Over the last few months, Get Invest INV has helped several clients to purchase property in Berlin and NRW while avoiding the ‘bustle and hassle’ that generally occur in this kind of transaction. Based on our own experience — and given the questions our clients and potential buyers kept asking us — we developed a quick guide of questions to ponder before investing the German real estate market, especially in Berlin and NRW.
Here are our top 10 factors you should consider before stepping into the property market;
1. Set your budget. Knowing how much you can afford can help our team quickly draw a plan to narrow down the search, find your most suitable investment and help you conclude a transaction as soon as possible.
2. Find out the asset’s worth. A property’s selling price does not mean it is worth it. The Get Estate team works with reputable property-valuation experts to assess the property’s true worth and then use that to negotiate on the price. Evaluating a property before buying or selling can help an investor negotiate the best price, reduce risk and save money.
3. Determine your target yield on the property. Knowing the yield you would want on a property can help you make the best decision in terms of property — and make it easier for our team to assist reach your goal. Remember important formulas for the annual yield:
Total income from property = Rent payments + extras (application fees, payments for repairs or improvements, and any portions kept from a security deposit)
Total expenses = Mortgage + insurance + advertising + repairs/paint + extras (property management fees)
Net income from property = Total income from property – Total expenses
Yield = Net income from property / property’s initial cost
4. Find out what is being built nearby. New infrastructure projects can be beneficial or detrimental to your investment property. Ask a Get Estate representative or search in our database to find out what is being planned and when it is due for completion.
5. Inquire about the local market. Socio-economic trends in the local area can directly affect the property market — either negatively or positively. The best way to find out is to contact a Get Estate representative. Our team not only has expertise in the local property market, it is also “close to the ground.” Our representatives can get out there, go to the local retail strip, look for the standard and style of retailers there and assess whether gentrification has taken place or is about to. They can also evaluate local demographics, crime rates and employment drivers in the area – to give you a complete, objective picture of the local market.
6. Determine your target market. It is essential you identify your potential tenants and know what they would be looking for in a rental property. A Get Estate consultant can help you during this process. For example, if you are looking at a property in a university area, you should be looking at a multiple occupancy homes near transport and amenities. If, on the other hand, you are going for the family market, look for a large home, with a garden and spacious communal area.
7. Find out the strength of the competition. Get Estate consultants help you evaluate the risks, market saturation and rental trends, among others, related to a specific property. A market saturated with investors will reduce your chances of successful rental returns. This will also create issues around capital appreciation. Contact us to learn more about rental data in Berlin or NRW, including the percentage of homes that are owner occupied. In addition, you should exercise caution when contemplating big apartment blocks. You must check that the spot is not an overused rental area. If you are buying in a large block, you can end up with both rental and selling competition if the market gets tough.
8. Know what matters to you: capital gains or rental return. You should consider whether you are chasing rental returns or capital gain — and in the case of multiple investments, it should be the latter. The rental income will help you hold the property, but it will not help you buy again. Capital gain should be, in the early stages of investment, the number one goal because it will allow you to buy your second and third property. If you look at high rental return and low capital growth, you will be sitting there a long time before you have any equity to do something else.
9. Gauge the rental potential. Just because an agent says a property will earn 300 € a week in rent doesn’t mean it will. Contact a Get Estate consultant or search our database to get a realistic idea of rents on comparable properties. If necessary, our team can commission a rental appraisal from an independent company, so you get an accurate picture and know whether a property is underpriced or overpriced.
10. Determine how much work you want to do: work-in progress or turnkey property. A potential rental property should be good to go – purchasing one in need of renovation will only delay the time it gets to market. At the most, allow for paintwork and furnishing and steer well clear of homes in need of structural improvements – you are likely to lose a few months’ rent before you even have tenants. Small, paved gardens make for easier maintenance and make sure you factor in the cost of a management company to take care of day-to-day running.
Remember that our team is here to help you along the way: We speak several languages (including German, English and Arabic), have smooth communication and can better explain the process. We accompany the buyer in all of the purchase steps: finding the suitable property, conducting viewings in Germany, phone support, conducting all the official and bureaucratic actions on behalf of the costumer. We help the buyer to receive financing from German banks. We work with house management companies who take care of all the maintenance of the buildings and work with the tenants, including collecting rent and sending it to the owner, so the investor doesn't have to deal with any the mentioned issues.