Berlin’s real estate market has virtually exploded in recent years. Until recently, investors bought condominiums in the center of Berlin in order to renovate them and then sell them at a profit.
But is it still worth buying an apartment in Berlin as a capital investment these days? How high should the yield be and what do you need to consider when financing an investment? We take a look at this and more in this magazine article.
How important is the return on a property as an investment?
A property is generally referred to as a capital investment when it is not purchased solely for owner-occupation. The property should generate a return and therefore be sold at a profit at a later date or generate profits in the form of rental income. In the case of real estate as a capital investment, the focus is therefore on business.
The yield is extremely important because it is an indicator of the profits that can be expected from the purchase of the property. There are different types of yields, each of which is calculated using its own method. For example, if the income is to be generated by renting out the property, the net yield is of great importance.
What do you need to consider when financing a property as an investment?
If a property is to be acquired as a capital investment, banks regularly place higher requirements on the financing commitment. If, for example, the expected rental income fails to materialize in the future, the repayment of the property loan may be at risk. For this reason, the bank wants to make sure that you can compensate for any loss of rental income with your own funds if necessary when it comes to repayment.
At the time of purchase, you should be in a position to pay the ancillary purchase costs from your own capital. The more equity you have, the better the conditions you can negotiate for financing. Under certain conditions, however, it is also possible to have the investment financed in full by a bank.
In any case, the interest rate largely determines the success of the investment. If the real estate loan can be concluded at favorable conditions, a good return can be expected.
