Explainer video: 3 advantages in 4 minutes

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Advantage 1: protection against inflation

Inflation can quickly devalue your savings. For example, if you have €100,000 and inflation is at 5%, you lose 5% of your money every year. After two years, your €100,000 is worth only €90,500. Real estate offers effective protection against inflation, because rents usually rise with inflation. If inflation is at 5%, your rental income also rises by 5%. This means you benefit from rising rental income in the long term, and your investment is protected against the effects of inflation.

• Assets: €100,000
• Inflation 5%, purchasing power after 1 year: €95,000
• Inflation 5%, purchasing power after 2 years: €90,500
• …

Bonus tip! The effect of inflation on loans and repayment

Suppose you’ve taken out a loan of €100,000. In times of inflation, your money gradually loses value. This means your money’s purchasing power decreases while prices for goods and services rise.

Here’s the interesting part: while prices rise and incomes increase, your loan’s monthly repayment rate stays unchanged. This means that over time you keep repaying the same fixed instalment, which decreases in real purchasing power.

This has two important effects:

Your debt gets “devalued”

Inflation causes your debt to decrease in real terms. This means the originally borrowed loan amount of €100,000 is worth less in real purchasing power over time. In other words, you effectively repay less once you factor in inflation.

Rising income can make repayment easier

If your income rises over time due to inflation, it becomes easier to manage your monthly repayment instalment. This means you may have more financial leeway to make other investments or reach your financial goals faster.

Advantage 2: your tenant pays off your investment

One of the best features of real estate investments is that your tenants pay off your investment. The bank grants you a mortgage loan that you don’t have to earn yourself. Your tenant pays the monthly rent, which covers part of the financing. Once the financing is paid off, the property belongs to you entirely. On top of that, you benefit from the appreciation of the land. Even if land prices rise by only 5% per year, these gains add up over the years to a substantial sum of additional wealth.

• You only need 20% equity
• The bank provides the rest (debt capital)
• Who pays your loan? Your tenants!

Remember this sentence forever:

Your tenant pays off your investment!

Advantage 3: passive income

As soon as your monthly rental income covers your monthly costs, you generate passive income. This means you earn extra money every month without having to work actively. This passive income can help you achieve financial independence and give you the freedom to enjoy more of your life. For example, if you have monthly costs of €1,000 and monthly rental income of €1,100, you generate a monthly passive income of €100.

• “Costs” of your property p.a. = €12,000
• Net cold rent p.a. = €13,200
• Surplus = €1,200

Why does a property make sense as a capital investment?

Hopefully you no longer ask yourself this question after these 3 key advantages!

Real estate investments offer effective protection against inflation, the opportunity to build wealth while your tenant pays off the investment, and the chance of passive income. If you enjoyed this video, don’t forget to like it and subscribe to my new channel. Stay tuned for more insightful content on real estate investing. Thank you for watching!

Tip: Capital investment guide

Where to invest? A, B or C locations

Where to invest? The 3 location types quickly explained:

1. Properties in A-locations promise high profits on sale, but rental income often doesn’t cover the costs Primary goal: profit on sale
2. Properties in B-locations offer positive cash flow and are ideal for beginners, with positive economic development and good infrastructure Primary goal: positive cash flow
3. Properties in C-locations carry risks with poor prospects, low income and high crime, which can lead to falling prices and vacancies Primary goal: low purchase price, high yields

Explainer video: Real estate location at a glance

My walking route through Inglewood

From Phil’s Barbecue to the Mega Donut through Inglewood.

A-location: high profit on sale, but…

In my video I explain what it means to invest in an A-location. These locations, such as in Munich, Berlin or Hamburg, often promise high profits on sale thanks to the constant increase in land prices. However, rental income here can’t always cover the costs (yield), which means you pay extra every month. This is called investment property in an A-location.

• A-location stands for prestigious locations in cities like Munich, Berlin and Hamburg
• High profits on sale beckon here, as land prices rise continuously
• However, rental income often can’t cover the high costs, which can burden investors on a monthly basis
• Investment properties in A-locations are known for long-term appreciation, but require patience and capital

B-location: positive cash flow and ideal for beginners

The B-location is a different story. Here, rental income is often sufficient to cover the costs (repayment, interest, maintenance reserve) and even generate positive cash flow. These locations offer positive economic development, a growing population and good infrastructure. B-locations are often found in the commuter belt around A-locations or in individual major cities and are an ideal investment, especially for beginners.

• B-location refers to locations in the commuter belt of A-locations or in up-and-coming major cities
• Here rental income is often sufficient to cover costs and achieve a positive cash flow
• These locations offer positive economic development, growing population figures and good infrastructure
• B-locations are ideal for beginners looking for stable investment opportunities

Invest in A-location or B-location?

• A-location = profit only on sale (annual net cold rent < cost of the property)
• B-location = direct positive cash flow (annual net cold rent > cost of the property)

C-location: don’t underestimate the risk

Then there’s the C-location, and here you really need to be careful. These are districts or cities such as Duisburg Marxloh, where prospects are poor, income is low and crime is high. Nobody wants to buy here, and prices are often cheap. However, there’s a risk that land prices will stagnate or even fall, offering no protection against inflation. Add to that the local clientele, vacancies and possibly rent nomads.

• C-locations are risky locations with unfavourable prospects, low income and high crime
• Investors might find cheap purchase prices, but there’s a risk that land prices will stagnate or fall, with no protection against inflation
• Vacancies and possible rent nomads are typical of C-locations, and potential tenants may be hesitant
• These locations require comprehensive risk analysis and can be challenging for inexperienced investors

More details in the video!

If you want to know exactly how to assess the location of a property and decide where and when to invest, check out my new video. I give you all the important information and advice you need to make smart decisions in real estate investment.

Don’t forget to subscribe to my real estate YouTube channel so you don’t miss any updates. The world of real estate investment is diverse, and I’m happy to help you understand it better!

Lukinski YouTube: yield, investment property & co.

Discover with me the key factors, metrics and fundamentals of real estate investment. Compared to other forms of investment, real estate offers a ‘safer’ way to invest capital with consistent returns and long-term appreciation. Want to invest your money wisely? My recommendation: real estate, passive income and a good life.

• Lukinski YouTube

Valuing an apartment building in under 5 minutes

Let’s start with a case that could happen to you today:

Imagine a friend sitting next to you in the café and saying: “Someone wants to sell an apartment building in this street, I knew the old lady, her son is taking care of it now. I’ll ask around for you.” The next day you get the numbers via WhatsApp: 240,000 euros in annual rent, the purchase price should be 8.5 million, A-location. Sounds exciting – but is this really a good deal?

It’s important to note: you only need two numbers in the first step – the purchase price (PP) and the annual net cold rent (ANCR). With these, you can immediately calculate the price factor and the gross rental yield. Both are the most important key figures to determine whether an investment can even be sensible.

Free calculators for your quick evaluation

Whether it’s return or purchase price factor – use my free real estate calculators on Immobilien Guru or directly the purchase price factor calculator.

Stream it for free here – the fastest real estate rating in the world! More videos? Follow me on YouTube x Lukinski Immobilien.

Calculate purchase price factor and gross return

Example:

• Purchase price: 8,500,000 €
• JNKM: 240,000 €

Start now:

Purchase price factor = purchase price / JNKM = 8,500,000 / 240,000 = 35.4

An purchase price factor of 35 means: It takes over 35 years until you have earned back the purchase price through rental income – without costs, without interest, without risk.

Calculate gross rental yield

Return = Annual rental income / Purchase price = 240,000 / 8,500,000 = 2.8 %

At first glance, it sounds okay – but this is the gross return. After costs, significantly less remains. More on this shortly.

Purchase price factor by location – understanding the range

A factor of 35 is not always bad – and a factor of 18 is not always good. Here are the typical ranges:

The magic threshold: why calculations start only from ~5.5 % gross yield

If you’re working with debt capital – and that’s almost everyone – you need to account for the ongoing costs. Here’s the honest breakdown:

What really eats into your return?

• Interest: currently about 3.5 % p.a. on the loan amount
• Maintenance: 1.0 % (new build) up to 4.0 % (unsanitized old building) – rule of thumb average: 2.0 %
• Management: 250–350 € per residential unit p.a. (about 0.3–0.5 % of the purchase price)
• Rent default allowance: 2 % of the JNKM (vacancy, rent nomads)
• Amortization: 1–3 % – this is not a loss, but asset building

Rule of thumb: Only from a gross return over 5.5 % does the object cover itself. At 2.8 % you pay every month – even with full rental income.

Gross vs. Net – the crucial difference

Example on a 4 million € purchase price with 240,000 € JNKM (= 6 % gross):

• Gross rental income: 240,000 €
• – Maintenance 2 %: −80,000 €
• – Management: −10.000 €
• – Vacant rate 2 %: −4.800 €
• = Gross rental income: approx. 145.000 €
• Gross rental return: 145.000 / 4.000.000 = 3,6 %

From 6 % gross, you quickly end up with 3,6 % net. This number belongs in every pitch.

How much should you pay at most?

Turn the formula around. You want at least 6 % gross return?

Maximum purchase price = JNKM / desired return = 240.000 / 0,06 = 4.000.000 €

At 6 %, the object should cost at most 4 million €. At 8 %, even only 3 million €.

Example: You want 8 %

Purchase price = 240.000 / 0,08 = 3.000.000 €

Anything above that is not financially attractive – or you have to negotiate the purchase price down.

Purchase ancillary costs – the forgotten factor

Attention: The pure purchase price is never the final price. For an apartment building, purchase ancillary costs of 8–12 % are added on top:

• Land transfer tax: 3,5 % (Bavaria) up to 6,5 % (North Rhine-Westphalia, Brandenburg)
• Notary + Land Registry: approx. 1.5–2.0 %
• Real estate agent commission: 0–7.14 % (negotiable, often split)

With a purchase price of 4 Mio. €, you realistically need to plan for a capital investment of 4.3–4.5 Mio. €. These additional costs further reduce your return by approximately 0.3–0.5 percentage points.

Cashflow Reality Check – what remains at the end of the month?

Quick calculation for a MFH for 4 Mio. € with 80 % financing:

• Equity (20 % + additional costs): approx. 1.2 Mio. €
• Loan: 3.2 Mio. € → Interest 3.5 % + repayment 2 % = 5.5 % annuity
• Annual annuity: 176,000 €
• Annual net rental income: approx. 145,000 €
• Operational cash flow: −31,000 € p.a. (before tax, before depreciation)
• After depreciation (2 %) and tax advantage: usually ±0 or slightly positive

Insight: Even with a 6 % gross return, the deal is often only “black zero” in the first few years. Wealth building occurs through repayment + appreciation, not through cash flow.

Rent increase potential – the hidden lever

A factor of 30 can be a top deal – if the rents are 30% below market level. This is very common in older stock with long-term tenants.

Example: 240,000 € JNKM today, market rent would be 320,000 €. After a tenant change and modernization, the return increases from 2.8% to 3.8% – and so does the market value. This is the King’s discipline: buy, improve, rent out, hold.

Therefore, always ask:

• How old are the rental agreements? (Index rent? Seasonal rent?)
• How far below the rent index are the rents?
• Is there modernization potential (§ 559 BGB rent increase after modernization)?
• What is the local comparable rent?

Checklist: Which numbers do you ask the seller?

Before you make an offer – you need to know these points:

• Purchase price + presentation of negotiation room
• JNKM – breakdown per unit (target and actual rent)
• Living and usable area in m² (total + per unit)
• Year of construction + last major renovation
• Energy certificate (efficiency class, final energy demand)
• Heating system (type, year of construction, GEG compliance)
• Roof + facade (condition, last renovation)
• Tenant structure (rental period, age, social situation)
• Vacancy currently + last 3 years
• Reserve fund for maintenance (if available)
• Land register extract (encumbrances, easements, right of way)
• Standard land value + land size
• Ground rent? (a critical factor for many buyers)

Are 8.5 million a good deal? Income-generating property vs. investment property

On immobilien-erfahrung.de, I have elaborated extensively on this topic: Difference between Return and Investment Real Estate.

The difference lies in the focus: With a return property, what matters is what comes into your account monthly – positive cash flow through rental income, usually in B-locations and C-locations. With an investment property, you rely on long-term appreciation and sale proceeds – usually in A-locations like Berlin, Cologne, Dusseldorf, Hamburg, Munich.

Do you want cash right away? Option 1 brings you ongoing income. Do you want more cash in the long term? Option 2 requires patience, capital, and market knowledge – in return, a big profit is possible later (and possibly tax-free after 10 years).

Even better:

If you buy in a prime location at a low price and renovate: Cashflow + Longterm Cash = Top class. Buy, renovate, increase rent, benefit from appreciation.

FAQ – the most common questions about the MFH quick valuation

At what purchase price factor does an apartment building become worthwhile?

As a rough rule of thumb: A factor below 20 is classic cashflow territory, 20–25 is a mixed calculation, above 25 you need to invest subst

Prefabricated houses in Germany: Market, prices and quality

The share of prefabricated houses in new construction in Germany is around 22 % — a rising trend. The main reasons are calculable fixed prices, short construction time of four to six months from the foundation slab, and well-plannable energy efficiency. Those who build traditionally with solid materials usually wait 12 to 18 months.

Most homeowners compare prefabricated house providers based on the prominent “from” price in the brochure. That is the most expensive mistake in house building: This figure typically excludes the foundation slab, earthworks, house connections, outdoor facilities, and 60 to 80 percent of the special requests from the sample display. The real final price is on average 35–45 % higher than the tempting offer.

Construction methods in direct comparison

Before you check individual providers, you should know which construction method suits your requirements. Sound insulation, thermal storage capacity, lifespan, and resale value can differ significantly:

Price Ranges by Construction Stage

The cost per square meter of living space varies significantly depending on the chosen construction stage. A realistic range for house construction calculations:

• Kit House: from 800 €/m² — requires a lot of DIY work
• Partially Finished House: 1,200–1,800 €/m² — interior finishing done by the owner
• Turnkey Standard: 1,800–2,500 €/m² — move-in ready without outdoor facilities
• Turnkey Premium: 2,500–3,500 €/m² — with high-end sampling
• Design house / Architect line: from 3,500 €/m² — e.g. HUF HAUS, LUXHAUS
• Plot + additional costs: plan for an additional 25–40 % of the house construction sum

Quality seal — mandatory when comparing

Serious German prefabricated house providers are organized under the Federal Association of German Prefabricated Construction (BDF) and carry one of these seals: QDF (Quality Community of German Prefabricated Construction) or RAL Quality Mark Timber Frame Construction. Both set minimum standards in building physics, soundproofing, air tightness and warranty — without these seals, caution is advised.

The leading prefabricated house providers in comparison

The following table shows the most important German manufacturers in a direct profile comparison. Price level refers to turnkey houses including standard furnishings. The fixed-price commitment indicates how long the contract price is guaranteed after signing.

Suppliers by Buyer Type

Not every manufacturer is suitable for every homeowner. The following classification helps narrow down the selection to two to three realistic candidates — based on budget, requirements, and intended use:

• Beginners with a tight budget: Town & Country, Danwood, Bien-Zenker
• Families with a middle-class budget: FingerHaus, WeberHaus, SchwörerHaus
• Energy efficiency focus (KfW 40): Kampa, SchwörerHaus, LUXHAUS
• Design-oriented / Premium: HUF HAUS, LUXHAUS, GUSSEK HAUS
• Maximum individuality: GUSSEK HAUS, FingerHaus, LUXHAUS
• Investors / Apartment building: SchwörerHaus, FingerHaus, WeberHaus

Model house parks and reference visits

Before making a decision, at least three houses from the same supplier should be viewed in person — ideally one in a model house park, one at the current homeowner’s construction site, and one with an existing customer who has five to ten years of living experience. The largest model house parks in Germany:

• Fellbach near Stuttgart: around 50 model homes, largest selection in the south
• Mannheim: about 35 homes, many premium providers
• Wuppertal: about 25 homes, focus on NRW market
• Berlin (Nuthetal): about 30 homes, focus on the east
• Bad Vilbel near Frankfurt: about 30 homes, centrally located in the middle
• Tip: Test the noise level on every viewing (clap, walk up the stairs) and open the windows to the outside — a noise test on the construction site is more serious than in the quiet park

Fixed price, sampling and hidden costs

The term “fixed price guarantee” sounds secure, but should be viewed in detail. What is usually guaranteed is the house price at the time of contract signing — based on the standard equipment. As soon as you add your own wishes during the sampling process, the price starts to rise.

What the fixed price guarantee typically does NOT include

• Slab foundation / basement: 25,000–80,000 € extra depending on the execution
• Earthworks and soil survey: 5,000–15,000 €
• Utility connections (electricity, water, sewage, telecom): 8,000–15,000 €
• Outdoor installations (terrace, paving, fence): 15,000–40,000 €
• Sampling surcharges: realistically 40,000–80,000 €
• Construction ancillary costs (surveying, structural engineering, insurance): 3–5 % of the construction sum

Sampling: Process and Insider Strategy

The sampling is the most expensive appointment in the entire construction process — often 40,000–80,000 € surcharges within two to three days. The process almost always follows the same pattern:

• Day 1: exterior shell, roof, windows, doors, façade — usually 10,000–25,000 € surcharges
• Day 2: floor coverings, wall design, stairs, interior doors — usually 8,000–20,000 €
• Day 3: sanitary, electrical, heating, smart home — usually 15,000–35,000 €
• Sales tactic: time pressure and immediate decisions — standard solution of the homeowner is stress + approval

The most important preparation: Have the complete sample list sent to you four weeks before the appointment. Anyone who goes into the sampling appointment without preparation usually leaves with a significantly more expensive contract. Experienced homeowners create a priority list in advance with three columns: must-have, would be nice, can do without. In addition, an independent building expert who is not affiliated with the provider (500–1,500 €) can help — he identifies standard gaps in the performance schedule that you might overlook yourself.

Typical Sampling Traps

In practice, certain surcharge categories keep appearing because the standard equipment in the brochure is deliberately calculated at a minimum level. Those who are prepared here often save five-figure amounts:

• Windows: Triple glazing, larger formats, floor-to-ceiling elements — quickly 8,000–20,000 € extra
• Floor coverings: Standard is affordable laminate, solid wood parquet costs an extra 30–80 €/m²
• Sanitary: Brand faucets and floor-level shower bring 5,000–12,000 € on top
• Elektro: mehr Steckdosen, Smart-Home, KNX-Bus — 10.000–25.000 €
• Staircase: Solid wood staircase instead of standard folding stairs: 3,000–8,000 €
• Roof: Gables, roof windows, solar installation — 8,000–30,000 € depending on the scope

Insolvency protection and builder model

Several well-known prefabricated house providers have gone into insolvency in recent years — sometimes even in the middle of an ongoing construction project. Anyone who has made advance or partial payments without any construction value on the plot generally loses the money. Three mechanisms offer protection:

• Builder’s guarantee under § 650f BGB: 5 % of the order sum as security, claimable in every construction contract
• MaBV-compliant payment plan: Payment only after reached construction progress stages — no advance payments
• Completion guarantee: mandatory in developer models, optional under construction contracts — but negotiable for large projects

Builder vs. Work Contract — the Tax Trap

When it comes to prefabricated houses, there are two legal structures that are treated very differently for tax purposes:

• Work contract (classic): You buy the plot separately, the manufacturer builds the house on it — land transfer tax applies only to the plot price
• Bauträgermodell (einheitlicher Vertrag): Grundstück + Haus aus einer Hand — Grunderwerbsteuer fällt auf die Gesamtsumme an, schnell
  ]]> https://lukinski.com/venice-canals-los-angeles-investor-faces-little-venice-new-video/ Sun, 15 Oct 2023 12:40:47 +0000 https://lukinski.de/venice-canals-los-angeles-investor-faces-little-venice-new-video/ Venice Canals Los Angeles – Did you know there’s a hidden gem in the middle of Los Angeles that will transport you to a world far removed from the typical urban landscape? The Venice Canal Historic District, nestled in the vibrant suburb of Venice, is a testament to the visionary dreams of its founder, Abbot Kinney.

  Location of the Venice Canals in LA

  As always, we start with one thing: location, location, location!

  The Venice Canals are located in the Venice Beachdistrict of Los Angeles, California, USA. They were created in the early 20th century and are part of the original urban planning project for Venice Beach. The area also has a relaxed and artistic atmosphere and is known for its street artists, boutiques and cafés.

  Venice Canals in Los Angeles

  Walkthrough: 360° Tour

  Abbot Kinney’s “Venice of America”

  Abbot Kinney, a man with a bold vision, began in 1905 with an ambitious mission: he wanted to bring the allure of Venice, Italy, to the Los Angeles coast. Kinney wanted to bring the look and feel of Venice to California.

  Imagine strolling along picturesque canals, crossing enchanting arched bridges and gazing at beautiful riverside properties. The history of these iconic canals is just as fascinating as the water that flows through them.

  You can also find more figures on Wikipedia: Venice Canals

  The creation of the channels

  In 1905, Abbot Kinney began building artificial canals as part of his “Venice of America” project. The canals were given names such as Aldebaran Canal, Altair Canal, Cabrillo Canal, Coral Canal, Grand Canal, Lion Canal and Venus Canal – all named by Kinney himself. They were the centerpiece of this ambitious project, which attracted public attention and helped to sell properties in the area.

  The golden era and the decline

  In the 1920s, when cars were gaining popularity, the canals were considered outdated by many. As a result, some of the canals were filled in in 1929 to make way for paved roads. By 1940, the remaining canals were in poor condition and the sidewalks were condemned by the city. The district remained in poor condition for more than 40 years, and numerous proposals to renovate the canals failed due to funding issues, environmental concerns and disagreements over who should bear financial responsibility.

  The rebirth of the channels

  It was not until 1992 that the long-awaited renovation of the canals began. They were drained, new sidewalks and walls were built, and in 1993 the canals were reopened. They developed into a sought-after and expensive residential area of the city.

  The channels today

  The residential area around the remaining canals was added to the National Register of Historic Places in 1982. In recent years, however, extensive renovations have been made to many of the old houses, and many large, modern homes have been built.

  Bringing the canals to life

  The canals are supplied with water through sea locks in the Marina Del Rey Breakwater across the Ballona Lagoon. They open at low tide to release most of the water and close at high tide, trapping the water for about three days before it is refreshed again.

  The legacy of Abbot Kinney

  The Venice Canals are not only a historical landmark, but also an amazing example of one man’s vision that dared to transform a small corner of Los Angeles into a piece of Venice.

  The renovation of the canals – a joint project

  The renovation of the canals was a community project in which the residents and owners of the canals worked together to preserve and improve their unique environment. Despite some disagreements and obstacles, the community was eventually able to find a solution that brought the canals back to life while preserving their natural beauty.

  Venice Canals in Los Angeles

  The Venice Canals in Los Angeles are not only a place of historical significance, but also a living example of the beauty that can be created through vision, collaboration and a belief in the possibility of change. If you ever have the opportunity to visit these mesmerizing canals, you’ll experience the history, charm and magic of Abbot Kinney’s “Venice of America” firsthand.

  Hollywoodland: The story behind Hollywood

  Tip! Do you already know the exciting story behind the Hollywood sign? Read all about Hollywood Land here!

  

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