Notary Fees,
Sales Tax and other important information how to buy/sell in Germany
Tenancy Rules and Regulations - How to increase your tenant´s rent to achieve maximum
yield
New rental contracts: If you have a vacant property and you
wish to rent it out, you have a variety of options:
My best advice is to use
a standard tenancy contract from the "home owners association". They have the
best lawyers in rental law, and the best contracts (for the owner of the
apartment) so you cannot go wrong.
You can fix the rent freely:
charge as much (or as little) as you want, providing you find a tenant.
You
can also offer furnished lettings, or time-limited contracts. The
maximum time for a time-limited contract is 5 years.
Ideally, you should
specify the yearly rental increase in the contract ("Staffelmiete") like
an indexed rent increase. Your rental manager will know what is best for you
and give you expert advice accordingly.
Tenants are obliged to keep the
property in good condition and renovate the apartment every 3 - 5 years and
when they move out.
Deposits are a maximum of 3 months of base rent. Our
rental manager always requests the full 3 months deposit from all new tenants.
Don´t accept any compromise on this.
Existing / old rental contracts:When purchasing a tenanted
apartment for investment purposes, you enter into the current tenancy agreement
with the tenant. If you wanted to vacate the property, you can do so for
particular personal reasons (for instance, if you or your family members want
to occupy the flat). You can cancel the tenancy arrangement with the legal
deadlines - by giving 3 and 9 months notice in writing.
Rental
increases:
If the current contract stipulates yearly increases, the rent
will go up as mentioned in the agreement.
If not, then you increase the rent
under the following circumstances:
Your rental manager consults the Town
Hall´s Qualified Rental Guideline (called "qualified Mietspiegel")
or in absence thereof, you can show 3 similiar properties with higher
rents, then an increase ofmaximum 20 % every 3 years is
acceptable.
Berlin Rents are Rising:
The average rent
has increased 6% from 2007 to 2008 according to Berlin´s leading
newspaper "Tagesspiegel".
How to calculate your Rental Yield:A major bone of contention
is the calculation of your return on capital. Due to Berlin´s low
property prices, consider your rental income as a bonus to the capital
appreciation you are going to achieve. Capital appreciation in % terms will
most likely to be the same in most Berlin districts.
Community Charges: The
bulk of community charges are paid by the tenant together with the monthly base
rent. Therefore, this position does not reduce your rental return. Only a few
items that are not the tenant´s liability such as the administration fee,
building maintenance, certain sundry expenses and the contribution towards the
maintenance fund (which is the community´s "savings account", also called
"sinking fund") are up to the owner.
Owner / Landlord
expenses:
Administration Charge: tends to be between 20 and
25€/month. This is to be paid by the owner.
Maintenance: depends
on each community and accounting rules in each community. Normally very low if
the sinking fund is appropriate.
Sundry Expenses: for instance legal
costs of the community - normally negligible.
Sinking fund
(Maintenance Fund): tends to be between 0.50€ and 0.80€ per m².
Beware of low sinking funds to make the property look artificially attractive
because of low monthly expenses. The sinking fund is the community´s
saving´s account, so it´s important that a decent sinking fund is
being maintained. You should not include the sinking fund as an expense since
it´s a contribution to the community´s "savings account" (of which
you own a share). The charge is only to be accounted for when the money has
actually been spent (on repairs or improvments).
When the capital is
invested in a fixed deposit account. the community benefits from accrued
interest.
In order to avoid distortions when calculating rental yields, the
contribution towards sinking fund should not taken into
consideration.
Special (one-time) contributions: tend to happen in
badly managed communities with no (or little) contribution towards the sinking
fund. Avoid these properties.
If you apartment is vacant or you do
not spend any heating/water, you can get part of your monthly payments refunded
the following year.
|
Tenant Yield Calculation for 70.000€ purchase (50m²) |
per year |
|
Tenants rent 350€ / month x 12 |
4.000€ |
|
Administration Charge (20-25€/month) |
250€ |
|
Maintenance |
60€ |
|
Sundry Expenses |
20€ |
|
NET RETURN FREEHOLD (most properties are freehold) |
3.670€ = 5,24 % |
|
|
|
|
Sinking Fund |
We have not deducted contribution towards sinking fund in order to avoid
distortions. |
Attention:
Most realty advisors quote the "net yield" as a
simple equation of yearly rent / purchase price without the deduction of any
further house charges, maintenance cost or administrator fees.
This simplied
formula is widely used because you will only know the exact rental return of
previous years by examining past statements but never of current or future
years (since the yearly figures are only estimates).
Therefore, the
formula "yearly rent / purchase price" is the widely accepted formula to
calculate yields. |
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