Mistakes when buying real estate: You should avoid them at all costs!

Emotional real estate purchase, a too special property in a bad location and the purchase of a house for personal use – the list of possible mistakes is long. Learn here what you should avoid at all costs!

Error: Poor location of the property

One of the most consequential mistakes is buying a property in a bad location. Demand is low, renting is difficult and the risk of vacancy is high. Large cities in sought-after B locations are best suited. Even a little outside the major cities, in the Speckgürtel, real estate investment is worthwhile. Here are the best locations at a glance:

• Buying in major cities (not metropolitan areas in top A locations)
• Metropolitan areas, the famous Speckgürtel, with good B-location
• Cities in demand with B location

Error: Your real estate is too specific

The more special your property is, the more difficult it is to sell or rent it later. A chic loft with a view of the skyline or a designer villa on the edge of the forest sound tempting, but are nowhere near as sought after as an average 1-3 room apartment on the edge of town. Our tip: So before you start looking for real estate, get to grips with the different types of houses and apartments and their demand and don’t invest in a property that is too fancy.

While each property on the market has its own individual charm, it may not be as easy to resell later:

Mistake: Buying property for personal use

One of the most basic mistakes beginners make is buying a property for their own use. After all, it is not tenants and the tax office who will then pay off the property, but you yourself. This makes owner-occupancy the most expensive form of housing. That’s why we recommend investing in a property as a capital investment first and only then in owner-occupation.

Reading tip: Personal use or capital investment? Advantages and disadvantages

Mistake: Buy house as the first property

Similarly, as with owner-occupancy, you are left with 100% of the costs when you buy a house. So for your first property, do not invest in a house, but in an apartment. As a homeowner, you must always bear all costs alone. However, if you are an apartment owner, these costs are divided among the parties.

Mistake: Emotional real estate purchase

You have dealt with the topic of real estate investment, the different location types and property types and clarified the question of investment or yield property, and suddenly you stumble upon an apartment that reminds you of your childhood? The important thing here is: Never buy a property based on your emotions. Stay true to your strategy and goals and think rationally about the purchase.

Mistake: Resale value not in view

When purchasing your property, also think about the resale value. After all, you should not make a big minus after a later resale. Here, above all, the location again plays an important role.

Here is the comparison of the 3 types of location and their increase in value:

• A-location: Annual increase in value of 4-6%.
• B-location: Annual value increase of 1-2%.
• C-location: no increase in value (possibly small decrease in value)

Error: Buy due to the top equipment

If you buy a property because of its features, you may even end up flipping it unnecessarily when you buy it. Instead, you should apply the strategy of ‘buy and flip’. So you buy a property cheaply, renovate and refurbish it and thus make a profit again when you resell it. After all, you cannot increase the square meters of your property, but you can always improve the facilities.

Buying real estate: Learning from A-Z

If you want to learn even more about the individual sources of error, then take a look at our guide:

• Mistakes when buying real estate (external)

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

Definition: What is a ground lease?

You have found a house or an apartment building you are interested in, but it is located on a leasehold land? Or you have found a suitable property and it is subject to a ground lease? What does this mean? Simply explained, hereditary building rights mean that the right of ownership and the right of use are permanently separated. A distinction is made here between two parties: The ground lease provider and the ground lease taker. The ground lease holder leases the land and is then allowed to use the land in return for an annual ground rent.

Here is a summary of the ground lease:

• Ownership and usage rights permanently separated
• 2 parties: ground lease grantor and ground lease taker
• Leasehold in return for building rights

Advantage of a ground lease: Favorable purchase price

Of course, a ground lease has both advantages and disadvantages. Probably the biggest advantage is that the purchase price here is significantly lower than usual, since the purchase price for the land itself is omitted. Leaseholders also benefit from reduced ancillary purchase costs.

The purchase price of a property on leasehold land is significantly lower

Disadvantage: Monthly ground rent

In return for being allowed to use the land, you have to pay a monthly or annual ground rent to the owner of the land. In addition, the mortgage lending value of your property decreases significantly because the value of the land is constantly decreasing while the ground rent incurs costs.

The two disadvantages of a ground lease at a glance:

• Payment of the ground rent causes costs
• Collateral value of the property decreases

Conclusion: Is a ground lease worth it?

Buying or building a property on leasehold land therefore brings different advantages and disadvantages. While you can enjoy a low purchase price, a regular ground rent is incurred at the same time. And the mortgage lending value of the property also decreases.

You can now find even more facts and tips about ground leases on my new project for real estate buyers (Immobilien-Erfahrung.de):

• Ground lease (external)

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)