Buy, Sell, Purchase and Renovate in Berlin:
Apartment Renovation at low prices

Yield calculation for tenanted apartments
How to maximise your return on investment !

How do I maximize my yield / return?
Very simple:
a) by spending as little as possible on renovation
b) by holding the apartment for 10 years
c) by selling the apartment after 10 years, when the tenant has moved out.

The easiest and most lucrative way:
You buy with current tenant (because it is cheaper than a vacant unit) and you get immediate income and have no expense.
Then you sell after 10 years, preferably once the tenant has moved out and the apartment is vacant. If the apartment is not vacant, simply wait a little bit longer - it is only a matter of time. Because you get a higher sales price for a vacant unit. If your current tenant moves before the 10 years, my administrator will find you a new tenant with a 5 year limited contract.

This allows you to get "double profit" - first the price increase from buying "low with tenant" to "selling higher vacant" plus the normal price increase over ten years - which can be substantial.
Additional advantage: If you sell an investment apartment after 10 years of hold time, there is no gains tax (no tax on profit).

Example for calculation:
You buy an apartment for 80.000€. The tenant pays appprox. 380€ plus charges. You get 380€ - your share of community fee (for example 80€) = 300€. During the years you have only very little extra expenses for the house, because your share of community fee also covers the community fund for repairs. So you make 300 x 12 months x 10 years = 36.000€.
Then, you sell in 10 years for 190.000€ (feasible estimation, since it is only 10% increase per year and then the apartment will be vacant, and therefore worth more). That profit of 190.000 - 80.000 (buying) = 110.000€ is tax free in accordance with German tax law (minimum holding period is 10 years).
Of course, you can also sell earlier, as a matter of fact, you can buy today and sell tomorrow.
Disclaimer: You should always consult a tax advisor to confirm for exact details - information on this domain is provided without legal or binding nature. We cannot be hold responsible if this does not apply to your individual case.

Must the owner renovate an apartment that is rented (tenanted)?
No, unless something important breaks that is not the tenant's responsibility (for example if the toilet would not work).
But you are not obliged to renovate the apartment, you do not have to put new floors, new electricity or a new bathroom.

Price difference - vacant vs. tenanted properties
Vacant properties are 15%-20% more expensive because they are vacant and they can be visited easily.
Tenanted properties are cheaper because they are tenanted and because visiting inside is mostly difficult.
Thinking that a german tenant will welcome you with open arms and willingly show "his home" to a foreign investor is a fallacy and it would be naive to expect a warm welcome. As a matter of fact, it is frequent that tenants cancel visits upon very short notice or simply do not open the door. You must accept that as an investor. I buy all my apartments without inside visit and .... I try to have as little contact with the tenant.
If you insist on inside visit, you should (better said you "must") buy a vacant apartment.

You cannot get both ways: cheap low price - and viewing inside - and thinking that a clever local investor will not buy before you. Until you have arrived from abroad, this "steal" property would have been sold several times.

If you get a discount of example 15.000€ for buying a tenanted property - it comes at a price.
For yield calculations, you should in all fairness add the savings of the buying price over 10 years, which would be 15.000 €/ 10 years / 12 months = 125€ per month and add this "savings" to your lower entry rent.
Example:

vacant	90.000€	potential rent 400€ plus charges	Yield: 400 x 12 months / 90.000 = 5.3%
with tenant:	75.000€	actual rent 250€ plus charges	Yield: 250 x 12 months / 75.000 = 4.0%
Then you should calculate : 15.000€ / 10 years / 12 months = 125 €+ 250€ actual rent = 375€ x 12 months / 75.000 = 6%

Rent Payout - How much will I receive on my bank account after all expenses?
The figures varies each month due to adjustments. You should only look at yearly figures. In order to simplify the calculation, I calculate for my own properties 10 months out of 12 months. I consider 2 months expenses for the "community fund" and for "administration" - these two positions must be borne by the owner - the rest of the charges (like heating, water, cleaning, insurance, ICI (land tax) is invoiced to the tenant.

Community Fee - Amount vs. Composition?
As an investor I sometimes find it hilarious when people ask "how much is the monthly community fee"? The question is legitamate but it is a beginners question. The correct question should be "What is the composition of the community fee" or "What is the owners share and what is the tenant's share of the community fee?". The sum itself is the least important since it gives no details about the quality of the property. You can have communities with central heating, others with individual heatings, community with no reserve fund (illegal in Germany but they alas they exist) or communities with exorbitant administration fees.

Rule of thumb: 1€ - 1.50€ per m2 (depending on the composition) with a minimum of 50€ as owners share is a positive indication of a sound community, providing that the fund is 50% of this figure. The contribution of the community fund should always be 50% of your share of the community fee. This avoid nasty surprises called "Sonderumlagen" (special payments).
By the way, always ask how much money the community has saved up.... there are communities with 100.000€ debt (or more, such as "Soldiner") and others with 300.000€ surplus or savings. Examples of surplus are Virchow, Ostender, Karl-Marx-Allee. All four are very sound communities. The surplus in Karl-Marx-Allee is currently in excess of 4.000€ per apartment which is huge and indicative for a very high quality property. The surplus is passed on to your community account with your purchase. It is linked to the apartment, not to the owner.

Can you give an indication how long tenants stay or when a tenant will move out?
The older the tenant, the less likely they want to move. If you buy an apartment where the tenant has been living for many many years, you can be pretty sure that the tenant enjoys living in the apartment. This is very good for you, because if you are lucky you can keep the apartment for 10 years without doing any major work or spend big money or losing months with vacancy. Quite often, older tenants even tend to renovate or improve their apartment themselves. We have had tenants who even refurbished their bathrooms, including tiles and sanitary. Younger tenants tend to move more frequently. It also depends on the size of the apartment: the larger the apartment, the less fluctuation. Families tend to move less than single people or couples without kids.

What is the duration of a rental contract?
In Germany, 95% of all rental contract are of indefinite nature, i.e. they do not expire. They continue to be valid until the tenant or the owner cancels the contract. All our apartments have indefinite contracts. If you buy a vacant apartment, you can limit the duration of a new contract from 1 day to 5 years. Contracts in excess of 5 years or contracts which have been renewed will always be considered indefinite contracts.

Can I cancel a rental contract?
Yes and no. It depends on the lease details. If the cancelation from the owner has been excluded, then you cannot cancel and you have to wait until the tenant moves out.
If the cancelation of the owner has not been excluded, then you can cancel the contract giving 3 to 9 months notice providing you want to move in yourself - but you must prove your claim. You cannot simply claim it - you should be able to prove that you have no other property in Berlin you can move into. You cannot cancel the contract simply because you do not like the tenant's face or because you can get more money with a new contract.
However, you can always immediately cancel the lease contract if a tenant does not respect the lease rules or condominium regulations, or if there are arrears in rent payment.
By the way, if a tenant faces payment difficulties (for instance sudden unemployment), then the government pays or subsidies his rent - so the owner's stable income is fairly secure.

How much does a "refurbishment/renovation" cost?
The builders we work with charge approx. the following:
50m² : from 8.000 to 14.000€ for good, basic renovation, up to 18.000€ for designer renovation.
70m² : from 10.000 to 18.000€ for good, basic renovation, up to 22.000€ for designer renovation.
However, I do not recommend you renovate unless you absolutely have to, or if you want to move in yourself.

Can I sell an apartment that is not renovated? Can a find a tenant for an unrenovated apartment?
Yes of course, selling an apartment that needs renovation is really simple and easy - especially if the apartment is vacant. As a matter of fact, many buyers prefer unrenovated because they can choose their own materials and personalise their new home in accordance with their own tastes.
You can also rent the apartment in unrenovated condition if your current tenant moves out. You simply get a little bit less rent - or we can do a deal with the new tenant so that the tenant renovates himself in exchange of a few months (maybe 3) of free rent.

Viewing a tenanted property - inside "inspection visit" for an occupied apartment.
Please bear in mind "privacy laws" and "tenancy agreements" in Germany.
1) a normal tenancy contract (i.e. when you buy) is "unlimited" - i.e. the tenant can stay as long as she/he wants and must give 3 months notice before leaving. You, the owner, can cancel the contract if you wish to move in yourself (by giving 3, 6 or 9 months notice).
2) a normal tenancy contract limits the number of "inside visits" to 2, maximum 3 per year. That means that we will not drag customers through tenanted apartments unless you have visited the house/area before and a notary sales contract has been drafted and a signing date fixed. Normally we arrange an inside visit the day before signing the contract - if the tenant is present. However, you can retract from your offer to purchase any time - the only cost is the notary draft which is minimal.
3) the sales price for a "tenanted" property is already 10-20% lower than the sales price of a vacant apartment. Therefore, you have already been compensated for the "risk" for not viewing inside. But do not worry, our apartments are as described and in surprisingly good condition.
4) according to the tenancy agreements, the tenant is normally responsible for the necessary interior decorative repairs when he moves out
5) privacy laws in Germany are very strict - therefore we are not allowed to publish inside photos. Tenants must agree in writing before fotos are taken. You are not allowed to take pictures inside when you visit an apartment. This is basic common sense since furniture & fittings belong to the tenant. If you visit Google Streetview (maps) in Berlin, you will also find that certain pictures of buildings have been blurred - due to tenants opposition to being published online.
If an inside visit is imperative before you purchase, you should only consider a vacant property.
We will arrange visits whenever we can and whenever the tenant agrees, but we cannot 100% guarantee. In order to overcome this problem, we do have "show" apartments with the same size, layout and finishing which are very similar or even identical.

All information is provided for courtsey and without any legal or binding nature.

Buy, Sell, Purchase and Renovate in Berlin:Apartment Renovation at low prices

Yield calculation for tenanted apartmentsHow to maximise your return on investment !

Buy, Sell, Purchase and Renovate in Berlin:
Apartment Renovation at low prices

Yield calculation for tenanted apartments
How to maximise your return on investment !