What real estate property should I buy?
On the subject: the euro
The closer the date of the currency change comes, the more nervous become the finance markets. The interest rates tend to go up again. The shares are going down. The solution: invest one’s money in asset values. And first of all: valuable real estate properties in good locations in Germany. By the way: we are not objecting to the euro. A common European currency will bring certain advantages. But nevertheless it will also bring with it risks and disadvantages. The only secure protection lies in real estate properties.
On the subject: real estate locations
People keep asking us the question: where should I buy? What are the best locations? The following are the long-term reliable top locations based on researches of the large economy journals (“Cash”, “finanzTest” and more) as well as several inspections:
- Frankfurt am Main (high purchasing power, increasing prices)
- Duesseldorf (high purchasing power, prices stable)
- Berlin (good purchasing power, market is still regulating)
- Wuppertal (middle-class up to high income, good purchasing power, good yields)
- Duisburg (prices are going up, are still on quite a low level)
- Further locations: very good locations around Frankfurt up to 100 km.
The most important rule when it comes to location is: only buy in locations where the value is stable and which are easy to reach by train or by car, and which are economically strong! In such locations one achieves the best rents. Buy in locations where you have good purchasing power. Best locations within the mentioned cities generally bring low yields but are extremely stable in value.
On the subject:
what real estate property should I buy?
General answer: no matter if you earn much or not that much, there is the right property for every investor. We offer properties from an order of magnitude of 100.000 DM upwards up to 15 million DM.
Here are some guides:
Employees, gross annual income up to 100.000 DM, single or married: the property can be purchased up to the 2,5X of the gross income. Our recommendation would be a freehold flat in a good location with a yield of 4-5%.
Self-employed or employees, gross annual income 100.000 up to 200.000 DM, single or married: two to three freehold flats with a yield of around 5-5,5% can be financed as a mix.
Self-employed or employee, gross annual income 200.000 up to 500.000 DM, single or married: residential buildings up to 1 million DM. Self-employed or employees, gross annual income above 500.000 DM, single or married: buy commercial properties between 5 and 15 million DM with a good yield. Location: Berlin, only exclusively chosen locations. Here special depreciations can be an advantage in some cases.
Secret tip: use listed properties that need refurbishment with high tax advantages and subsidies! Locations: large area of Rhine-Main. Here you find excellent opportunities. City refurbishment programs, state subsidies and tax write-offs on the listed area of 10% annually for ten years are the factors that make these properties sell themselves. Additionally these are usually buildings which are historically valuable and have a high significance within the city or community.
Attention: the tax advantages will possibly be reduced starting next year – thus now is the time to still do something this year! We have several properties which are waiting for investors. You buy – the whole procedure is done by us. An interesting opportunity for a taxable income of 120.000 DM or more.
On the subject: financings
Here are some financing tips briefly: let us give you comparisons. The terms of banks, insurances and building and loan associations are very different sometimes. A basic rule is: financing is a matter for an expert! Over the years one can save five- to six-digit sums by this!
The interest rates are fairly low up to now (though the tendency shows it is going up). Hints: use low interest rates with a long fixed rate period (10 years) if you want to keep the property as a second pension plan. Finance it with a period of five years if you, perhaps, want to resell it afterwards. But in this case, amortize 2% when doing so, so that in case of a new fixed rate period in five years part of the loan has already been returned.
On the subject: own funds
You do not want to spend your existing funds in cash but you want to invest it at low interest rates? We show you how you can best finance without using your own funds! We gladly advise you and give you tips and tricks on “financing without cash” in a personal conversation!
The following usually applies: today banks only finance with a tolerable part of one’s own funds. In some way this is sensible, so that the property is lent on mortgage to a reasonable degree. But: if you pay 5% interest on one hand and have invested your money for 6% or more, why then liquidate the existing capital? There are other possibilities!
On the subject: permanent insurance
In our last issue we announced the “life insurance founded on asset values”. Here it is, brief and simple:
If you already have a permanent insurance or are planning to get one then “underlay” it with a leased freehold flat. All things considered such a property usually doesn’t cost anything or only a little monthly fee for the house administration and maintenance set asides. With that you secure your life insurance against a dramatic loss in value after the currency change. Smart people prevent!
We gladly give you a calculation example if you send us a copy of your policy.
On the subject: health insurances
Now be prepared for the new regulations in the subject of health-care. Two more reforms and we all need an additional private insurance. The obligatory insurance bodies are no longer able to finance the increasing costs of health-care. Get our information now on attractive alternatives.
Calculation example
(Non-committal and without liability)
Taxpayer, married
Annual taxable income: 80.000 DM
Property acquisition in a good location
Sales price: 190.000 DM including the added costs
Rental income per month is 752 DM in the beginning
Financing with a fixed rate over 5 years, 5% interest
Pay-off with a 5% discount
Use of one’s own funds: 15.000 DM
Tax charge without property including solidarity surcharge: 17.000 DM
Tax advantage in the year of the purchase after it has been bought: 5.402 DM (= 1/3 of one’s own funds by the tax office!!)
Initial monthly personal contribution in case of 2% amortization: 289 DM
(monthly amortization = 307 DM, meaning the plus before amortization is 18 DM!!)
Annual value appreciation: ca. 5.300 DM in the first year, then going up
(compound interest effect!)
That means in plain language:
The total value appreciation being achieved, with an initial use of one’s own funds by 3.468 DM annually, is 5.300 DM (an increase of 65%). With rent increases the use of one’s own funds becomes zero after 5-8 years. Yet the value appreciation continues. If you have any more questions – give us a call. We calculate your property INDIVIDUALLY.
