Posts in category: General

Due to the property tax reform, owners of houses and apartments, leaseholders and all land owners, whether of plots, forestry or agricultural land, will have to file an additional property tax return in 2022. We explain what it’s all about and how you need to proceed now.

Cost of living in Germany is relatively lower when compared to other European countries. However, even a tiny amount of money can make a big difference for students. And it’s common for all students to want to save as much money as possible.

In this sense, the location you choose to live has a significant impact on your monthly expenses, so take this in mind when deciding where to live. For example, if you decide to stay in Munich, you will find it difficult to save money because it is the most expensive area in Germany and the cost of living is extremely high.

So, if you are a student looking to study and live in Germany, you will need to know which cities are expensive and which are not. In this article, we have selected some of the cities in Germany that are less expensive and where you may live on a budget.

Following are the of the Top 5 inexpensive Cities in Germany to Buy or rent a house in:

#1 Passau City Germany

It is a small city in southern Germany near the Austrian border. It is known as “The City of Three Rivers” because it is crossed by three rivers: the Danube, the Ilz, and the Inn. According to recent statistics, this city has 50,000 residents.

In comparison to other German cities, the city is quite inexpensive. In the city, a one-bedroom flat may be rented for €600 on average. Outside of the city, the apartment can be rented for €340. However, the average three-bedroom apartment costs €1,050 in the city centre and €700 in the outskirts.

Aside from that, utility bills in Passau are lower than in other cities. Monthly bills cost an average of €75. However, depending on your consumption, the expenses can rise to a particular level, such as €250.

It is evident that the city is quite affordable in comparison to other German cities, and you should think about relocating there.

#2 Krefeld City Germany

It is a city in North Rhine-Westphalia, close to Dusseldorf. According to the current figures, the city has a population of 230,000 people and covers an area of 137 square kilometres. It is a reasonably priced city, with a one-bedroom apartment in the city costing €450 per month. However, it may cost you much less in the surrounding neighbourhood. Furthermore, a one-bedroom apartment outside of the city costs €400.

Furthermore, if you require additional space, you must hire a larger apartment, which will cost you more. The average rent for a three-bedroom apartment is roughly €760, with prices ranging between €400 and €1,100. Utilities cost roughly €170 per month, but if you control your electricity and other expenses, you can save money. Utilities often cost between €50 and €250 per month.

#3 Halle City Germany

Halle City is located in central Germany and spans 135 square kilometres. It is home to approximately 240,000 people. The city is fairly inexpensive and has a distinct Renaissance period. The monthly rent for a one-bedroom apartment in the city is €350. In the suburbs, however, the same apartment can be rented for €200. Furthermore, larger apartments are more expensive, costing roughly €710 on average in the city but just €470 in the outskirts. In comparison, apartment rent in Berlin is 130% more. Utility prices can range between €85 to €340, implying that you may have to spend an additional €195 per month for utilities.

The city is inexpensive in terms of food prices. Dinner at a low-priced restaurant will typically cost around €10 for a single person. In addition, a beer will set you back €3.50, and a cup of coffee would set you back €2.70.

#4 Bielefeld City Germany

It is a city in North Rhine-Westphalia with a population of around 350,000 people. In comparison to other German cities, living here is quite affordable.

Rent prices are something to be concerned about, yet they are not too expensive in Bielefeld. A one-bedroom apartment costs about €460 per month, which is relatively affordable. Furthermore, with little haggling or luck, you can acquire the property for €400 per month. In addition, flats in the surrounding neighbourhood range in price from €200 to €460 per month.

Bielefeld is also reasonable in terms of food affordability, as it offers a large number of places where you can obtain a cheap dinner.

#5 Frankfurt (Oder) City Germany

Frankfurt is a city in East Germany on the Polish border. It is traversed by the Oder River. According to the latest statistics, more than 60,000 people dwell in a tiny metropolis of only 150 square kilometres.

Frankfurt is a highly affordable city because a one-bedroom apartment costs €460 per month in the city and is cheaper in outlying suburbs, such as €325 per month only. Furthermore, a three-bedroom apartment in the city costs €1,250, but it is cheaper in the surrounding area, which costs €400 to €1,400. As a result, it is 40% less expensive than Berlin.

To keep track of their credit rating, everyone is entitled to a free copy of their Schufa report once a year. You can obtain this by submitting your information online at meineSchufa.de.

If you’re looking at buying a house in Germany, you should also consider buying a house on a leasehold basis.

A lot of people when they move to Germany come with the dream of owning their own apartment in the city. The most obvious thought that comes to mind while a person decides to invest in real estate is, how am I going to arrange for the finances? We’ve tried to cover things that people need to keep in while buying their apartment in Germany.

House or apartment: Where are there differences?

Well it depends on an individual’s needs. For some an apartment works well but for some a villa or a bigger bungalow works. The following points are extremely crucial when one considers buying their own property.

Price

Well it’s obvious that an apartment comes cheaper than a villa or a bungalow. One must consider all the costs related to financing the apartment and add that in the final price. That way, you’ll get clarity about how much financing you would need and the rate of interest that you will be paying. There has been a sharp increase in the real estate prices in Germany in recent years. The demand is high, but the supply is less. There are several applicants for one property and the due process is followed before it is sold. 

Extra charges

There are expenses for insurance, property tax, water, rubbish collection, and additional fees for property management in addition to the financing costs for the apartment purchase. You must establish joint reserves for the entire residential complex in addition to the reserves for potential apartment repairs and upkeep. In the owners’ meeting, the contribution amount is decided.

Notary fees, a brokerage commission, the one -time real estate transfer tax are also something that you need to pay for additionally.

When purchasing an apartment, you can lower your purchase price and avoid paying trade tax if the maintenance reserve for the complex is disclosed separately in the purchase contract. Additionally, the real estate transfer tax is reduced as a result.

Home owner’s association

A homeowner’s association is something you become a member of when you buy a condominium.

You alone cannot make the decision for an entire residential complex. There’s a joint meeting of the home owners and if there’s a decision that the majority of the people approve, you must abide by it.

Resale value

Houses have a higher resale value than the apartments which is why it’s difficult to sell apartments again. It largely depends on the location of the real estate; the condition of the apartment and what services are provided at the residential complex. However, it can be modernized and made energy efficient which helps increase its value.

Financing an apartment

Equity is probably the most important aspect when you’re thinking about housing finance. A higher equity can reduce the financing costs and the tenure of your loan. You must finance about 15% of the purchase price from your own funds. This is recommended. Mortgage without equity is also possible under certain conditions but this leads to high interest rates and a longer tenure.

Like we mentioned above, there are several other costs that one needs to consider while buying an apartment. Notary fees, brokerage commission, real estate transfer tax, cost of entry in the land register, costs for waste disposal, electricity, wastewater & insurance are all additional costs for which you need to have sufficient reserves.

All this you need to consider finding out whether you’re entitled to funding or not. There are special guidelines that you must adhere to if you have children and you’re buying an energy efficient apartment. This will help minimize the risk of funding application rejection.

Special features of an apartment

Once you’ve bought an apartment you also become a member of the owner’s association and have certain rights & obligations. The community lays down rules regarding, the distribution of costs for maintenance & upkeep of the residential complex, distribution of voting rights and regulate voting in the event of structural changes. This helps all apartment owners co-exist. Additionally joint house money is levied which you need to pay once a year to cover for insurance, administration & garbage collection.

Community and special property

In addition to your own apartment, you also own all the common areas such as stairs, the heating system, the gardens, windows, facades & roofs. 

As the owner, in addition to your own apartment, the special property, you also own a so-called community property, which belongs to all residents of the house. These include, for example, stairs, the heating system, the garden or doors, windows, facades and roofs. The declaration of division, which is a crucial component of the purchase contract, specifies what is considered community property.

Insurance with communities of owners

For your own apartment, you are responsible to get it insured. For the residential complex the insurance or the protection is determined by all owners jointly. 

You are responsible for your own apartment and must insure it yourself. The protection of the residential complex, on the other hand, is also determined jointly in the owners’ meeting. A building insurance policy for the residential building and any existing outbuildings is crucial, as is the signing of a home and landowner liability agreement.

A home money loss insurance or legal expenses insurance can also be helpful, and it is advised that landlords obtain both a home liability insurance policy and a rent loss insurance policy. These are responsible for repairs that cause the rental apartment to become uninhabitable for an extended period.

Rent out your apartment

After you’ve bought the apartment, you need to decide whether you want to live in it or want to rent it out. Purchase of an apartment is a great investment to build up some wealth to provide for your old age. Also, the current interest rates allow favorable financing of apartments as an investment. If you’re looking at renting out the apartment, there are a few things you must consider.

Location

Rentals are high if the property location is great. Also, infrastructure, proximity to the city center, renowned builder & the facilities are also some of the key factors. It’s also easier to find a tenant in a larger city. 

A good location of the property is crucial for the success of the rental. A well-developed infrastructure, proximity to the city center and possible employers are usually particularly important. Basically, it is easier to find a tenant in a larger city. An increasing number of households and low unemployment rate are indicators of a desirable real estate area.

Quality

One of the very important factors is how the property was maintained. Any renovation or modernization that was carried out, will help potential buyers arrive at a decision faster. The older the apartment, the more money it will require to renovate it. So that means more reserves should be available with you.

Creditworthiness of the tenant

You can evaluate the tenant’s solvency and dependability with the use of a credit report, greatly increasing the likelihood that the rental will be successful.

Rental yield

The revenue you generate from renting out your unit is known as rental yield. This is crucial to the success of your investment. In this case, the purchase price, including ancillary expenditures and maintenance charges, is established in relation to the annual net rental income. The higher the rental yield, the lower the buying price per square meter and the lower the amount of rehabilitation work required.

Result

If you decide to finance an apartment, you should make sure that the apartment fits your needs or that it offers potential for renting and that you are aware of the risks of renting. In addition, if possible, get to know the other apartment owners to make sure that you understand them and share their values. They should agree with the Community Order and the Partition Order.

Finally, it’s critical to determine whether your reserves are enough to cover any maintenance and modernization expenses which might come soon after purchasing the apartment.

Nothing prevents you from purchasing an apartment and financing a condominium if you have been paying attention to everything up to this point.

Why are real estate foreclosed?

Auctions in real estate (Versteigerung) always come with mixed emotions. For bidders it’s a happy occasion of having acquired a property very cheaply and for the previous owners, it shatters a dream since foreclosure auctions happen only if the owner has defaulted.

Usually, it’s the high debt of the owner which is the reason for foreclosure. If the owner is unable to pay monthly EMI’s, he/she can apply for bankruptcy at the district court. All the assets are sold to settle part of the debts in the district court. If he/she owns a property, they can sell it or the creditor can apply for foreclosure.

Which properties are foreclosed?

All immovable property, whether it is a house, an apartment or a plot. They’re sold to the highest bidder at a public real estate auction (Zwangsversteigerung) for as much profit as possible.  

What are the costs for the buyer in a real estate foreclosure auction?

A lot of times buyers expect to get a property at a very cheap rate in foreclosures. However one must be aware that a security deposit needs to be provided as a bidder. So please, inform yourself about your financing options, have adequate equity and please have a security deposit ready.

Check with your bank about financing options. Would you be given a specific amount of loan if you are awarded the contract for the foreclosed property? Have answers to questions like these so that eventually with a fixed purchase intention you are able to save 20-30% market value of the property. Then, the bank financing of the remaining sum will be realistically possible.

To enter the bidding process one must provide a security deposit which is usually 10% of the estimated market value of the property. You can write a cheque, by means of a bank guarantee or by transferring the amount to the court treasury.

Timelines are very important. The cheque must not be older than 3 working days, if you transfer the funds to the court treasury, you must do it 10 days before the auction. This security deposit is refundable if you do not win the contract for the property. However, if you win the contract there will be additional costs that you need to factor in. Real estate transfer tax of 3.5%,  costs for the entry in the land register and interest are applicable. The surcharge is also an additional cost but it is not applicable on the private purchase of a property. This is 1% of the total price which must be paid to the district court. Interest is charged at 4% from the day of the knockdown until the payment of the purchase price.

How does a real estate foreclosure auction work?

The date is set by the district court after the decision of the compulsory auction and the determination of the market value. The date is fixed at least six-eight weeks in advance. One can look at notices in the district court or Internet portals to get more information about the foreclosure dates in the region.

Everyone is allowed to participate in the auction since it’s a public event. To bid for a property there are certain criteria. The bidder must be 18 years or above, the bidder must carry a valid identity document, the bidder must also have transferred the security deposit to prove solvency.

Event pattern remains the same for years. First, the parties are introduced, relevant information about the property are also listed out, market value and the minimum bid is announced post which the bids can be submitted.

The official time for the bidding is 30 minutes but in some cases it takes much longer. If no further bids are submitted after the last one being announced thrice then the bidding process is over. Also, if the last bid is less than 70% of the market value then another auction can be requested. However, if the last bid is less than 50%, the contract will not be awarded. In the second auction these rules don’t apply.

You will get 4-8 weeks to pay the full amount if you’re awarded the contract. The previous owner must vacate the premises within this time frame. If the property was rented out then you will start receiving the rent. You will no longer be able to withdraw from this purchase contract so think carefully before bidding for a condominium or a two family home.

Advantages: Purchase property from foreclosure

While a few of you may get lucky at times for picking up a property far below the market value, you must be very very careful before submitting the first bid.

There is a process that you will need to understand before you get too excited about a property. First you will need to study the documents about the property which also includes an independent report that is made before an auction. The report is made by an independent expert commissioned by a competent local court. This report has an accurate description of the property with all possible defects. This report is extremely important as the market value of the property is determined on the basis of this report. You will get a very clear picture of how much you will have to also invest in modernization. So please go through this report thoroughly.

If the highest bid is less than 70% of the market value, there will be a second auction, and if the highest bid is less than 50% of the market value the contract is not awarded. In the second auction, since these rules don’t apply a buyer can make a bargain if there is little interest in the property.

You will also enjoy the following benefits if you participate in a foreclosure auction:

• The cost of the property may be substantially less than its typical market value.
• No brokerage commission is charged.
• A notary charge is not included.
• Since the district court has already hired a surveyor, there is no need to show them the land.

However, there are also risks that you should consider before buying a house.

Disadvantages: What are the risks of acquisition by foreclosure?

Purchase of a foreclosed property involves dangers. You should educate yourself thoroughly and take some advice if you want to avoid falling into a trap. You must accurately assess the purchase of real estate rather than placing a bid “blindly.” The most important bit is financing and one must invest only when there’s absolute clarity on that.

Consider the following risks when foreclosing an object:

• You cannot view the owners apartment or house and can only make the decision basis the information available and the external impression.
• Even the district court expert does not have permission to enter the living space while determining the market value. The real state in the expert’s view may differ because the foreclosure process might take months or even years.
• Once you bid you will not be able to withdraw from it. Do it if you’re absolutely sure that you can buy the property. You’ll only get the surety once you have clarified regarding the financing with your bank.
• There is a risk of bidding a higher amount than your budget. If it gets accepted then you will not be able to withdraw from it. Be very careful.
• If the former owner refuses to move out after you’ve bought the property you can enforce eviction. 
• After buying the property, the former owner must move out. If the latter refuses, the new owner must enforce the eviction. Due to the insolvency of the preceding owner, additional fees may be applicable. If tenants occupy the unit, the lease is in effect until it is registered for personal use.
• The rules of mangehaftung do not apply and the buyer is not entitled to a warranty. The buyer must pay for defects himself/herself.

So carefully consider whether the risks are worth purchasing a cheap foreclosure property. You ought to have a reserve of money set out for unforeseen repairs or remodelling expenses.

One of the factors which can help you reach a decision while buying property is special payments or lump-sum payments (Sondertilgung). Let’s dive into the details of the special repayments. Let’s try and answer some very important questions like do the banks offer this service for free or do you have to pay for it?

What are special repayments?

Real estate finance is usually done through EMI’s (Equated Monthly Installments) (Annuität), which is a fixed monthly amount that one has to pay after taking a loan. The loan amount and the interest paid on it depends on the tenure. A special repayment is the additional payment outside of these EMI’s. The loan is repaid faster which reduces the remaining amount to be paid, shortens the tenure and a lower interest is paid. 

Is the special repayment beneficial for me?

For a lot of banks the special repayment is free of charge as many people opt in to pay off their loans faster. However, for some banks one needs to pay a higher rate of interest for these special repayments. What you as a buyer need to figure out is, whether you have the cash to pay off the loan and how much money are you going to save through these special repayments.

Example of a special repayment

Say you receive a loan for about 10,000 EUR on which you have to pay 3% interest. That means that you’ll be paying 300 EUR as interest every year. Now a special repayment of 10,000 EUR does not really make sense as the amount that you save in a year is only 300 EUR. What you would end up doing in fact is block 10,000 EUR which could be planned for some unforeseen costs. All we’re saying is, you should be aware of all this before opting for a special repayment plan.

TIP: If you want to sell the property during the fixed interest rate, please agree on a special repayment right. If you sell your house, and repay the banks before the end of the loan tenure, the banks can charge you a repayment penalty.


CONCLUSION:

With a special repayment, you can definitely pay off your loans faster but that also means you’ll have to block so much cash which you could use or invest elsewhere. If you expect that you’ll have more money then please agree on a special repayment right and must also expect to pay a higher interest rate.