Apartment as a Capital Investment

In view of the lack of alternatives on the capital markets and to protect their assets from possible inflation, many people are currently looking to buy an apartment as an investment. So that the investing in apartment buildings becomes the hoped for success, there are however some sources of error to circumnavigate – not each dwelling is suitable for the investment.

The central success factor is the rentability of the apartment. “Location, cut and equipment must correspond to the requirements as much as possible of potential tenants, otherwise the respective dwelling stands possibly over a longer period empty , explains Jrgen Michael Schick, vice-president of the real estate federation IVD. “Besides the financing must be correct. Are the installments affordable even if the apartment is being prepared for a new lease and is still temporarily vacant?

The right choice of location

The demographic development in the region is of great importance when selecting possible locations. The greater the population growth, the greater the letting chances. It should also be borne in mind that different population groups also have different housing needs. “Older people are looking for other housing than young families,” says Schick. It should therefore be clarified whether the housing in question is suitable for many or rather few tenants due to the population structure of the region. The accessibility of the apartment is also important. A good connection to local supply centres is desirable both by car and by public transport.

Visiting the apartment together with a real estate agent or expert

An apartment should never be purchased without a visit. Already the first impressions of the house are first important indicators for the quality of the object. “Visible damage to the house not only entails repair costs, but also indicates negligent management,” explains Schick. “We therefore recommend that you always carry out the inspection together with a real estate agent or an expert,” Schick continues. “Experts recognize defects more quickly and can assess whether the purchase price should be renegotiated or whether a purchase is not advisable.

Keeping an eye on the investment costs for the apartment

The cost of the investment is one of the most important factors when buying a home. Before buying, buyers should compare the offer price with similar properties in order not to buy too expensive. “Housing price comparison tables provide a good overview of prices,” advises Schick. The ancillary acquisition costs incurred in addition to the notarial purchase price (land transfer tax, broker commission and notarial fee) must also be included in the financing.

In the case of rented apartments, the monthly house money, including the administrator’s fee and the maintenance reserves, is also included. The investor must ensure that not all ancillary costs can be passed on to the tenant. Also the fiscal aspects of the purchase are to be considered.

Check all relevant documents

Before the purchase, the interested party should request and carefully check the extract from the land register, in the case of new apartments the building description, the real estate tax notice, the proof of fire insurance, the settlement of house fees with economic plan, the energy certificate, the calculation of living space as well as the declaration of division and the minutes of the owners’ meeting.

The minutes also show whether there has been a dispute between the parties in the past. “Contrary to the house owner the condominium owner with its property is merged into that of the other condominium owners of the respective housing estate as well as their interests , says chic. “The condominium owner cannot decide freely on investments into the house, but must co-ordinate itself with the other owners. Buyers of real estate should also check with their advisors whether the real estate is located in an inner-city redevelopment area, because this can result in restrictions on letting and resale.

Checking the property management’s qualifications

The administrator plays an important role in a residential complex. After all, they manage a considerable proportion of their clients’ assets. He calculates the ancillary costs, chairs owner meetings, obtains cost estimates for repairs or investments, monitors craftsmen and suggests necessary renovation and repair work on the house. One difficulty in choosing the right manager is that there are no licensing regulations for the profession.

In order to protect themselves against incorrect services and asset losses, the owners should pay more attention to the qualification and the insurance protection of the manager. “A property manager should have a Grundqualifikation with purchase to the real estate economy , says chic. “The classical training is thereby the real estate buyer. A financial loss insurance and a confidence damage insurance should be present.

For capital investors, the rentability of the apartment is a very important characteristic. Therefore, buyers should talk to their real estate agent or other experts about the rental situation in the immediate vicinity. What is the demand for rental apartments like? At what rent were the last leases concluded in the immediate vicinity? Here, the rent index of a city can only provide limited information because only a small amount of the newly concluded rents are received there.

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