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Should you think about purchasing a buy-to-let property in Germany?

Aaron Burnett
Aaron Burnett - [email protected]
Should you think about purchasing a buy-to-let property in Germany?
Leipzig's city centre. Photo: Photo by Paul Kapischka on Unsplash

Buying property in Germany specifically to rent out has increased in popularity over the last few years - even as overall home ownership remains low relative to the rest of Europe. So who should consider it here in Germany? We spoke to an expert.


Buy-to-let properties in Germany come with many of the same pitfalls as buying a German property to live in yourself. For one, fees and taxes of around ten percent of the purchase price could dissuade plenty a buyer.

But according to Nick Mulder, CEO of Hypofriend, a mortgage broker specifically targeted to expats - there are four broad types of people who might want to have a look at the option.

They include people who might have cheaper rents in the city but simply cannot afford to buy the forever home they might want. As such, they may consider buying a small one - or one in a cheaper city - that they can rent out and use to supplement their income.

Other groups include people who intend to stay in Germany for at least ten years, people with incomes high enough to write off property depreciation against their taxes, and people looking to supplement their pensions with rental income.

EXPLAINED: What you need to know about buying property in Germany

What are the pros if I fall into one or more of these groups?

Mulder says one of the most important things for a buy-to-let purchase of a property in Germany is to be sure that you will hold it for at least 10 years.

That's because once the 10-year clock runs out, you can sell it and pay no capital gains tax on it - even if the property isn't your residence. In Germany, selling your main residence at no capital gain is possible after two years - but that option opens up with any property based in Germany you own after 10 years.

If it works, you can effectively claw back the high upfront fees and then some after ten years.

"This is unique globally," says Mulder. "It can be very advantageous."


That's not the only advantage Germany seems to have over other countries. Another is the favourable financing terms. German mortgages tend to have the same terms and conditions for buy-to-let properties as they do for ones you buy as your own residence.

"This is uncommon in many countries," says Mulder. Interest expense can also often be written off against taxes if you own a buy-to-let in Germany - something not available for people to do on their own residences.

The tax advantages can also be considerable, with recent tax changes meaning that some people will be able to deduct up to 40 percent of their German property's value from their taxes in the first four to six years of owning it. Owners can deduct everything from the depreciation of the building's value (but not the land) to energy-efficient retrofits.

In many cases, Mulder says the gains are still generally there for the taking if you move abroad in the meantime - provided the country of your new tax residence has a tax treaty with Germany. You just need to hold the German property for long enough to realise the tax advantages - to help offset the high upfront costs.

READ ALSO: Is it a good time to buy a home in Germany?


What are the cons?

Obviously, if you purchase a buy-to-let in Germany - you need to stay locked in for a while to make the high upfront fees - which include everything from land transfer tax to notary fees - worth it. House flipping after a few years doesn't work here the same way as it might elsewhere - even for your own residence.

Maintenance can be an ongoing cost, which is why Mulder says they recommend that expat buyers buy up new buildings if possible.

Finally, with strong tenancy laws in Germany, rent is only likely to appreciate by two to three percent a year. This means the upside is largely taken when you eventually sell - not from rental income.

All that said, buy-to-let properties may make sense in Germany for certain types of medium to longer-term buyers - who can stick it out for a few years.

READ ALSO: What fees do you have to pay when buying a home in Germany?



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