Buying your first property is usually a big and challenging step. For many, however, it also means an investment for life, which at the same time should provide financial security. If you decide to take the step, however, one question and one uncertainty quickly leads to the next. That's why we have put together five initial tips that can spare you the occasional dilemma when it comes to buying your first real estate property.
The decision to invest your capital in real estate is the first step. However, this also requires weighing up whether you prefer a rented or vacant apartment. With a rented apartment, the big advantage is that the cash flow is guaranteed, because there is already a paying tenant. Therefore, you do not have to look for new tenants and ongoing rental income is also assured. On the other hand, having a vacant apartment is not necessarily a bad thing, but we recommend starting with a rented property when investing in your first apartment.
Numerous bars, restaurants and supermarkets, cultural and educational institutions, short distances to local and long-distance traffic and a short distance to the countryside - all elements that make up the perfect location for your own property. Because as the saying goes: location, location, location - an essential factor for the final decision when buying real estate.
An initial on-site inspection provides a great deal of information about the current condition of the property. It is essential to get a precise impression of the entire house, its structure, the apartment itself and any renovation or repair work and maintenance measures.
Once you have decided on a type of property and have a rough idea of the costs that will be incurred when buying, you need to calculate these costs in order to draw up an appropriate financing plan. With a cost breakdown - consisting of income as well as expenses (e.g. for notary fees and land transfer tax) - you will find out which monthly loan installment can be afforded and with how much equity you can or would like to enter into financing.
Running costs for electricity or gas as well as for garbage collection should also be kept in mind. You should also consider that repair or renovation work may always be necessary. So building up reserves can be a wise thing to do.
Once all the costs have been calculated, it is important to find sensible financing options for the necessary borrowed capital in addition to the option of self-financing. In addition to the classic model of borrowed capital from the bank, there are now a number of subsidy models that support a real estate purchase and the associated self-financing. These are offered, for example, by the Kreditanstalt für Wiederaufbau (KfW) and the Bundesamt für Wirtschaft und Ausfuhrkontrolle (BAFA).
What many real estate buyers don't know: There are numerous options for saving taxes - for example, the possibility of deducting renovation and repair costs from taxes. The following cost items, among others, are eligible for this:
Acquisition costs of the property, depending on the year of construction
Costs for renovation and repairs to tenanted apartments
Interest for construction financing
As the owner of a rented property, you benefit from complete tax exemption under sections 22 and 23 of the Income Tax Act if a period of at least ten years has passed between the purchase and sale of the property.
For many, buying real estate for the first time means entering uncharted territory. Those who are looking for their dream property quickly lose sight of the details. Therefore, take the time to thoroughly inform and prepare yourself. This can make the real estate purchase a lot more pleasant.
✔️ An apartment that is already tenanted would definitely be easier as a starter apartment and it offers a secure source of income, as there are already paying tenants.
✔️ When buying a property for the first time as an investment, definitely prefer an apartment with a good location. Pay attention to whether the property has rent appreciation potential. Rent increase potential goes hand in hand with a good location and infrastructure.
✔️ Hire an independent appraiser who can reveal hidden costs, for example.
✔️ Start with a one- to two-bedroom apartment.
✔️ A new building or a renovated old building is recommended. This will save you the immediate maintenance costs.
Note: The tips we have listed here by no means represent a prescribed procedure. This is purely intended as a recommendation.