC, Saving Taxes

There are many things to be aware of, and things to take into account for buying rental property for real estate investment. It’s important that you research a lot so as to make a smart decision. Still, there are a few secret tips that are very important to ensure quick profit from rental property!

1. Do the Math!
2. Landlord Insurance
3. Found a Company
4. Buy or Finance?
5. Go out of State

Do the Math! Research, Calculation of Costs for Rentals

This is critical. Of course, before investing in rental property the most important thing is extensive and intensive research. This does not only consist of informing yourself about e.g. mortgage or mortgage interest, and a downpayment. The main question is: for each dollar that you invest in this real estate rental investment, how much will you get back. Factor in the time, and then compare to your finances. It is possible that your investment strategy only offers returns after two years. Can you hold out that long?

For each dollar you invest, how much will you gain? When is your investment profitable?

Get Landlord Insurance! Recover Lost Rental Income, Liability Protection

There are going to be accidents, unwanted injuries and more on your property. You need to protect yourself from this. One possibility is with a limited liability company or the similar s corporation (see below), but this is not going to protect you legally, rather than just make sure that a legal action does not bankrupt you. So you have to get landlord insurance! A landlord insurance covers lost rental income (great for the rare difficult tenant), damage to the property, and of course, as mentioned liability protection against injuries or worse on your property. Remember, itemizing insurance costs is one of the top methods of real estate tax deductions!

• Protection against lost rental income
• Damage to property
• Liability for injuries on property

Found a Company – LLC, S Corp or C Corp

As mentioned above, it’s important to protect yourself from possible liabilities. Even with landlord insurance, you should likely put in the effort and cost to found a real estate entity which owns the buildings in your place. The main examples are the LLC, S corporation, C corporation, and Limited Partnership. These all differ in the degree to which they protect you from liability, but also to the degree in which they prevent double taxation, a common problem with other real estate investment entities.

• LLC
• S Corp
• C Corp
• Limited Partnership

Buy or Finance? Mortgage or Cash for Rental Investments

You will hear many voices insuring you that the only smart choice for buying a rental property is to finance it, in other words to buy it using a mortgage. This is true in most cases, but if you have the money available, buying cash can be even better. No mortgage interest, no uncertainty, and you profit right away. Of course you’ll be a few thousand dollars lighter, bt this comes in with rental income over time. It’s also seemingly forgotten at times that a house purchased with a mortgage still requires a substantial downpayment, as well as significant additional costs buying real estate, which means even with a mortgage, where, e.g. a 20-year plan can hound you for years, you have some saving to do before starting to invest and reap profits.

• Buy with mortgage
• Consider alternative cash options

Go out-of-state! Rental Investments Far away – Is it Profitable?

Many first-time investors make the decision to buy close to home. They hear a great offer for a house nearby in an up-and-coming neighborhood and choose to buy because it’s just a few minutes drive away. It’s true of course that this has its advantages; if a renter has an issue or a repair, you can come by quickly and fix it, you can give personal house tours with no problems, etc. At the same time, it’s a calculation game. There are extremely profitable neighborhoods in many parts of the country. Buying a rental there can give you much larger profits in much shorter time. These profits would offer the possibility of a property manager, reduces your involvement and makes the now-larger income even more passive.

• Advantages to buying nearby
• Far away can be much more profitable

Gross Rental Income – Top Tip for Saving Taxes

Easily explained: rental income is taxed as your normal income would be taxed. That means you add it to your salary as you would a normal job. Rental income can include the following types of payments: Advance payments of rent, non-returned deposits, services provided in exchange of rental income. Now we know what the income consists of, but the question is how can you pay less of it?

What can be Deducted from Rental Income? Itemizing Tips

You can deduct more than you think from your rental income. That includes things like the mortgage interest of your property, the insurance costs and property taxes. Along with these it is also typically possible to deduct fees such as those for advertising your properties, and those for legal assistance and for the Homeowner’s Association.

• Depreciation
• Property Manager Payments
• Mortgage Interest
• Insurance Costs
• Property Taxes
• Advertisement Fees
• HOA / Condo Fees
• Legal and Professional Fees

There’s so many more tax deductions you can use when you own real estate, whether as residence or as a landlord!

Real Estate Tax Deductions

Best Gross Rental Income Deduction! Depreciation

The most important concept here is depreciation. Depreciation is the answer to every time you wondered why real estate moguls and landlords pay so few taxes. Large items bought for business purposes can be deducted from your taxes, but not all at once. That means e.g. a property worth $250.000 which is deducted from taxes over a 27,5 year period, leads to a reduction in your taxable income of

$250.000 / 27,5 y = $9.090

per year! Add that to all the other possible real estate tax deductions, and many owners pay no taxes on their rental income!

The three phases of building saving: saving, repayment and loan phase

Each building saving consists of different phases. In most cases there are three different phases that have to be passed through. First a certain amount is saved, then the loan is allocated and finally repaid. But how exactly do these phases work and which key figures have to be determined during the respective phases?

Tip: More about the topic Credit & Financing

The Most Important at a Glance

• In the saving phase, a certain amount is saved. This amount depends on the volume of the building savings contract
• If the minimum amount is saved, the loan can be paid out. There are several options that can be taken during the allocation phase
• In the loan phase, the loan is repaid with monthly payments. The repayment period depends on various factors, such as the loan amount
• Building savings operate with the help of payers and payees who provide cash flow and earn the same from interest
• Different building savings offer different tariffs for building savers. The comparison of the building saving accounts is worthwhile due to the different offers for each building savinger

The Saving Phase – Save Money Until Allocation

In the saving phase, a certain amount is saved first. This usually corresponds to 30-50% of the volume of the building savings contract. For this purpose, the savings amount, the loan interest rate and the redemption amount must be determined. It is important to know in advance exactly how high the loan amount should be and to consider both the costs for the property and the existing equity capital. Only when this sum is completely saved, the contract is ready for allocation and the loan can be paid out. A building saving contract is also often started at a young age without having planned a concrete building project. Here the sums for the contract vary depending on the individual situation and financial situation.

• In the saving phase a certain amount is saved
• This amount depends on the volume of the building saving contract

The allotment phase – different possibilities for building savers

After the minimum valuation number has been saved, the contract is ready for allocation and the loan is paid out. The valuation figure regulates the fair distribution and the order of allocation, since all building savers of a building saving pay into the same pot. Therefore, only a certain amount of the loan can be paid out each month in order to keep the incoming and outgoing payments in balance. The allocation phase is reached after at least 18 months after the conclusion of the building saving contract. Here building savers then have two options. The credit balance and the state premiums can be paid out or the building saving loan can be used for home ownership. In the latter case, the building savingkasse will pay out both the savings and the loan, i.e. the entire building saving sum. Special payments can shorten the allocation phase and help you reach your goals faster.

• If the minimum amount is saved, the loan can be paid out
• There are several possibilities that can be perceived in this phase

The Loan Phase – Repayment of the Loan

If building savings loan customers decide to take out the loan and use it for home ownership, the building and loan association will pay out the saved credit balance and the loan, i.e. the entire building saving sum. The loan is then repaid in monthly interest and repayment instalments. The amount of the repayment installment is chosen by the building saving customer. The repayment period depends on the amount of the monthly repayment contribution, the selected loan interest rate and the loan amount and varies according to the building saving tariff.

• In the loan phase, the loan is repaid with monthly payments
• The repayment period depends on various factors, such as the loan amount

The Building Saving Contract – Different Variants, Uses and the Benefits

Building saving contracts are one of the most popular and widespread financial products. Mathematically, there will be around 27 million such contracts at the Bundesbank at the beginning of 2019, accounting for three quarters of German households. However, this does not mean that a building saving contract is the best solution for everyone. Moreover, there are very big differences between the rates of different building savings contracts. Exact information and the comparison between different offers helps to make the right decision.

The Most Important Facts at a Glance

• A building savings contract combines a savings plan with real estate financing and is divided into two phases, the savings phase and the repayment phase
• The building savings is meant as a long-term, supplementing financing in addition to a real estate financing
• The topic of building saving savings contains some technical terms that must be understood in order to acquire sufficient expertise. Some of these terms are, building savings collective, regular savings contribution or also building savings sum
• There are different variants of building savings, which are suitable for different scenarios. For this count the building saving fort financing, the savings contract and the insurance against rising building interest
• The tariffs of different building savings differ significantly. So it is definitely worthwhile comparing different offers
• Which building saving contract is the correct one, appendix of different key figures and the individual personal situation must be determined
• A building saving contract is usually only concluded for a relatively small amount and therefore works only in addition to the actual real estate financing
• Real estate financing is usually concluded with a bank and not with a building saving
• The money at building savings is insured by law up to an amount of 100,000 euros. As an additional security, the creditworthiness of the building saving accounts can be checked in advance

What is it and how does it Work? – the Most Important Basics on the Topic of Building Savings

A building savings contract combines a savings plan with real estate financing and is therefore divided into the savings phase and the repayment or loan phase. First, a building savings amount is determined and the percentage of the minimum savings amount. In the first phase, the consumer saves a certain amount of money, which is mostly 30-50% of the volume of the savings agreement. Once this amount has been saved, the contract is ready for allocation and the loan can be called. Thus, savers only receive the loan when the minimum savings amount has been reached. The loan is then paid out together with the money saved up to that point. The loan may be used however only for so-called residential purposes and not for example for the purchase of a car.

If the loan is disbursed, the second phase begins, the loan phase. Once the loan has been paid out, the loan is repaid to the building saving in monthly installments. Explained by an example: An agreed building saving sum is 60,000 euros and the minimum saving amount is 50 percent. The loan in the amount of 30,000 euros is therefore paid out when 30,000 euros have been saved in the savings phase. If the saver puts thus monthly approx. 300 euro back, the allocation maturity can be reached in less than nine years.

• A building society contract combines a savings plan with real estate financing
• Building saving is divided into two phases, the saving and the repayment phase
• The building society savings is meant as a long-term, supplementing financing in addition to a real estate financing

The Most Important Key Figures – Building Saving Collectives, Regular Savings Contribution and Much More

The topic of home loan and savings is very complex and therefore contains many terms that can cause confusion. In order to leave no questions open for you, we explain the most important terms in the topic of building saving savings!

The building saving sum

The building saving sum is the most important key figure in a building saving contract. It indicates the amount of the concluded sum, i.e. both the amount saved and the loan taken out later. When financing a property, the amount of the savings sum can be included.

The valuation figure

The valuation figure defines when the loan can be allocated to you. This number increases as the savings phase progresses. If the valuation figure exceeds the target valuation figure set by the building saving, the loan can be reduced. The higher the valuation number, the more money has been deposited, the lower the amount, and the shorter the term of the loan.

The building saving collective

building saving is based on the collective idea that people willing to save under building saving contracts join together to form a building saving community. This consists of payers, who save credit balances in contracts and of borrowers, who use these credit balances as loans. However the following problem can occur here: If there are too few savers, not all borrowers can access the appropriate credits.

The minimum savings balance

In order to be able to take advantage of the loan, a certain amount of money must be saved in advance. This sum is called the minimum savings balance and is usually between 30 and 50% of the volume of the building savings contract.

The regular savings contribution

In each building saving contract a so-called regular savings contribution is defined, which usually amounts to 4-5% of the savings sum and depends on the amount of the savings sum. The building saving customer thus reaches the minimum savings balance required for allocation after approximately six to seven years. Monthly special payments must be approved by the bank, but are possible in principle.

The terms emerge again and again with the topic building saving saving and must be understood first, before the topic can be concerned intensively. The terms are therefore all very important to acquire an intensive specialized knowledge about the topic.

• The topic of building saving savings contains some technical terms that must be understood in order to acquire sufficient specialist knowledge
• Some of these terms are, building savings collective, regular savings contribution or also building society sum

The Variants – Building Loan Continued Financing and Savings Agreement

In addition to the normal building saving contract, there are other variants of building saving contracts. The insurance against rising building interest is worthwhile itself for example, if the later real estate acquisition is firmly planned or however the building interest rises clearly.

With a building loan it can be besides meaningful to know the interest rate up to the last fixed rate. The associated variant is the building saving financing or also called combination loan. Here the building savings contract is combined with another loan. The variant is particularly suitable if the total effective interest rate is lower than a comparable annuity loan or if the borrower wants to finance immediately.

The last variant is the savings agreement, which describes the building saving contract as a pure savings product. Here the contracts lure with an interest bonus, if the customer does without the disbursement of the loan. This variant is worthwhile itself, if high interest is offered, the money is not needed and the savings rates can be kept exactly.

Finding the right contract – the different offers of the building savings

Different building savings sometimes have significantly different rates. A comparison in the search for the best building saving contract is therefore definitely advisable. When comparing different ratios must be considered, as for example the loan interest. But other factors are also important, such as the interest rate on the credit balance and other key points of the contract.

However, the comparison is not easy in any case, since different interest rates are combined with different savings and repayment periods. These key data must then be coordinated with the wishes and individual situation of the savers. Thus it may well be that an offer with a significantly higher loan interest rate is the better choice, since the time to allocation is shorter than with the other variants. Tip: Obtain different offers from different providers for a building saving sum and compare them with regard to the mentioned key figures. All important key figures at a glance:

• The loan interest rate
• Interest on the credit balance
• The savings and repayment period
• The individual wishes of the investor
• The costs of the building society for a contract
• The flexibility (special payments, extensions, …)
• Periods of notice
• The amount of the sum
• The percentage of the minimum savings

You should consider all these key figures when choosing the right contractual partner and compare the different tariffs intensively to find the one that fits your individual ideas and wishes.

• The tariffs of different building societies differ significantly
• Comparing different offers is therefore definitely worthwhile!

Building savings and real estate financing – a bank loan as additional financing

The sums of the building savings usually do not exceed the amount of 50,000 euros. However, this amount is not sufficient for the ultimate financing of a property. If the decision to buy or build a property is made, the further financing must be considered. This is possible with a bank as well as with building savings. However, a loan from a bank is often easier and more advantageous than the complicated models offered by building savings. Especially for larger loan amounts, banks are often the better contact partners. With banks, a short term financing is possible and the building saving contract can be used additionally.

Find out more about financing real estate with banks: Tips on Construction Financing!

The security – how safe your money is with the banks

In general, deposits at building savings are similarly secure as savings accounts at banks for overnight and fixed-term deposits. The credit balance is legally secured up to a value of 100,000 Euro. As an additional protection, we recommend checking the creditworthiness of building savings, using the ratings of the major agencies Moody’s, Fitch and Standard & Poor’s. These agencies issue ratings for banks and building savings and evaluate the creditworthiness of these. For overnight and term deposit accounts, only banks with a rating of at least “BBB” (Standard & Poor’s and Fitch) or “Baa” (Moody’s) should be considered. For building and loan associations, a rating of one of these agencies is sufficient, as the ratings of building and loan associations are less common than those of banks. In addition, building saving accounts always have the option of passing on impending risks to the collective. If your bank or building saving meets the criteria, you can be sure that your money is safe.

• The money at building savings is insured by law up to an amount of 100,000 Euro
• As an additional security, the creditworthiness of building savings can be checked in advance

The Deal: Facts About Building Savings and the Contract

In addition to the three phases of building saving, other key figures are also important! These include the general understanding of the function of a building saving or important key figures of the building saving contract.

The building saving accounts – the principle, the individual parts and the most important facts

Building savings have specialized in the allocation of building saving contracts. There are different parts that work together and thus make the principle of building savings work. The three phases play an important role here. building saving accounts always have depositors and payers. The payers, who during the savings phase pay in so-called savings installments and the payers, who during the loan phase repay the building saving loan.

The payers are those in the allotment phase, who both receive their saved assets and can draw the loan. The money in a building savingkasse therefore flows back and forth from the payers to the payers. The building savingkasse itself earns its money with interest, which the building saving customers pay in different phases.

The building savings contract – Various offers from building savings collectives

Different building savings sometimes have significantly different rates. A comparison in the search for the best building saving contract is therefore definitely advisable. When comparing different ratios must be considered, as for example the loan interest. But other factors are also important, such as the interest rate on the credit balance and other key points of the contract.

However, the comparison is not easy in any case, since different interest rates are combined with different savings and repayment periods. These key data must then be coordinated with the wishes and individual situation of the savers. Thus it may well be that an offer with a significantly higher loan interest rate is the better choice, since the time to allocation is shorter than with the other variants. Tip: Obtain different offers from different providers for a building saving sum and compare them with regard to the mentioned key figures.

• Different building savings collectives offer different tariffs for building savers
• The comparison of the building savings collectives is worthwhile due to the different offers for each building savings collective

The Conclusion – Funding Opportunities, Costs and Advantages and Disadvantages

However, building saving savings offers more than the building saving contract and the general conditions. For example, building saving contracts are intensively promoted by the state. In addition, costs are incurred when concluding a building saving contract, which vary from bank to bank. Before a contract is concluded, other key figures must therefore be observed and checked. In addition, we will give you an overview of the advantages and disadvantages of a building saving contract.

All important information at a glance

• The state supports building savings through various subsidies. Depending on the situation, the subsidy options can help to access the loan earlier or to pay it off faster
• In addition to the interest on the loan, other costs are incurred with the building savings contract, such as the acquisition and account management fee, which vary from bank to bank
• Building savings is not suitable for everyone and therefore offers many advantages and disadvantages
• On the one hand, building savings offers a great deal of security and can be planned, but is not suitable for short-term real estate financing, for example

The subsidy possibilities – saving is subsidized by the state

There are various subsidies for building saving savers from which they can benefit. These depend on the saver’s income and whether or not the employer participates in the savings agreement for capital-forming benefits. The subsidies come from the state and can help to get the loan paid out more quickly or to repay it more quickly. We have summarized the most important subsidy possibilities and explained them for you:

The capital-forming benefits

Capital-forming benefits can be applied for by employees, civil servants, judges, trainees and by soldiers by the boss. These amount to a maximum of 40 euros per month. The payment is a voluntary decision by the employer and therefore does not have to be approved. However, if they are offered, they are directly recorded in the contract.

The employee savings bonus

If capital-forming benefits are used for the building savings contract and the saver’s taxed income is a maximum of 17,900 Euros or 35,800 Euros for married people, an annual allowance of 43 Euros or 86 Euros can be claimed from the state via the income tax return. However, this employee savings bonus is only paid if the building saving loan is used for residential purposes.

The housing construction bonus

This premium will only be paid out if the building saving contract is used for residential purposes and the taxable income does not exceed 25,600 Euros or 51,200 Euros for married couples. As a further condition, at least 50 euros must flow into the contract annually. The amount of this premium is 8.8 percent of the annual payments and has a maximum value of 45 euros or 90 euros for married persons.

The residential subsidy

In order to receive the residential subsidy from the state, the savings sum may only be used for the construction or purchase of owner-occupied property or for conversions suitable for the elderly. In addition, the saver must have statutory pension insurance. The amount is 175 euros per year, if the saver pays at least four percent of the previous year’s gross income into the savings agreement. For each child entitled to child benefit, an additional amount of up to 300 euros flows into the contract.

The allowances flow both in the savings and loan phase and ensure that the building saving contract is ready for allocation earlier or can be paid off more quickly. Before using one of the mentioned subsidy possibilities, however, the tax aspects should be considered and discussed with an expert.

• The building savings is supported by the state through various subsidies
• Depending on the situation, the funding opportunities can help to access the loan earlier or pay it off faster

The costs – closing and account management fees vary from bank to bank

For a building loan agreement, there are other costs in addition to the loan interest, such as the closing and account management fee. The closing fees are a percentage of the amount of the savings amount, while the account management fee varies from bank to bank. Since the costs vary from bank to bank, they should be compared in advance and taken into account in the decision. The costs are therefore another important factor that must be considered when comparing different rates. Tip: According to the German Federal Supreme Court, account management fees are only permissible in the savings phase, as the additional costs for customers in the loan phase in 2017 were declared inadmissible. Please bear this in mind when choosing a building saving.

• In addition to the interest on the loan, there are other costs associated with the building savings contract
• The costs include the closing and account management fee, which varies from bank to bank

For whom is it worthwhile? – Decision-making aid building saving contract

A building saving contract is not the right choice for everyone. Especially for people who are looking for short-term real estate financing, the building saving contract is not suitable because the money is only available after the end of the savings phase. For whom a building saving contract is worthwhile itself and which advantages this offers you experience now:

• The building savings can be planned and determines when money is available for the financing of construction, purchase, conversion or modernization measures
• The building savings is suitable for people who are looking for security in the long run
• It is possible to secure low interest rates on the loan for a long time and until the end of the repayment period
• A building savings contract is supported with many different state subsidies
• Building savings remain flexible for savers despite the ability to plan
• Special payments are possible at any time
• The saver has limited freedom as to when the building saving sum can be used
• The financial means are available to the saver when he needs them
• The loan interest rates for building society contracts are usually very low

For whom a building saving contract is not worthwhile and which disadvantages such a binding can have:

• The building savings contracts are usually only for small amounts, so that the bausparkassen can secure the favorable interest
• The building society is not suitable for a short term real estate financing
• The repayment rates demanded by the building societies are comparatively high
• A building savings contract is not suitable for the financing of an entire real estate, but only as additional financing sum
• Fees at the time of contract conclusion are relatively high for building societies
• There is no absolute planning security, since the time of payment depends on the savings portion

Depending on the situation, the advantages and disadvantages make a building saving contract very attractive for the saver, while in other situations saving with a building saving does not offer a sensible alternative. Which choice is the best for you has to be determined according to the individual situation and cannot be answered in a generalized way.

All Questions About Building Saving

The topic of building saving savings is very complex. Therefore it is important to have some expertise and to be well informed before signing such a long-term contract. The experts from Lukinski will answer the most important questions about saving for building purposes, so that no ambiguities remain for you.

What is meant by a building saving contract?

A building savings contract is a savings contract between the investor and the building saving. The building saving contract is a form of investment where a fixed part of the sum is saved before the loan amount is paid out. The building saving saving is therefore divided into two phases. The first is the saving phase, in which the minimum savings balance is saved. In the second phase, the Darlehenspahse, the loan sum is disbursed and gradually repaid by the investor.

How long does one pay into a building savings contract ?

A term is agreed upon in the building saving contract, which is however usually adjustable at any time. Often a minimum term of 18 months is agreed upon and the term is limited to a maximum of 20 years. How long it is finally deposited depends on the sum and the redemption amount.

What does a building saving contract cost me?

The cost of the building savings contract varies from bank to bank. In addition to the costs for the interest on the loan, there are also costs for the closing and account management fee. These costs are an important key figure to compare different tariffs.

Can you transfer a building saving contract?

Yes, a building savings contract can be transferred to a relative. In most cases, the previous conditions are simply retained and thus the rights and obligations are simply transferred to the relative. However, whether a transfer is possible in your contract must be agreed with the building saving in advance.

How can I have my building saving contract paid out?

A building savings contract can theoretically be paid out at any time. However, the payout depends on the respective phase in which the investor is in. In the loan phase, the amount is automatically paid out as soon as the minimum savings balance is reached. During the savings phase, however, the contract must first be terminated in order to receive the assets saved up to that point.

What is the regular savings contribution?

The regular savings contribution describes the monthly amount to be paid and is based on the amount of the building saving sum. The contribution is specified in the savings agreement, but can be changed at any time depending on the contract.

What is the taxable income?

Taxable income is a term from tax law. It describes the assessment basis for the determination of income tax. It is calculated using a rather complicated formula and is therefore not easy to determine for laymen.

Social ads, online advertising, ads in newspapers

On the other hand, not only the unit price plays a role in the choice of media, but also the quality. Of course, the individual person can be reached more cheaply via a Facebook ad than, for example, through a sales employee at the trade fair stand. At the same time, despite the lower reach of individual persons, the trade fair stand is much more profitable for some industries, as the individual contacts are of higher quality, because they are more intensive, and accordingly potentially bring in more sales. When deciding for or against a certain marketing campaign, the target group analysis is again decisive.

B2B or B2C advertising?

Do you want to reach private consumers or business customers?

Depending on that, you’ll choose to be pro Facebook Advertising or pro trade show, tackle both, or opt for a different strategy entirely. If we are within media advertising, the comparison between the different channels is especially important. What is the effectiveness of each campaign? The comparison is based on the CPM.

CPM – Thousand-Contact-Price

Media advertising is usually calculated using the CPM and compared with other campaigns. The CPM refers to the thousand-contact price. The CPM tells you how high the costs are for reaching 1,000 people. If you want to run a campaign to reach 5 million people, for example, you can use the CPM to compare the different offers. More on the CPM with best practice later in “Social Media”.

Tip. Social Media Advertising. Especially for young companies and startups, social media advertising is worth a look. While other, classic channels are often overbooked by brands and companies, for example because they are used to traditional advertising techniques. Thus, they often fall back on trade magazines and TV advertising. Accordingly, the costs for advertising placements are high because the competition is fierce. It is completely different in social media marketing, for example. Although more and more companies are discovering the social networks for their own marketing campaigns, very few companies use these methods, so it is still possible to run good campaigns, with low click prices and high conversion (we will also come to this technical term in the chapter on social media marketing). The second advantage, the media advertising does not have to be booked in a package. You only pay for the reach that was really generated.

Media advertising costs

There are two advantages to this. Firstly, you don’t have to pay for the big package straight away, you pay for the media advertising bit by bit. The much bigger advantage is that if a campaign doesn’t work, you can cancel it or change it. Of course, you can’t do that with media advertising in trade magazines or on TV. The magazines are printed, the TV program is scheduled. Now, if you’re paying to reach three million people and you realize at the beginning of the campaign that there’s hardly any return, you’ll be happy if you can still edit your campaign.

Advantage Digital Media

Over the course of the business, you’ll learn a lot of marketing strategies. For your business plan, we’ll look at the most important, overarching strategies for attracting customers, from offline to online.

Mailing and direct mail: Classic

Mailings and direct mail are still central tools in marketing today, despite laws against mass mailing of information, sending emails and direct mail in the mailbox is still commonplace. Of course, the ratio of email to direct mail has changed dramatically, but letters are still in vogue. Even modern startups use classic letters, because that’s how you can create awareness again. The less the method junk mail use, the more attractive listening test again to create attention. In your company, you’ll also get regular ads for new mail products. The last one that stuck in my mind was a letter that had a pop up box in it. Of course, when you open the letter, you don’t know that yet. As soon as you open the letter, the box unfolds and literally pops up in your face. Never seen before, ingenious! Whoever has the right idea around the box, e.g. a booth builder, has a great tool to creatively win customers or to bind them again.

Guidebook: Setting up your own business & business plan

You want to start your own business as a real estate agent or with another business idea? We support you with tips on your business plan and concept. Whether self-employed full-time or part-time self-employed: If you want to start your own business, you have to think about many things, in advance and in the operational business. From the right idea to health insurance – what do you have to consider when you want to become self-employed?

There is no education or training for entrepreneurs. One is or is not a managing director. What is always important is your own ambition, because that is the only way to improve every day.

The topics at a glance:

1. Business Plan
2. Founder and founding team
3. Product / Service: USP
4. Increase customer satisfaction
5. Market Overview: Customers & Competition
6. Reference customers: Positive image transfer
7. Market analysis / validation: business idea
8. Site selection
9. Marketing concept: Sales
10. Advertising: Google Ads, SEO, Newspaper, Radio?
11. Marketing: Media advertising, costs and CPM
12. Marketing: trade fairs, training courses and trade advertising
13. Marketing: sales talk, telephone call and psychology
14. Marketing: promotions, discounts and special offers
15. Marketing: Social Media and Online Advertising
16. E-business: electronic commerce in the enterprise
17. Cooperations: Cooperative Principle
18. Financial planning: capital and financing

Here you come back to the overview:

• Form a company
• Legal forms: OHG, KG, GmbH, AG & Co.

Properly plan house remodeling – analysis, budget and goal setting

As an owner who wants to sell their home and get the best price possible, consider having renovations done beforehand. This can make the house more attractive to the buyer and increase the general interest. Sometimes, however, it makes sense to forego renovations and leave them in the hands of the buyer. In this case, however, a significantly lower purchase price can usually be achieved. Here it is important to carefully weigh up the costs and benefits.

Through a well-planned home remodeling, old properties can be designed in a new way. For the success of the project, thorough planning and cooperation with professionals is of great importance. Seek the advice of architects, structural engineers and tradesmen and choose a company you trust to meet your needs and expectations. Whether a house conversion makes sense when you sell the property must be decided on an individual basis. If you are unable to sell the property without remodeling, it is worth the effort. If you are looking for professional home selling assistance, give us a call!

Before the start of the conversion, some considerations must be made. Make clear what your ideas are and to what extent you want to change the existing property. If necessary, you can seek advice from an experienced architect. List everything you want to change and which parts of the house are affected. Also consider whether you are planning an extension in addition to the conversion to increase the living space.

• How much does it cost to remodel a home?
• What is the cost of remodeling old house?
• What do I have to look out for during the conversion?
• How much does it cost to hire an architect for a remodel?

Planning phase and building analysis

Establish a preliminary approximate schedule and include delays in the calculation. These can occur unexpectedly due to undiscovered defects. Also set your budget. Once you have documented your ideas, the concrete planning phase can begin. This absolutely includes a building analysis by a professional. A master builder is the ideal contact person for this. He or she can identify defects and structural damage and give you a more accurate time frame for the remodel. It is also necessary to talk to a statistician. This person will inform you about the building regulations and check the statics of the building. It is essential that load-bearing walls remain standing. Now it will quickly become clear which of your ideas are feasible and which are structurally impossible. Compare your new findings with your original planning and create a new conversion plan on this basis.

Financing plan – craftsmen, material costs & financial reserve

Now you can create a financing plan. To do this, you can obtain various quotes from tradesmen and construction companies. Compare the prices and keep an eye on your budget. In addition to the costs for the craftsmen, there are of course also material costs. Create a cushion and ensure you have a financial reserve of about ten percent of the total budget. This is for unforeseen costs.

Permits for conversion work

A number of permits must be obtained prior to remodeling. Not all remodeling work requires a permit. However, if you are planning to add a storey or an extension to the house, you will need permission in almost every case. Even if you are converting the house to create a granny annexe or you are having a conservatory built, you will often need permission. Since these regulations differ from state to state, no general statements can be made. It is therefore essential to enquire at the relevant building authority. If you plan your conversion together with an architect or engineer, you can rely on their expertise. Craftsmen who are authorised to submit building documents are also familiar with the regulations.

This is how you find competent service providers for the conversion

For the remodeling of your home, it is best to turn to master companies. They stand for quality and have the necessary skilled workers. When choosing, pay attention to the focus of the respective master craftsman company and which projects they normally carry out. References are always a good indication when it comes to the quality of a company. Smaller renovation tasks that you would also like to have carried out in the course of the renovation, such as laying new floors, can also be left in the hands of independent craftsmen. Contact regional master craftsmen and meet with a contact person in person. Home remodeling involves large sums of money. A get-to-know-you meeting can build trust and eliminate doubts. When you feel you’ve found the right company, you can ask for a quote after inspecting the property together. It is best to get quotes from different companies.

Request alternative offers from trades

You may have to hire different companies anyway. It always depends entirely on what and how much you want to remodel. A company that moves your walls may not be able to tile the bathroom. Once you have decided on a quote, a contract will be signed. In it, all of the remodeling work you plan to do should be put in writing. Since each remodeling project is individual, the contract should also be custom made. Model contracts cannot capture the complexity of the project and are therefore useless. To be on the safe side, you can have the contract checked by a lawyer. However, bear in mind that this may involve further high costs.

Delays and fixed price

If delays occur during reconstruction, the service provider is not always to blame. Construction measures rarely run without problems and additional obstacles. There are many reasons for this. For example, undiscovered defects that become apparent during the remodeling process cause time delays. In addition, you as the builder may change your mind about details during the remodel and order additional work. This can also cause the schedule to be blown up. In this scenario, always keep an eye out for additional costs coming your way and ask the service provider to let you know if there are any new costs. This way, you’ll keep an eye on your budget and end up with a bill that won’t bankrupt you. Alternatively, it is possible to negotiate a fixed price with the tradesman.

Final building inspection

After completion of the project, the building inspection is due. Take a look at the result in peace. Even if you are not an expert, you can at least judge whether everything looks neat and works. If you are working with an architect, he can of course accompany you and advise you. If you notice any defects, these must be rectified by the tradesman. Set a deadline for this, unless this is stipulated in the contract. Only when everything is to your satisfaction will the invoice be paid.

Difference between a renovation and a refurbishment

A renovation is a visual improvement in which visible damage is repaired and living comfort is enhanced by better equipment, for example in the bathroom or kitchen. In this way, renovation differs from refurbishment, in which structural defects are removed. Renovation is therefore not absolutely necessary, but can lead to a visual upgrade and make the property more interesting for potential buyers. Wallpapering walls, repairing minor damage to the facade or laying new flooring are all part of a renovation. So, a renovation does not mean the complete renewal of the house. Instead, details are tweaked to make the property look more inviting overall. First impressions count and cannot be repeated. In order to appeal to as wide a range of people as possible, the renovation should result in a result that is as timeless and neat as possible. Extravagant wall colors and gold-plated fixtures in the bathroom appeal to only a small percentage of the population. Brightness, cleanliness and an immaculate condition of the property, on the other hand, are universally rated as positive.

Upscale, normal or simple equipment

Upscale, normal or simple equipment?

Adapt renovation to real estate

You’ve probably seen real estate listings that advertise upscale amenities.

Other offers talk about a simple or a normal equipment. This is understood to mean different standards, which of course affect the purchase price and may attract different clientele. With a targeted renovation, you can give your property the desired standard. It makes sense to adapt the furnishings to the property as much as possible.

A villa or a spacious apartment in the city centre, for example, can be better advertised with upscale furnishings. Potential buyers are prepared to spend a lot of money right from the start and want the interior of their dream property to meet their requirements. A small terraced house in the suburbs, on the other hand, is better suited to normal or simple furnishings.

Location and neighbourhood: influence on building elements

The surroundings and the location also play an important role when deciding on a standard of equipment. By looking around the neighborhood, it is usually easy to see if your property fits in with the surrounding area. If the home is in an area with mostly upscale homes, buyers who want to live in an upscale environment are more likely to be interested. Before you take action, plan your renovations accordingly.

Upscale equipment

Upscale equipment must meet high standards. Bathroom, central heating and double windows are mandatory here. The flooring can be high-quality carpet, natural stone or parquet. In the bathroom and kitchen there is a tiled floor. In addition, no supply lines may be visible. They disappear invisibly under the plaster. With the appropriate renovation work, you can give your property an upscale standard. Other extras, such as a fitted kitchen, integrated lamps or an alarm system also contribute to an upscale interior and are considered a luxury by buyers.

Normal equipment

Houses with normal equipment are equipped with double windows, at least on the windward side. Here, too, the utilities run mostly under the plaster. Bathroom and kitchen have a tiled floor. There is also central heating. Basic fittings are houses with single windows, linoleum or PVC flooring and no central heating. Many supply lines run above the plaster. A less than optimal layout of the rooms can also result in a classification in a simple equipment. Through renovation work, you can transform a house with simple fittings into a property with normal or upmarket fittings and thus appeal to completely different groups of buyers.

Renovate different living areas

You need to properly weigh the costs and benefits when renovating different living areas.

Weighing costs and benefits correctly

In a house, there are many construction sites that are candidates for renovation. One of them is the bathroom. A renovation makes sense if there is visible damage or if the equipment is no longer up to date.

Bathroom: Tile, WC, tub & shower

Bathrooms with small tiles and trees on the wall tiles are no longer in line with current tastes and are considered outdated. They can look unattractive to the buyer. So new tiles are a worthwhile investment. However, replacing the toilet, bathtub and shower is very costly and does not always make sense. Here it is important to weigh the costs thoroughly against the benefits and question the necessity. In a house with upscale furnishings, however, the sanitary facilities should also be brought up to date. Outdated bathrooms are a reason for buyers in this price segment not to buy the property.

Kitchen: renovation and modern look

The renovation of the kitchen can also be reflected positively in the purchase price. A modern kitchen can increase the purchase price by 4.5 percent. In this way, a few thousand euros can be gained in many cases when selling real estate. However, the costs for the kitchen must be deducted. If a kitchen already exists, a new one does not necessarily have to be installed. Old fronts can easily be replaced with new ones. A better interior additionally enhances the value of the kitchen. Modern electrical appliances make the superficial renovation complete.

Living areas: Wallpaper, Laminate & Co

A renovation of the living areas is almost always worthwhile. It makes for a neat and tidy impression. Depending on the condition of the house, not all walls need to be re-wallpapered and all floors need to be re-laid. Wallpaper that is in good condition can be painted over and wooden floors can be sanded down. Damage to laminate flooring can be repaired with laminate infill and defective tiles can be replaced individually. However, if you want to raise the standard of the decor, it may be necessary to replace the floors, for example. Also bear in mind that certain floor coverings are considered out of date, despite their high quality. Carpets, linoleum and cork flooring are no longer desired by most buyers and will reduce the purchase price for this reason alone, even if they are in good condition.

Wallpapering is always advisable

Wallpapering the living rooms, on the other hand, is always advisable when the old wallpaper no longer accepts paint or cannot be painted over. For example, a woodchip wallpaper tolerates about six coats. If you decide to redecorate the living rooms, you can choose between different types of wallpaper. For living room and bedroom normal paper wallpapers or non-woven wallpapers come into question. In the kitchen or in the hallway, however, waterproof latex wallpapers are a good choice. They can be easily wiped off and are therefore the perfect choice for heavily used areas.

Conversion of older houses and apartments

Many older houses and apartments have great potential in terms of a new design. It is not always necessary to demolish the building and build anew. This variant is often chosen by builders. However, it is not very profitable. Demolition sometimes involves high costs, especially if there are harmful substances to be disposed of. In addition, there are the costs for the new building. In many cases, it makes sense to consider rebuilding. If the substance of the building is in good or very good condition, the property can be gutted and remodeled. If you own an older building that you would like to sell, we would be happy to make an appointment with you for an individual inspection. Together with a building expert, we can decide whether the building is suitable for a comprehensive conversion and can be offered on the market accordingly. Since the demand for real estate in Hesse and Rhineland-Palatinate is high, we can successfuly assist you in selling your property in most cases. Get in touch with us without any obligation. We look forward to your call.

Prerequisites for a successful conversion

Before you decide to remodel an older home, it is important to find out what is feasible. Surely you have many ideas that you would like to implement. What is possible and what is not, however, depends on the condition of the building and the statics. For many builders, the question of cost also plays a very important role.

Verification of the statics

Before you start with the actual conversion, a review of the statics is required as part of the feasibility study. It is a great advantage if you are in possession of building plans. These make a statement about the way in which the building was constructed. In principle, it is possible to tear out walls and reconstruct them. However, these must not be load-bearing walls. If you remove them, the consequence may be the collapse of the building or some parts of it. If you want to remove a load-bearing wall, it is important to support the building beforehand. You are hardly limited in terms of what you can do. However, changing the statics is a cost issue. Many measures related to maintaining the statics are expensive and may only be carried out by a professional. In any case, a comprehensive renovation should be accompanied by an experienced structural engineer. However, if you limit yourself to comprehensive renovation work, you can do without a structural engineer and save the costs.

Calculate costs safely in advance

If you have decided to remodel because building a new home was too expensive, your funds are sometimes limited. However, a comprehensive remodel can also yield very nice results. A complete remodel sometimes costs as much as or even exceeds the cost of a single-family home. Basically, though, you can operate within your margin. Even if you only have a small budget, a lot can be made of it. Also consider whether you would be willing to do your own work. You will save money on the labor hours that you would have to pay to the tradesmen. Technical skills and a good hand are important prerequisites for the provision of personal services.

Redesign walls and floors

Remodeling a home involves many small investments. If you decide to completely gut the house and completely redesign the interior, you will have to reckon with a five-figure sum in the low to medium range in any case. The design of the walls and floors alone will cost 10,000 EUR or more. The high financial expenditure for the craftsman hours is already included in this amount. However, it makes little sense to take on the laying of the floors and the wallpapering yourself if you are not experienced in this. In this case, you should hire an experienced craftsman and look for cost savings elsewhere.

Bathroom and kitchen planning

There are a variety of beautiful design options for the bathroom and kitchen, but they are very costly. The advantage of remodeling the house is that you can re-route pipes and electrical wiring. So it is possible to install taps, toilet and shower in a different place. You can even choose a different room if you don’t like the previous layout. However, again, plan for a five-figure sum in the lower or middle range.

Determine real costs

The total cost of a remodel can quickly exceed 100,000 euros. A comprehensive redesign with the assistance of a structural engineer quickly exceeds the costs you would have to bear for a new construction of the house. It is important that you compare costs and benefits and really include all the little things in your planning. Define generous sums by rounding up significantly. Then add an amount of 10,000 euros for the things you have forgotten. Then you are protected from unpleasant surprises and may even have capital left over with which you can fulfil some special wishes.

Allow for buffer: planning costs + 10%.

Converting a house can be an attractive alternative to buying a new one. It is important that you clarify, if possible before buying the property, which planning you can implement and what costs you will incur. You should only complete the purchase when you are sure you have found the right property. Contact a structural engineer and have a feasibility study done. Only when all the plans are feasible to your satisfaction is it the right time to buy the property. Would you like advice from a professional? We are happy to be of service to you. Simply make an appointment for a non-binding discussion.

Conclusion: Renovation before selling the house

Renovation work before the sale of the house is reflected positively in the selling price. However, the costs and benefits should be thoroughly reviewed beforehand. If you decide to renovate, you should refrain from extravagant experiments. Because you do not know the taste of the buyer. Timeless, bright and well-maintained rooms appeal to most potential buyers. In addition, you should think about the desired standard of furnishings and plan the renovation accordingly. By replacing floors and wallpaper and renovating the bathroom and kitchen, you can specifically improve the standard of furnishings and thus improve your chances on the housing market.