Calculate purchase price: Important factors

To calculate the purchase price depends on several factors. The location of the property, its location, as well as its year of construction are important. Once the purchase price of the property has been determined during the property valuation, the ancillary purchase costs must be added.

The final purchase price is therefore composed of

1. Purchase price of the property
2. Incidental purchase costs

Incidental purchase costs: land transfer tax, broker & Co.

Not all incidental purchase costs are the same in all federal states. Some incidental costs, such as the real estate transfer tax, differ from state to state. Sometimes it also depends on whether you are buying a house, an apartment or an apartment building. The investment strategy, i.e. income property or investment property, can also have a different effect on the ancillary purchase costs. If you also buy through a real estate agent, you will also incur a broker’s commission, which also varies by state.

Reading tip: Real estate transfer tax by federal state

So what counts as an incidental cost of purchase?

• Real estate transfer tax (3.5-6.5%)
• Notary fees (1.5%)
• Land register entry (0.5%)
• Broker commission (3.57-7.14%; 50:50 for private purchase)

in a home of one’s own in a dreamlike setting. What are the ancillary purchase costs here?

Example: Buying a house in NRW including incidental purchase costs

We will show you how these ancillary purchase costs add up to the original purchase price using this short example. Let’s assume you want to invest in a single-family home in NRW. To keep the example simple, let’s assume that after technical and commercial inspection the purchase price is 100,000 euros.

• Purchase price for house in NRW: 100,000 euros

Calculate real estate transfer tax in NRW

Depending on the federal state, the real estate transfer tax ranges from 3.5% to 6.5%. Our property is located in NRW. One look at the table and we find out: The property tax in NRW is 6.5%.

• Real estate transfer tax in NRW (6.5%): 6,500 euros

Notary costs: sealing the purchase contract

You will also incur notary fees. After all, the purchase agreement must be sealed. You can estimate this amount at 1.5% of the purchase price of the property.

• Notary fees (1.5%): 1,500 euros

Land register entry Costs: Transfer of ownership

The land transfer tax has been paid, as well as the notary? Very good! Next comes the land register entry. Here, the property you have purchased is now registered as your property. For this transfer you should calculate 0.5%.

• Land register entry (0.5%): 500 euros

Broker costs: commission & distribution

If a broker is involved, the broker’s commission is still due in the last step. It is important to note here: If it is a private real estate purchase, the broker’s commission is split 50/50 between the buyer and seller. However, if the real estate purchase is a commercial purchase (for example, on behalf of a company), then the commission and distribution are freely negotiable. The amount of the broker’s commission varies depending on the federal state. In NRW it is 3.57%.

• Brokerage commission (3.57% [3,570 / 2]): 1,785 euros

Conclusion: Purchase price and ancillary purchase costs at a glance

The actual purchase price of the property is therefore 100,000 euros. If the ancillary purchase costs are added, we are then at 110,285 euros, which must be invested in total. Our tip: Right from the start, make a concise checklist of the ancillary purchase costs that you will incur and add these to the original purchase price. This prevents any nasty surprises with regard to financing.

You want to invest a property and are looking for a suitable guide? Find here everything from A to Z: owner-occupancy or renting, financing a condominium, apartment search, real estate portals, brokers, valuation, purchase prices, negotiations and taxes. Knowledge and experience from experts, in one guide.

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Macro, Meso & Micro: Definition

In addition to a distinction between A-, B- and C-location, the second step in determining the location is to distinguish between macro, meso and micro location. Thus, the macro location defines the city of the object, the meso location refers to the neighborhood and the micro location to the immediate surroundings. So, to describe the meso and micro location of an object, we must first define the macro location.

Here is the overview:

• Macro position (Where in Germany)
• Meso location (Which district)
• Micro-location (Exact location)

Let’s take a closer look at the different types of layers.

Macro location: A, B & C location

The macro location depends on your personal goal and individual strategy. Do you want to invest in a property as a capital investment? Is this a return or investment property? For investment properties, we always recommend A-locations, i.e. metropolitan areas such as Berlin, Hamburg and Munich. In the case of yield properties, it is best to look around in good B and C locations, as the rental yield is high here compared to the purchase price. Of course, your individual preferences are also in the foreground.

The different macro-locations summarized:

• A-location (metropolis)
• B-location (large city / city with positive development)
• C-location (small town / city with stagnant development)

So the macro location is about the question: Where in Germany is the property located?

Meso-location: infrastructure, connectivity & co.

So you have now decided on a city or place? Very good! Then we must now answer the question:

Which part of town do you want to go to?

Large cities in particular offer a large number of attractive districts, all of which differ in their character and charm. How well is the district connected? Is it easy to reach by public transportation? Is the neighborhood safe? Are the commutes to school and/or work long? So think about your living situation, future plans and needs in advance.

So here’s what you should definitely keep in mind when it comes to the meso layer:

• Infrastructure
• Security
• Proximity to work & school
• Connection to the other districts
• Environmental influences

Foremost in the meso location: In which district / neighborhood is the property located?

Micro-location: guaranteed feel-good factor

Finally, the last step is to determine the micro-location. This is about the immediate surroundings of your property. Is it located directly on the street or near railroad tracks? Is it quiet, especially at night, or does the street noise rob you of sleep? Where is the nearest shopping market? As soon as you step out of your front door, do you feel comfortable and safe?

This and more is the focus of the micro-location evaluation:

• Noise level
• Parking facilities
• Shopping facilities
• Cleanliness

The micro location of the house:

Conclusion: Personal preference & objective decides

So before you start looking for real estate, think about the criteria that are important to you. Look at different neighborhoods and also the street in which the property is located. After all, you should feel comfortable and safe here and not suffer a loss of value in the event of resale.

If you want to learn even more about macro, meso and micro location, check out my new site for buyers, Immobilien-Erfahrung.de:

• Macro, meso, micro situation explained – (external)

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Checklist: Criteria for your real estate investment

With our 11-point checklist you are well prepared for your real estate purchase:

Real estate as an investment vs. personal use

At the beginning, the question clearly arises: Do you want to live in your property yourself? Or do you want to rent out your apartment as an investment property after the purchase? This is something to think about at the beginning. After all, this not only affects the financing. As an owner-occupier, you will continue to be responsible for the operating costs yourself after purchasing the property. However, if it is a property as an investment, these costs are mainly covered by the tenant and the tax office.

• Self-interest or capital investment? Comparison

Amount of the purchase price: factors

It is equally important that you set a maximum purchase price for yourself. You should take several factors into account here. These include your creditworthiness, the available equity capital and your mortgage lending value.

Learn more about the important factors including tips and tricks here:

• Maximum purchase price

Maximum gross rental return: Formula

What is the minimum rental yield required for the investment to be both profitable and paid off by the tenant? We recommend the following formula for this:

Formula: Annual rent / purchase price * 100

Investors pursue one primary goal, efficient wealth accumulation. Accordingly, the gross rental yield of a yielding property must be high. Learn more here:

• Minimum gross rental return

Buy rented or unrented?

Of course, you can buy an already rented property just as well as an unrented one. However, if you are purchasing the property for your own use, an unrented property would definitely be more advantageous. If you already have tenants in the apartment, you can terminate the lease after purchasing the property for your own use. The same applies to capital investors. On the one hand you save time by the tenants time and do not have to look for new ones, are however at the same time bound to the rents. So should you buy rented or unrented? Find out all the advantages and disadvantages here:

• Rented vs unrented

Location, location, location!

Not only the city is important, but also the neighborhood. Where is the nearest hospital? What is the connection like? Is there a lot of vacancy in the neighborhood? And how safe is the neighborhood? All of this affects not only your on-site living experience, but also the value of the property and the purchase price. So what exactly does A, B and C location mean? How can it be determined and how does it affect the purchase price? Learn more here!

• A, B, C position

The perfect location

Depending on whether you are looking for a property as an investment or for personal use, the demands on the location also differ. So what are good locations for your personal investment goals?

• Find location

New construction or existing property?

Both new construction and existing buildings have their respective advantages and disadvantages. The most important question here is: Are you using your property for your own use? Or as a capital investment? Finally, the use of your property also influences your decision. The differences between existing and new buildings, as well as the respective advantages and disadvantages can be found here:

• Existing or new construction?

Age of the property: advantages & disadvantages

More than 2,650,000 properties currently located in Germany were built before 1919, and 5,000,000 of them were built before 1949. Some of these properties are real bargains on the market, and their subsequent sale price can be significantly increased by value-enhancing measures. But what are the advantages and disadvantages of buying an older property? Here is a direct comparison:

• Defects by year of manufacture

Size of house and apartment

How big should the property be? In addition to the location and age of a property, its size ultimately plays an important role. One-bedroom apartment or villa with several bedrooms? Bungalow with basement or rather maisonette? Here we compare living space for owner-occupancy as well as for capital investment. Especially for capital investors who plan to rent out their purchased property, the room layout and the number of square meters are important.

• Optimal size of a property

Ground lease? Yes or no

Some real estate is subject to a ground lease. But what is a ground lease? Can the costs be tax-deductible or even passed on to the tenant? Learn all about ground leases, how they work and their advantages and disadvantages:

• Ground lease

Social binding? Yes or no

In addition to the ground lease, it may be that you will also stumble on the subject of social binding. Everything about your obligations on low-interest loans to the post-commitment period – Is it worthwhile for you to buy a property with social and post-commitment?

• Yes or no? Social binding