Living space for investors: Small apartments in A and B locations

As an investor, it is not only important to you to achieve a high rental return and avoid vacancies, but also to rent out your property quickly and easily. Therefore, you should select an optimal living space for this purpose.

Most important: High rental yield, no vacancy & fast leasing

Important: When buying a property as an investment, pay attention to the relation between the number of rooms and the living space. Example: A 120 m² apartment with 2 rooms is just as difficult to rent out as a 60 m² apartment with 5 rooms. Instead, apartments between 50 and 80 m² have proven themselves in the past. One-room apartments with a size of 20 to 40 m² in very good A and B locations are also profitable. These properties are particularly popular among singles, young professionals and students. The only disadvantage: a frequent change of tenants.

Here are our tips in summary:

1. Balanced relation between room and living space size
2. Apartments between 50 and 80 m²
3. One room apartments between 20 and 40 m²

Tip: Avoid vacancy with WG division

So apartments that are too large are difficult to rent out. Why? The target group for such apartments is simply smaller. If you already own such a larger apartment or are planning to buy one, then you can get around these difficulties by renting it out as a shared apartment. Although this entails a frequent change of tenants, it allows you to earn a more effective price per square meter.

You can now find more tips on the optimal property size in my guidebook on Immobilien-Erfahrung.de:

• Size of a property: living space (m²) when buying a condominium? (external)

Microapartments also make excellent investment properties:

Living space for owner-occupiers: high feel-good factor

Compared to capital investors, the subjective feel-good factor plays the biggest role for owner-occupants when choosing the right living space. Most owner-occupants tend to have more living space than necessary. However, keep in mind that a larger property also comes with a higher purchase price. Not to mention the high ancillary purchase costs!

Personal preference and goals are paramount!

Conclusion: How big should your property be?

This question depends on your investment strategy as well as on your individual goals. If you are buying a house or apartment as an investment, you should make sure that the number of rooms and the size of the living space match. In addition to 2-3 room apartments between 50 and 80 m², one-bedroom apartments in A and B locations have also proven successful. If you invest in a property as an owner-occupier, your personal well-being comes first.

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

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

Now new on Immobilien-Erfahrung.de:

• Buy property: learn – external

Old real estate: apartment & house from older decades

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

Here is a brief overview:

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

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

Existing property: advantages and disadvantages summarized

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

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

Here again summarized, the advantages and disadvantages.

Advantage of buying an old property:

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

Disadvantage of buying an old property:

• High costs for maintenance and repairs
• Possible hidden defects

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

Real estate with year of construction 1900

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

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

Defects of real estate before 1900

Here is a brief overview:

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

Real estate with year of construction 1900 – 1939

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

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

Checklist: Defects of real estate around 1900 – 1939

All shortcomings briefly summarized at a glance:

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

Real estate with year of construction 1939 – 1945

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

Checklist: Defects of real estate around 1939 – 1945

Typical deficiencies include:

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

Real estate with year of construction 1945 – 1959

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

Checklist: Defects of real estate around 1945 – 1959

Characteristic of real estate from the period are:

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

Real estate with year of construction 1960 – 1969

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

Checklist: Defects of real estate around 1960 – 1969

Here is a brief overview:

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

Real estate with year of construction 1970 – 1979

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

Checklist: Defects of real estate around 1970 – 1979

Typical deficiencies include:

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

Real estate with year of construction 1980 – 1999

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

Checklist: Defects of real estate around 1980 – 1999

Here again the typical defects from 1980 – 1999:

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

Conclusion: Should you invest in old real estate?

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

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

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

Owner-occupancy: buy rented or unrented?

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

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

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

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

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

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

Reading tip: Notice of termination of own use

Rented vs unrented for capital investments

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

Buy rented: No new leases or vacancies

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

Here again the advantages at a glance:

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

Buy unrented: Current lease and market price

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

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

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

Bottom line: should you buy rented or unrented?

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

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

• Buy rented vs unrented? – external

New! Especially for real estate buyers

Buying real estate from A-Z: preparation, search criteria, buying process and all that, free of charge and online, from experts.

Now on real estate-experience.com

Buying an apartment, buying a house, owner-occupation or capital investment, yield or investment property? On my new project Immobilien-Erfahrung.de you will now find everything you need to know for your successful real estate purchase! Learn everything you need to know about setting goals when buying real estate, types of locations(A-, B- and C-locations), types of real estate, their yields and more! All online and free of charge! What you absolutely have to pay attention to before you start looking for an apartment. Now on Immobilien-Erfahrung.de:

• Buy criteria apartment

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