Sale of rented properties - Berlin investment
Anyone selling a rented property turns to investors, not owner-occupiers. The goal is not to sell a Berlin property that could fulfil the desired requirements for a dream home in Berlin, but to satisfy the owners’ expected returns. Furthermore, one should have in mind that rented properties not only compete with each other for the favour of investors, but are also in competition with other Berlin investment, such as shares, funds, bonds, etc.
Berlin investment - the main property types
The following types and differences should be considered for a Berlin investment.
- Multi-family property or a typical Berlin apartment block (residential building with multiple tenants)
- Commercial property (e.g. shop or office building)
- Rented or tenanted Berlin apartments
Of course, there are also similarities in the sale of these different Berlin investments. The similarities lie mainly in the fact that all investors expect a risk-adjusted return on capital.
Return expectations on Berlin investments
Essentially a buyer of a rented property has two ways to achieve a return:
- Current return
- Profit on sale (capital gain)
A current return can be achieved if the rental income is regularly higher than the recurrent costs (including financing costs, administrative costs and maintenance costs). A capital gain occurs when the property has experienced an increase in value over the holding period until the sale, and this can be realized on the actual sale. Both for current return and profit on sale, tax considerations can play an important role
Berlin investment - tax aspects
Anyone buying a rented Berlin real estate is allowed, during the holding period of the property, to claim the write-downs on the value of the building and deduct any losses from taxes. When selling the property, the profit deriving from the increase in value can be realized tax-exempt if the speculative period of 10 years has been observed (the property has been sold after a 10-year holding period).
Berlin investment - marketing strategy
Which marketing strategy is the right one depends of course on the particular property and its type.
In any case, it is important to show potential buyers how the current return may evolve (e.g. rent increases) and how the value of the property could increase over the years.
At the same time, a buyer must be convinced that he has acquired the Berlin property for a reasonable price and that there are only limited risks.
Valuation of rented properties before sale
Rented properties or Berlin investments are evaluated using the income approach and the sales comparison approach. The earning power of a property is higher, the more the rental income exceeds the expected costs in the depreciation period. In the comparison approach similar Berlin properties are compared with the Berlin real estate investment to be sold and their realized sales prices are used as benchmarks.
Since the valuation of a Berlin investment is more complex than determining the value of a vacant Berlin real estate, you should let your Berlin investment be assessed by an expert prior sale.
Sale of a Berlin investment through Berlin estate agents?
Rented properties are sold in Berlin usually through Berlin estate agents. A professional Berlin real estate agency are familiar with yield calculation and tax aspects of a rented property. A real Estate Agency in Berlin that often sell this type of property have also good contacts with investors. Therefore, it is advisable to select a broker who deals frequently with Berlin investments. You can find additional tips for the sale of rented Berlin real estate in our guide, which you can download for free.