Homeowners’ association at a glance

A condominium owners’ association (WEG) is a community of owners who own one or more apartments in a common building. So when you buy an apartment unit in a property, you automatically become a co-owner and a part of the community of owners. Explore Real Estate Germany.

The community of owners can be described like this:

Community of all owners of a property.

The community of owners is responsible for the management, maintenance and modernization of the common property. Decisions are made at the owners’ meeting, where each owner has one vote. An administrator is appointed to represent the interests of the owners and is responsible for the management and maintenance of the common property. The condominium owners’ association is a legal entity and can, for example, conclude contracts or appear in court.

Homeowners’ association at a glance:

• A WEG is the community of all owners of a property
• Each owner can represent his right to vote at the meeting of owners
• Each owner has a certain co-ownership share in the common property
• Each member of a WEG must bear costs for the common property
• Each owner is responsible for his or her own special property
• Each owner has to fulfill certain rights and obligations
• Each COA must have certain documents that set out rules and boundaries

Ownership shares and common property

The distribution of property in a condominium owners’ association is defined in the declaration of division. There, it is described in detail which parts of the building are assigned to separate property and which are considered common property.

Each owner has a co-ownership share in the common property of the building, such as the land, the facade, the staircase or the roof. The size of the share depends on the size of the respective apartment in relation to the total living space of the building.

For this purpose, each owner occupies special ownership of his or her apartment. This means that he has sole ownership of his apartment and can use and manage it freely.

This is the right of each owner:

• Co-owner of the common property
• Special ownership of own apartment

Rights and duties of the WEG

Each owner of a condominium association has certain rights and obligations arising from the Condominium Act and the declaration of division. In this section, we will look at these aspects in more detail and explain what rights and obligations an owner has.

The rights and obligations in a WEG include:

• Management
• Maintenance
• Owners’ meeting
• Resolutions

Management and maintenance

The owners are jointly responsible for the management and maintenance of the common property. This includes, for example, the maintenance of the garden, the cleaning of the staircase or the repair of the roof. The costs are apportioned to the owners in proportion to their ownership shares.

This duty has every owner:

• Responsible for common property
• Responsible for internal or external management

Participation in the owners’ meeting

The owners’ meeting is the central body of the condominium owners’ association and is used to make important decisions for the common property. It is therefore important that the owners attend the meeting and express their opinions. However, there is no obligation to attend.

Minutes of the owners’ meeting must be kept and signed by an owner and the administrator. The minutes must contain all resolutions passed and voting results.

Are you interested in the topic of owners’ meetings? Learn more here!

• Owners’ meeting

Voting procedure and resolution

In the owners’ meeting, decisions are made by voting. There are different voting procedures, e.g. simple majority, qualified majority or unanimous decision. A resolution is only valid if it has been properly passed and does not violate any laws or the declaration of division.

House Rules, Declaration of Partition & Co.

In order to regulate the ownership shares in a house with several parties and to guarantee a harmonious living together, a written order is needed. Therefore, every multi-party house has a declaration of division, community rules and house rules.

The house rules are the most important document and, from the legal point of view, the first place to regulate the operation in a multi-apartment building. They are drawn up by the homeowners’ association or the appointed manager and are an obligation for them.

The community rules regulate all regulations and laws for living together in the residential complex and are legally behind the house rules. Since the community rules can be determined by the owners themselves, changes may be decided unanimously at the owners’ meeting.

The declaration of division of a property exists whenever the overall property is split into individual parts, such as individual residential units. It therefore describes the formal division of the property and thereby defines the rights and obligations of the owners.

Order of the WEG at a glance:

• House rules: regulates operation in multi-apartment building
• Community rules: regulates all the rules and laws for living together in the residential complex.
• Declaration of division: thus describes the formal division of the property

Sell your apartment & stay: Is that possible?

Selling an apartment allows you to improve your financial situation and still stay in your home. But in addition to improved liquidity, you can also enjoy a variety of other benefits.

Advantages: Improved liquidity & More freedom

For example, some models allow you to buy back your sold property at a later date. Your heirs can also be granted a priority right of repurchase. In addition, the released capital can be used to pay off loans, you and your family are relieved financially and you can enjoy your retirement without worries.

These are the advantages:

• Improved liquidity
• No need to move out
• Flexibility
• Regulation of the inheritance
• Repayment of loans

Disadvantages: Loss of ownership & steady costs

However, you should also consider the disadvantages. Depending on the model, you may no longer be able to dispose of the entire apartment despite a right of residence that has been granted, and you may be prohibited from renting or leasing out your property, for example. At the same time, you still have to pay for the maintenance of the property, the maintenance costs and property tax.

All disadvantages at a glance:

• Loss of property
• Renting / leasing prohibited
• Continuous costs

So all in all, there are both advantages and disadvantages when it comes to selling your apartment and still staying in it. Exactly which advantages and disadvantages you will have to reckon with ultimately depends on the model you choose.

The most important models at a glance

As mentioned above, there are a variety of options open to you that allow you to sell your apartment without having to move out of your familiar surroundings. We present them to you.

Partial sale: one-time immediate payment

With the partial sale of your apartment, up to 50% of your apartment is sold to a professional partial sale company. You receive the purchase price immediately. The lifelong usufructuary right is guaranteed to you under land register law and you pay a monthly fee to the partial buyer. The special feature of the partial sale: You may continue to rent and lease your apartment and thus generate additional cash flow. In addition, you can buy back the sold part in full.

The partial sale at a glance:

• Disposal up to 50% of the apartment
• Receiving an instant payout
• Assurance of the right of usufruct under land register law
• Payment of a monthly usage fee

Life annuity: Regular annuity payments

An alternative to the partial sale is the life annuity. This is an arrangement whereby you sell your home and in return receive a regular payment in addition to yours for the rest of your life. The amount of the monthly payment usually depends on the age of the seller and the value of the home. The older the seller, the higher the monthly payment. Compared to the partial sale, however, the life annuity does not guarantee you the right of usufruct, but only the right of residence.

The life annuity in summary:

• Sale of the complete apartment
• Additional pension payment
• Amount depending on property value & age
• Assurance of the right of residence

Whether a partial sale or an annuity, selling a home without moving out is an ideal way to give you a financial cushion without having to move out of your home.

Reverse mortgage: Apartment as loan collateral

A reverse mortgage also allows you to stay in your home after a successful sale. If you opt for a reverse mortgage, your home is used as collateral to obtain money from a lender. Unlike traditional mortgages, where the borrower pays interest and principal, a reverse mortgage does not require the borrower to make any payments. Instead, the loan amount is increased over time by the interest and fees and becomes due when the borrower dies or moves out.

Everything you need to know about reverse mortgages:

• Apartment as collateral for the lender
• No additional payments by the borrower

Usufructuary right or right of residence for sale & donation

Instead, however, it is also open to you to sell or give away your apartment and have the sole usufructuary right registered. In the case of real estate, the usufructuary right allows the usufructuary to occupy the property and use it as he or she sees fit, to earn rental income or to lease it out. The usufructuary right is often not limited to any specific period of time and ends as soon as the usufructuary dies.

Instead of a usufructuary right, a residential right can also be registered. In contrast to the usufructuary right, the right of residence only gives the right to use and occupy the property, but not the right to earn income from or rent out the property.

Conclusion: The advantages outweigh the disadvantages

If you would like to stay in your own four walls and increase your financial resources in the process, there are a variety of options open to you. These include the partial sale, the reverse mortgage, the annuity, the usufructuary right and the right of abode. Each of these concepts has its advantages and disadvantages. Therefore, it is important to carefully review the terms to make the right decision. Some of the advantages are additional income, continuity and no relocation, while some of the disadvantages are loss of property, restrictions and costs.

So take enough time to compare the different models and make the best decision for you.

What is Fix and Flip? Success & Risk

Fix & Flip describes a strategy of real estate trading in which a property is bought cheaply, then upgraded cost-efficiently through refurbishment or renovation measures, and subsequently sold for a higher sales price. The profit is the difference between the selling price and the purchase price including the revaluation costs.

Fix & flip is a risky variant of real estate trading, since the goal is a timely sale and not a long-term return.

Fix & Flip enables a short-term increase in equity.

Fix & Flip in a nutshell:

• Real estate trading strategy
• Buy, Upgrade & Sell
• Gain profit through sale

What are the advantages and disadvantages of the strategy?

Advantages of Fix & Flip

The Fix & Flip strategy offers several advantages, especially for beginners. It allows you to make quick profits, especially when real estate markets are rising and to enter the real estate market with a small initial investment. You also gain experience-based knowledge about the real estate market and renovation processes.

The advantages summarized:

• Quick, short-term profits
• Low initial investment
• Experience in real estate trading and appreciation

Disadvantages of Fix & Flip

However, the strategy also brings disadvantages. For example, you always have a high risk, especially in case of unforeseen costs or delays during the renovation. Fix & Flip is also a time-consuming process, especially when it comes to finding suitable properties, monitoring the upgrade and marketing the property.

You need expertise and experience in real estate trading and renovation to effectively make a profit. And competition in the market is increasingly complicating the chances to sell properties.

The disadvantages at a glance:

• High risk due to costs and delays
• Time-consuming process of search and marketing
• Efficient upgrading as a prerequisite
• Increasing competition makes trading more difficult

Let’s look again in detail at the three main steps of the Fix & Flip strategy.

Fix & Flip property purchase: Market analysis and financing

The first step for your Fix and Flip plan is to find a suitable property. You must pay attention to the condition and location of the property. The condition of the property will determine the costs incurred and the duration of the upgrade.

The location plays a more extensive role.

If the property is in a busy location, the purchase price is higher, but you have a higher demand. If the property is in a less favorable location, the purchase price will be lower, but the sale may be delayed because the demand for these properties is lower.

It is therefore important to conduct a detailed market analysis and check properties on site. This way, several properties can be compared specifically according to your criteria and the right property for your fix and flip plan can be found.

The criteria for a Fix & Flip property at a glance:

• Real estate market analysis & comparison
• Checking the condition of the property
• Find object in an optimal location

Once a suitable property has been found, it must be financed.

Fix & Flip Financing: Banks & Risk Appetite

How you finance your Fix & Flip strategy is up to you. In most cases, you will have to rely on the support of external lenders. Banks are a good choice. Which bank will finance your Fix & Flip plan depends on their risk appetite. Since Fix & Flip is associated with high risks, some banks decide against financing Fix & Flip.

You can find out everything about Fix & Flip financing from our partners:

• Fix & Flip Financing

After the successful acquisition of the property follows the upgrading.

Fix and flip property upgrade: refurbish & modernize

The efficient upgrading of the property plays the crucial role in shaping the profit margin. Many Fix & Flip properties require renovation or refurbishment. These improve the quality of life for the residents and also increase the sales price. You should have already determined which measures are explicitly required during the substance check.

The important thing in upgrading is planning.

Proper planning of costs and time will allow you to select the necessary measures and include additional delay.

You can read about how exactly to upgrade your property for your fix and flip plan in this post:

• Fix and flip property upgrade

After the upgrade, the property must eventually be sold.

Fix and flip property sale: Preparation & Valuation

For a successful fix & flip strategy, the sale plays just as crucial a role as the purchase and appreciation of the property. The sale is decisive in the end about the real profit you get from the whole effort. In order to sell the property it must be offered. For this, valuations and price estimates are necessary.

Architects or craftsmen can already evaluate the property during the upgrading measures. This provides you with a clear assessment for the sale. In addition, the early assessment enables you to produce the advertisements and announcements promptly. Thus, interested parties and demand can be found at an early stage.

The sale of the property again at a glance:

• Sales as a decisive factor of profit
• For the sale the property must be offered
• Evaluation by architects & craftsmen
• Early placement of advertisements and announcements

In addition to the simple principles of selling, the Fix & Flip strategy also includes other factors. You can find out what these are in the following detailed guide:

• Fix & Flip property for sale

Conclusion. Fix & Flip to increase capital

The Fix & Flip allows you to either enter the real estate business or continue to grow your capital as an experienced real estate investor. Keep in mind the high risk that the method entails of losing time and profits. Also, the fix & flip is a short-term process. You are using real estate as a sales property, not as a long term income property. This in turn allows after a successful “flip” of a property to directly start the next project.

For a more extensive overview and depth on the entire Fix & Flip, visit our partner. Here you will learn more about the tax burdens, the control of the building fabric, as well as the exact cost accounting for the entire plan.

• Fix & Flip Real Estate