In Preißelpöhl near Plauen, there are still returns, and that’s right: five rented apartments, 416 square meters of living space, 21,744 euros in rental income per year – and that at a purchase price of 400,000 euros. The property offers a “sustainable return”, the advertisement promises. So on to Preißelpöhl!
The reality, however, is often much more complex. According to a study by the German Institute for Economic Research, not even every second private landlord achieves an annual return of two percent or more. After deducting all costs. Renting is a zero-sum game for one in four. And about one in ten landlords even makes a loss.
This is mostly due to the fact that private landlords rarely increase the rent because a good relationship with the tenants is more important to them than the maximum return. And because they have high running costs for repairs and the removal of blemishes. Or because the tenants change more frequently than expected and then a complete renovation is often due. All of this does not mean that a property cannot pay off as an investment. However, significantly more criteria play a role when buying a house than when buying an apartment or house.
On the one hand there is the financing. Anyone who wants to buy a property in order to rent it out does not enjoy the top interest rates that private individuals are currently getting for their own homes. Investment real estate is not a standard business for banks, which is why investors have to include surcharges of 0.5 percentage points per year in their calculations. Such guide values always depend on the region and the creditworthiness of the buyer.
The location is also decisive. Unlike in the owner-occupied apartment, other locations are of course possible in addition to your own place of residence. However, investing in rural, structurally weak regions is risky because people there are more likely to migrate. Popular metropolises, on the other hand, are usually so expensive that it can take decades to earn any money with a rented property. The most interesting are therefore medium-sized cities and municipalities, which are developing well economically and which attract many young people.
But even with a property that is not too expensive in a prosperous region, landlords are still not on the safe side. On the one hand, as with every location decision, the transport connections play a role. On the other hand, the buyer should pay close attention to what type of apartment is actually in demand. Many families dream of a little house in the country, but most people in Germany live under completely different conditions. Two to three-room apartments with 60 to 80 square meters are most sought after in large cities. In smaller places this area can be a little larger.
Old buildings are popular
The most attractive properties for landlords are, of course, properties that are in such good condition that they can be rented out immediately. White bathrooms, simple kitchens and lots of white walls are an advantage. With flashy 1970s colors in the bathroom or dark wood paneling, the question is: How easy can they be removed? Or is the rental market so tense that interested parties can easily ignore such idiosyncrasies?
The type of building is also not unimportant. According to the findings of a research group at Chemnitz University of Technology, real old buildings and Wilhelminian style houses are much more popular with tenants than modern high-rise buildings or even designer properties.