Real estate acquisition as a foreigner in Germany

The acquisition of real estate by foreigners is clearly regulated in Germany. Nevertheless, the opportunities for citizens from different countries are very diverse. There are, of course, some special features that must be considered here.

EU vs. non-EU citizens: the difference

Hardly any other country is so generous when it comes to allowing foreigners to buy properties such as Germany. It is both natural and legal allowing people to acquire real estate objects in Germany. The origin and citizenship of the person does not matter.

A common question in this context is the status of the buyer. Although the real estate acquisition is possible for everyone almost without any problems, but a purchase does not change the current residence status. For citizens of the EU, this is not a problem at all, since EU citizens if they want to live in Germany in the future, they only have to register by the residents' registration office. Thanks to the European Union, there are no limits anymore.

It is different with non-EU citizens. Although they are entitled to purchase real estate, but the ownership does not change the residence status. Those who buys a private property, must have a visa or a residence permit to enter Germany. However, there is one exception: anyone who buys a commercial property to run an independent business can obtain a residence and business permit and thus stay in the country.

Property market in Germany

The real estate market in Germany is developing rapidly. German people spend more than 160 billion euro per year on real estate purchases – and the trend is rising. According to the real estate market report of the expert committees, sales in the real estate sector have also risen sharply in recent years.

The real estate market in Germany is developing rapidly. Especially in the big cities, renovations and new construction projects ensure that the supply of real estate meets the strong demand for housing.

In Berlin, Hamburg, Munich, Cologne and many other popular cities, buying a property is much more than a retirement plan. Even as an investment property, a house or condominium in the city is becoming more and more sought after. Germans spend more than 160 billion euros a year on real

In recent years, according to the real estate market report of the expert committees, sales in the real estate sector have increased by about 3 to 14 percent annually. This development takes account of the enormous demand and the new construction.

Due to the increasing availability of various properties – from small apartment to luxury real estate – it is important to get basic information before buying or selling.

Real estate mirrors help with valuation

If you want to buy or sell a property, the first thing must be taken into consideration is the value of the property. When buying a property, the most important criterion is the location. The better the location, the more stable the property is - and that's why it's more expensive there.

The location is unchangeable, but the condition of a property can be improved at any time by renovation.

Independent experts can offer help. This gives sellers and buyers, but also the deceased and heirs, divorcees and the dispossessed a realistic assessment of what the house or apartment is actually worth. Professional appraisers can accurately determine the value of a property. Individual factors such as the structure, environment and equipment of the object are important.

Review real estate markets and make a purchase decision

Thorough research and information give buyers and sellers an advantage in the real estate market. Although Germany is experiencing a strong new construction activity and is becoming increasingly popular with both newcomers and investors, the upward trend in the real estate market is different from place to place. In particular, it is foreseen that the conurbations will face an enormous increase in prices and demand, while real estate in rural regions and in the eastern part of the Federal Republic are sometimes difficult to buy due to lower demand.

You have a piece of land and want to sell it, build a house or manage it. Perhaps you are the owner of an old building and planning to possess a new place on the market by means of revitalization.

It's not just the location that determines the value of your property based on the land value. Much more decisive is the degree of utilization by means of well-thought-out planning in order to meet the expectations of the end-users with the demand. This is the only way to maximize the benefits of your property.

In three phases of performance, analysis, appreciation and supply.

This method of creating shared value forms the mainstay of success, while at the same time putting the company at a reduced or manageable risk.

For instance:

A public-private partnership was entered into to develop an undeveloped property in Frankfurt's Westend. This property had a high potential for development, since undeveloped land in the city centre of Frankfurt am Main is extremely scarce.

After examining the suitability and selection interviews, a company was selected that had already implemented a number of residential construction projects, primarily in the upper price segment, very successfully and with high architectural standards in the past. All relevant framework conditions were analyzed by the company at the time of the negotiations. Thus, adequate solutions for the complex requirements of the project could be offered. A self-contained contract was worked out together. From the proceeds of sale, the land received the land value, the investor the costs incurred by him. The remaining development profit was distributed between partners.

This is how you calculate the real estate construction correctly

The basis for sound real estate financing is a correct and absolutely honest calculation of your financial scope. We therefore recommend that you clearly contrast your monthly income and expenditure. The prerequisite for not financially assuming the later financing is your honesty towards yourself:

Have you considered all current (budgetary) costs? Can you carry the monthly burden permanently?

As a basic rule for sound real estate financing, the monthly rate should not exceed 30 to 50 percent of your net income. The basic requirement for real estate financing is regular income. The awarding of a loan depends, in addition to the value of the property, on your proven creditworthiness: Most of our financing partners require the granting of a loan, e.g. to a single person, a proven, monthly minimum net income of € 1,500.

You have to expect these additional costs

Be sure to inform yourself before the house construction about the incidental costs, because these add up to the agreed purchase price of the property and the construction costs. Please note: the amount of incidental purchase costs depends on the purchase price. Therefore, the more expensive the land, the higher the purchase costs.

Since many different service providers are involved in building a house, you should not only consider the actual construction costs, but also plan the expenses for the architect and structural engineer as well as for the authorities and insurance companies. Likewise, a suitable property wants to be found and bought.

Do you intend to buy your property through a broker? Then the brokerage commission must be taken into consideration.

Insurance protection for new construction

When new construction projects are carried out, areas that are often open to the public are adversely affected, or there is a risk to third parties in some other form. Caution should be exercised in such situations, as each owner bears the responsibility and liability for ensuring that there are no hazards to third parties from his or her construction site.

Here are some insurance policies that can be recommended for you to build a new home in order to be prepared in case of need.

Builders liability insurance:

The owner's liability insurance compensates claims for damages against the owner. In case of damage, this insurance regulates the financial claims for damages on the construction site of injured passers-by or residents.

A policy usually costs about one thousandth of the construction sum with a measure of 50,000 euros, that is about 50 euros and protects for the period of construction activity. Make sure that the sum insured amounts to at least three million euros for personal injury.

Construction aid accident insurance：

Everybody knows the situation: neighbours, friends and acquaintances often support the renovation after work. In this situation, the construction workers' accident insurance can be worth gold. Auxiliary workers, whether paid or not, are legally insured against accidents by the Construction Trade Association. However, the client himself is fully liable for recourse in the event of an emergency. He can secure himself financially with a private construction worker accident insurance. The benefits of the insurance cover lifelong pension payments and / or one-off compensation in the event of death or disability. Accident insurance is already available for a single amount of 200 to 300 euros.

Works insurance:

From a statistical point of view, every second building site will result in a major loss with possible damage to the building or the building material. Since even the most prudent client cannot rule out many dangers, we recommend a building services insurance. This covers damage caused by craftsmen, wanton destruction as well as damage by theft or storm. The insurance cover usually covers the entire construction period (maximum 24 months) and insures all building materials, construction works and components against unforeseen damage. The insurance companies charge a one-off premium for the policy, which corresponds to about one tenth of the construction cost.

Important points in the building contract

One of the most important components of the construction project is the building contract itself, as it sets the course for the later course of the construction.

In order to avoid costly consequences, make sure that you make the right formulations when drawing up the work contract, as even a missing agreement can be expensive.

Prerequisite for the construction of a home is a building-ready property. Get informed before buying, not only about the location and the price of the property, but also about the property itself.

How much equity you need? The more the better!

If you want to finance a property, you usually need equity. How much should that be? What counts as equity? And maybe it can be done without it?

These count as equity:

• Savings on accounts
• Cash assets
• Building savings (your own share, not the loan amount)
• Life insurance
• Equity, mutual funds, security
• Real Estate
• Already paid building plots

Get an accurate overview of your finances. Add everything together to determine the available equity.

Tip: Do not use all your equity. If possible, keep a reserve for unpredictable expenses such as repairs.

Our recommendation: At least 20 to 30 percent of the total cost of buying the property should be covered by your own capital. Better even more. Because the higher your share of equity, the less credit you need to borrow.

The reason is quite simple: each lender integrates its risk into the terms. For him, a high proportion of equity means more security and reduces the risk of defaults. As a borrower, you benefit from lower interest rates.