Real estate investments are a fantastic way to enrich your own life. Many see buying their own home first. For others it is the opportunity to earn extra money and use it to fulfill other wishes. For me, real estate investments are the basis for building passive income. I can then quit my job and lead a self-determined life. And not only in 20 or 30 years, but in less than 10 years. Read: Privateer at 38 – never have to work again The advantages of real estate investments lie primarily in the leverage provided by outside capital (loans), complete control (development of the property) and easy understanding of the basics. On this blog I would like to explain the basics of real estate investments and how real estate leads to financial freedom. My video course: Real estate guide for beginnersIf you are particularly interested in a chapter, you can go to the more in-depth articles, which I have linked in the corresponding chapter. All chapters are listed in a table of contents below. I will be expanding this guide throughout the year with more in-depth articles. Basically, I would like to anticipate something: When I deal with investments and recommendations for investments, then two things are extremely important to me: transparency and the best possible digital use. When I look at other books or YouTube videos, I often miss the hard facts and figures. A lot of wishy-washy writing is used. Of course, for the reason to remain as general as possible. For me, that loses credibility. That's why I always write my concrete numbers. How much does my apartment cost, what income do I have and what is left over at the end. It should be shown in a tough manner whether my plan works or not. And everything is possible. Read: My real estate portfolio When it comes to digital use, I mean that you can do as much as possible on your own laptop from home. By email and by phone. Surely many people want to look at the houses and apartments. Want to get to know your tenants. We want to stop by on site if there is a problem. I do not want that. I want to do all the stuff from home or in the future when traveling to other countries. Read: Manage remotely That's why I need service providers in many areas who are on site and take on some tasks. At least after the initial purchase. For the notary, for example, you still have to leave the house. Capital Investment and Own Use Buy & Hold Fix & Flip Tackling instead of talking – how much are you willing to sacrifice? Passive income and financial freedom Real estate balance Saving instead of saving Repayment is asset accumulation Real estate agent The object check with Excel calculation Exposé and other required documents Calculation of investment real estate Outsourcing – real estate visitors Getting to know the tenant Write your own creditworthiness to the house bank, financing intermediary, financing strategy Purchase agreement subsequent approval Private or GmbH Long-term asset accumulation or commercial real estate trading Contacts – the be-all and end-all. notoriety trust New leases Rent increases Management of rent payments Real estate investment strategies capital investment and self-use When dealing with real estate, there is no avoiding the question of capital investment versus owner-occupation. For many people owning their own home is their greatest dream and they work/save their whole lives for it. What advantages and disadvantages this has is not the subject of this article. Just a little train of thought: Instead of buying the owner-occupied property and paying it off yourself with great effort, the following would be wiser: You first buy real estate as an investment and finance the owner-occupied property with the resulting cash flow. So instead of paying off your own apartment over 30 years, you could buy 10 apartments in 10 years. These 10 apartments then generate so much profit that you can use them to finance your own apartment or house. This way you remain more flexible and not stuck in the credit hamster wheel of your owner-occupied property for eternity. This article is therefore exclusively about real estate to make money.By that I don't mean the normal capital investments in big cities, which only yield 3% returns, just about cover the costs and serve to park the money. This is currently very popular because there is no interest on the account in the zero-interest environment. I write much more about investment properties that are self-supporting and also generate surpluses. So bring cash. Read: Increase your cash flow with these 5 basics The minimum criterion for real estate investments should be at least a black zero in the calculation. Of course, a surplus is much better. We are not interested in real estate that we have to pay money for every month. Buy & Hold Buy & Hold is the strategy of buying the property and holding it for the long term. The property generates monthly income from the rental income and thus ensures passive income.A single property only yields a small amount, but this is constant and increasing over time. The principle really comes into its own when you have several properties in your portfolio. You might not be able to live off a single property that generates €200 a month. With ten of these properties, things are quite different. Read: The most important points why you need diversification Buy & hold is not about quick success and quick cash. Rather, it is a long-term strategy in which you constantly build up your portfolio and thus increase your monthly income. It does not matter whether you invest in apartments, apartment buildings, garages, businesses or similar. The rent flows monthly, covers all costs and generates the surplus. As a beginner, you should start with a single apartment and gain experience. Both in terms of the process of buying and the life of a landlord. Read: 6 good reasons to buy a rented apartment as a beginner Bit by bit you can buy more and more and invest in bigger and bigger objects. Due to the cash flow from the previous objects, you always have more money available, so that the creditworthiness increases with each object. That means: more freely available equity and a better credit rating with your bank. Fix & Flip Fix & Flip is mainly about properties that are in poor condition being bought cheaply, upgraded and then resold. These are often run-down properties with a large backlog of repairs or other problems (legal or with tenants). This strategy often only has a time horizon of 6 to 12 months and is used to generate a one-off profit. For example, a dilapidated house is bought for €100,000. Then will be 30. 000€ put into the renovation and repair and got the house back in shape. This increases the value of the house and often increases the rent at the same time. The house can then be sold for €200,000 and the investor has a profit of around €30,000 after deducting taxes. This profit is often put into the next object. By building up equity, the objects and projects are getting bigger and bigger. So this principle is a good fundraising measure. However, this is not for beginners, as you need to be familiar with restructuring and have good contacts with brokers and bankers. Conclusion: The Buy & Hold strategy is recommended for beginners. For starters, a small apartment is ideal for getting to know the buying process and life as a landlord. If you like that, you can make bigger deals afterwards. Therefore, this article will mainly deal with Buy & Hold.Read: Renovation of the properties in the distance – What should I pay attention to when doing the repairs? Two important points about the mindset When it comes to buying real estate, there are supposedly big barriers to entry. However, these are not the knowledge or Remax Belize the equity, but hurdles in your own head. There are many prejudices that people prefer to invest in Riester pensions and funds instead of in real estate. Therefore, it is important to look at the hurdles in your own head and break down these hurdles quickly. Without that you can stop right away. Then this article would just be a waste of time. So look carefully at the next two sections and then check with your ego if this is okay with you. Tackling instead of talking – how much time are you willing to sacrifice? Often enough you have to deal with people who complain about everything and never want to change anything. Or with people who want to change something, but are banging their heads with theoretical knowledge and never get to implement it. Fritz Recknagel from the Digital Army recently said in a video that 30% of the buyers of his video course have never logged in. That is shocking. There's a big difference between "making a wish" and "making it happen". How many people want to quit smoking but switch back to cigarettes after a week? How many people want to lose weight but quit after the first two weeks of gym? Too many. The crux of the matter is: Don't ask what you want, but what you are willing to do to have your wishes fulfilled. And what you are willing to sacrifice for it. It's the same with real estate. If your desire is a real estate portfolio and the income that will come from it, then you must be willing to devote time to it. The time to acquire the knowledge and build the portfolio. One-click get-rich-quick money is often promised, but it's bullshit. Except maybe the lottery. But there the odds are 0.0000064 percent. So I would like to encourage you to set a goal, acquire the knowledge and then get started. Read: Goals for 2019 No years of research, no years of weighing the pros and cons. Just get started. The worst that can happen: Your first property may not be quite as ideal. So it was at least for me. My first property was poorly calculated and initially had a negative cash flow of €10 a month. However, I was able to quickly increase the rent and rent out the parking space as well. And even if you realize that being a landlord is not for you, you sell the property again. It is important to get started and then perseverance. As the successful investor Torben Käselow says: "Just do it". Passive income and financial freedom Of course, just "doing it" requires motivation. Nobody buys real estate for the properties. Nobody wants a lot of money because checking their account balance every day makes them happy. Rather, it's the opportunities that the money and passive income provide And these reasons can be very different. Everyone has a different motivation and drive. The first does not want to worry about poverty in old age. The next person would like to work less in a normal job and still have the same money available. The third wants to travel a lot and needs a location-independent income. The fourth wants a luxurious life and needs a lot of money for it. Read: I'm a millionaire. hell year baby Read: Retirement plan? Check! The reasons are different. But to realize all these dreams you need one thing: money. And if possible as a passive income stream. Time and location independent. That means you invest time and money once, build a system and thereby generate future income. For me you could describe it as follows: earn a lot with something that is fun, at the same time have a lot of freedom and be independent. When I have achieved this goal and can make a good living from the real estate, then I can think about what to do with my life. For example, I can move closer to my old friends or even start a family. I would also like to continue to travel a lot to South America. I really like the countries over there, the culture, the people, the climate and the attitude towards life. It enriches my own life incredibly and gives me a lot of energy. All of this is only possible if I earn a lot of money regardless of location. Hence my real estate investments. You see you need a reason. What drives you? Think about why you want to invest in real estate. Because then you are more motivated, even if things are going a little worse. Then you pull it off and you will be rewarded at the end. Read: Why Financial Freedom? education and knowledge Every investment starts with knowing how the investment works. Even Gerald Hörhan said that you should only invest in things that you understand. It's the same with real estate. You don't need to know what a building code or land register is up front. However, you have to understand the basic things like real estate balance sheet, cash flow calculation, saving instead of savings and repayment as wealth accumulation. These points are so important because they explain the real estate system and its advantages to you. When you understand that, the scales will fall from your eyes. You'll wonder why you didn't start real estate sooner. At least it was with me like that. Read: Recommendation for landlords real estate balance sheet The real estate balance sheet is the most important topic that a real estate investor needs to understand. She explains how real estate and making money with real estate works. The property generates income and this income is offset by costs. If the income is higher than the expenses, the property makes a profit. If the income is lower, then I have to subsidize my property with money. Therefore, one must know the right financial figures for the property and put them in relation. The most important figures are the cold rent, the loan installment, the management costs, maintenance reserves and taxes. Some things like reserves and taxes are very flexible and depend on different things. Others are fixed and can be found in the exposé. Attached is the schematic representation. In the calculation on the picture you can see the balanced balance. The costs are completely covered by the income. The withdrawal of the surplus – i.e. your income – counts as a cost for the system of the property. You see that the property pays for itself. In addition, the property will be repaid (asset accumulation for you) and you will have a small surplus. This representation is of course greatly simplified and is intended to serve as an explanation. If you have found a worthwhile property, the calculation must be made in much more detail. Attached is a calculation of one of my own apartments (ETW7). The exact calculation of the property is very important, so we will go into more detail on the subject later.Download: My free Excel calculation tool for apartments and apartment buildings Saving instead of saving A second important thing is the issue of saving vs. saving. This fact helps us to build up wealth more quickly with real estate. To understand the difference, you need to know both terms. As an example, let's take the target amount of €100,000. When you save, you save money over time. For example, you put a certain amount into a savings account every month. Until you reach the target amount of €100,000. You save the amount. When you save, you do it the other way around. You take out a loan of €100,000 and pay it off over time. In the first way you save the money, in the second you pay back a loan (saves off). Why is this all so important? Very easily. The big difference between these two forms of saving is the saving direction! When saving, the curve goes up. When saving, the curve goes down. The direction alone is not the decisive factor. But when you factor in inflation, saving takes on a whole new meaning. Inflation always goes in one direction. Downward. Inflation devalues your money, your assets, your savings. You try to save money, but the money is partially eaten up by inflation. The same applies to salary increases. Every now and then you get a raise at work. However, nothing is left of it due to inflation. All goods are becoming more expensive, you have to spend more money for the same lifestyle. Inflation therefore works against your efforts to save. Inflation affects debt in the same way. The debt is devalued by inflation. This happens on a large scale with government debt, but also on a small scale with credit debt. So if you repay the loan while saving, inflation will support you because it devalues your loan amount. Inflation works in the same direction as you save when you save. You take advantage of inflation. So once work against inflation and once work with inflation. In the following graphic you can see the difference in the example calculation of €100,000. Saving 100,000 at a monthly rate of €400 and inflation at 2% takes you 28 years. Paying off a €100,000 loan at a monthly rate of €400 and inflation at 2% takes just 17 years. So you're almost twice as fast! Conclusion: It is better to take out a loan and pay it off than to save yourself. However, this only applies to assets and not to normal consumer goods. They do not generate any money and therefore do not cover the interest costs. Repayment is wealth accumulationWith regard to the real estate calculation, the repayment plays a major factor. This is often seen as a "nuisance" because it minimizes free cash flow. As a beginner, one tends to think of amortization as just a cost. The repayment is a kind of asset accumulation if it is done by the tenant. The repayment minimizes the amount of your real estate loan. The difference between assets and liabilities in your balance sheet is getting better and better. For example, with a €100,000 property and 100% financing, you have net assets of €0 at the beginning. The €100,000 asset value of the property is offset by €100,000 debt. Thus, at this point in time, the investor has just as much wealth as a person with no assets and no debts. With an annual repayment of 2%, your tenant has repaid 2% of the debt after one year (your real estate assets remain the same). This means that there are only 98 left for the €100,000 property. 000€ in debt. Your net worth is now €2,000. In addition to the monthly cash flow of your property, the repayment of the real estate loan also increases your net worth. Thus, the repayment can also be counted as "income". However, this income is tied to the property. As long as you sell the property or lend it again. The repayment is therefore part of the return generated. It is important to understand that the repayment is only part of wealth accumulation if it is taken on by the tenant. For example, if you make a special repayment, this is not an accumulation of assets, but only a change from the left pocket to the right pocket. You reduce your debt, but also your disposable income. Conclusion: The repayment of the loan by your tenant is part of the wealth accumulation and increases your income and your return. Read: Plus 75% fortune in one night?Find the right property When looking for real estate, a fundamental distinction is made between on-market and off-market real estate. The first area is accessible to everyone, for example via Immoscout or broker sites. The second area is much more word of mouth or referrals. Of course, the second area is more lucrative, since there is less competition and there is often no broker in between to screw up the purchase price. For the off-market area you first have to build up a network, which is why beginners often only have access to the on-market area. But that's totally fine, I also found my first six apartments on the market. Read: 6 good reasons to buy a rented apartment as a beginner property scout One of the best-known real estate platforms is immoscout24. However, the other platforms such as immowelt and immohome serve the same purpose, which is why immoscout represents all platforms in this industry. This site is a marketplace for apartments and houses to rent or buy. Depending on the environment in which you move, all areas can be interesting. We are particularly interested in the apartment and house market in the buying area. Brokers offer many properties for sale on this platform. You can search there by region, price, room, square meter, rent, equipment and much more. For most properties you will find an initial overview with all the necessary numbers and some pictures. For me, the two most important figures are the sales price and the annual rent. Using these two values, I can form the quotient. So the yield (annual rent / purchase price * 100) or the factor (purchase price / annual rent). This value is a first rough guide to see if the property is worth it. For myself, I've found that I can only take a closer look at properties with a 7% yield. Anything below that usually doesn't generate much cash flow. This of course varies from place to place. In Munich, investors would be happy with a return of 5%. If I find something with a 7% yield, I write to the agent directly and ask for more documentation. Read: These 3 return indicators are the most important for you Immoscout offers the great function of the e-mail alarm. There you can set your search criteria and will always be informed by e-mail when a new property is advertised with these criteria. So you don't have to look through all the offers every day and you are always the first to see offers on this platform. Unfortunately, the filter cannot be limited to a percentage for the return. But we investors still have to have something to do. Conclusion: Create a search request at Immoscout according to your real estate criteria and you will receive all newly available properties by e-mail every day. Most properties are sold through brokers. It is therefore important to get to know a few good brokers and build a relationship of trust. Good properties are very rare and the brokers have a good network. Before you put good real estate online, you first write to your buyer network. Many properties are sold on these networks (off market) and never come online on Immoscout. Malicious gossips claim that only properties that nobody wants end up on Immoscout. I can not confirm. I have more than half of my properties from Immoscout. Many private individuals advertise there because they want to save themselves the broker.Nevertheless, you should establish good contacts with the brokers so that you can later be introduced to the good properties. You have to show the broker that you are professional and that the broker is not wasting any time with you. Agents don't want to waste their time on someone who just bugs them with questions and viewings but never buys anything. Conversely, you will automatically gain favor with brokers if you buy objects from them. The real estate agent notices that you are really interested in real estate and that you can make money with it. If he then notices how well organized you are and how quickly the purchase goes with you, you will become the broker's favorite and will soon receive preferential treatment. Conclusion: The more business you do with the brokers, the better the relationship with the brokers and the better real estate you get. Don't just see the broker as a cost, but as the person who gets you good deals in the first place. The object check with Excel calculation The property inspection is the core of the investment. Here you take a close look at the property and see whether the investment is worthwhile or whether the property is junk. Especially in today's world with low interest rates and many interested parties, some sellers are calling for moon prices. You have to sort out these properties very quickly, otherwise they will rob you of your valuable time. My first rough calculation is the rental yield or factor. This is the ratio of annual cold rent to the purchase price. Example: A purchase price of €100,000 and an annual rent of €7,000 mean a 7% return. I have decided for myself that I don't even look closely at properties below 7%. The absolute minimum is 6%, which I outlined in my beginner's guide. You can get both the purchase price and the annual cold rent from the exposé or on request from the broker. Exposé and other required documents The most important document when buying a property is the exposé. The exposé contains all key data that are required for your calculation and calculation. At least if the broker makes an effort. From time to time there is a short and a long exposé. If you cannot find all the information in the synopsis, request additional documents. For me the most important documents are: 1. Exposé 2. Lease Agreement 3. Economic plan 4. Extract from the land register 5. List of tenants (for an apartment building) With these documents you can calculate the profitability of the property. If you then like the property, you can carry out the further steps. In addition, these are the documents that your bank needs at the beginning. Based on these documents, the bank can tell you whether they will support you or whether they will keep their hands off it. Download: A complete list of required documents can be found in my Landlord Tools download package During the purchase process and negotiations you will need additional documents. These are WEG logs, pictures, household accounts, declarations of division, insurance policies, floor plans, construction drawings, cadastral maps and so on. Your bank will give you a detailed list of the required documents. Calculation of investment real estate The calculation of the property is the heart and therefore your most important task. I explained the theory behind it above in the real estate balance sheet section. Now for the hard facts. You are welcome to use my real estate calculation Excel as a calculation template. I use the same Excel for all my investments.Download: Real Estate Calculation Excel The Excel is self-explanatory and provided with formulas. If you want to understand a calculation of a field, look at the formula behind it. In addition, I have a small FAQ on the page, which explains common questions about Excel. The first thing to do is enter all the important data into Excel. Some data are only of an informative nature (e.g. address), other data are used for calculations. You can basically say that you have to deduct all your costs from all income. The result is the cash flow. It can be positive, zero or negative. At the beginning you don't find the best objects right away, so calculations with 0 cash flow are perfectly fine. The more positive the cash flow becomes, the better. Only properties with negative cash flow are a no-go. One of my criteria is the per thousand cash flow. In the case of a property, one per thousand of the purchase price should always remain as monthly cash flow. Then it is a worthwhile object. That is, we divide the purchase price by 1,000 and get our required cash flow. For example, if I buy a property for €50,000, then the property should have at least a monthly cash flow of €50. It is also important that I include all costs – including the imputed ones – in the calculation. I include both the hard costs, such as credit and management, and the soft costs, such as taxes and the imputed maintenance reserve. So I'm on the safe side, even if something goes wrong. The inspection of the property and the tenants The condition of the property is an important factor and checking it should always be part of the buying process. No one buys a pig in a poke, and realtors do a nice job every now and then. Of course they want to sell. Of course you can also do the visit yourself. There are many sources on the Internet for this, which you have to pay attention to when you visit them yourself. Alternatively, you can hire an appraiser and go along. He will show you what to look out for so that next time you can do the tour yourself. One of the most important factors in my passive strategy is outsourcing. Many good investors invest in locations far from where they live because these locations have a better return. They therefore need a good and reliable partner on site. Especially with new investments, the apartments and houses must be looked at. After all, a broker can write a lot in his exposé. As an investor, I need an objective appraiser who can flexibly carry out an inspection anywhere in Germany and who can describe the condition of the property to me in detail. He can tell me if there are any defects and how much it costs to rectify these defects. Then you can use these deficiencies as arguments in the negotiations and negotiate the purchase price down. Outsourcing – real estate visitors As an investor, you often have neither the time nor the knowledge of a civil engineer to be able to carry out a detailed inspection yourself. So we need a service provider to do this for us. In my research I came across the company immobilienbesucher. This company offers inspections and appraisals throughout Germany. The assignment works via e-mail and then the company sends one of its appraisers to inspect it. And that for a low price of around 100€. The appraiser then contacts the broker and carries out the inspection. So the whole thing runs quickly and not over three corners. Simple and efficient. I don't have to travel to the property myself and can save time and money. The report and the pictures are conveniently available via email. Contact: Appraisers throughout Germany Get to know the tenant During a viewing, you often get to know the tenant and get a first impression of him. Is he neat and clean or does he live in a dump. Does he look organized? How does he imagine the future tenant-landlord relationship? Does he want to stay in the apartment at all? These are all questions that can be clarified directly during the visit. You can also ask the tenant directly if everything is okay with the apartment or if there are any problems. Sometimes the tenants are more willing to provide information than the broker or the owner. Of course, in the presence of the broker, you have to ask the tenants directly and you can't ask everything directly. A bit of tact is required so that you don't expose the broker and mess with him. Financing – find the right bank The financing of the property is one of the most important factors in the real estate strategy. Unlike with stocks, for example, we can leverage our investment and thus take bigger steps. The return on equity increases and we can grow much faster with our money than with pure savings. In addition, the bank only finances us for good properties. The bank is a kind of additional safety factor, since it carries out its own calculation. If you have a bad item and don't notice it, the bank will tell you. If the bank offers you an interest rate that is too high, there is often a reason and you should examine the property (or your creditworthiness) again. Read: How do I find the right bank? Here are the most important pointsNevertheless, the banks have different guidelines, different conditions and different customer groups. There is no one bank that is perfect for all of us. One bank only does residential real estate, the next bank does not finance less than €50,000, the third bank does not finance non-resident taxpayers and the fourth bank always wants building savings. It is therefore important to find the right bank for your project. There are a few similarities for each bank, but also a few differences. Read: Non-residents – A loan for foreign real estate Own credit rating Money and a loan are always about trust. Likewise, if someone asks you for money, consider how much you trust the person to get your money back. The bank does the same. She's wondering what the chances are that she'll get back the money you lent her. The more the bank trusts you, the less risk the bank has to take, and the better the interest rates will be. If someone has €50,000 in the bank, then the bank trusts them more than someone living month to month. Read: Start with little income and bad credit The bank will check your complete financial situation, i.e. your creditworthiness. The better your credit rating, the easier it is to get good credit. Therefore, you should bring your credit rating to the best possible level. There are basically four options: 1. Household bill 2. Fortune 3. Collateral 4. Tracking Record You should make sure that your household bill is clearly positive. That means you should take in more than you spend. The bigger the difference between income and expenses, the better. If someone earns €3,000 and 1. 000€ in expenses, then he has a better credit rating than someone who has 6,000€ in income and 5,000€ in expenses. So increase your income (salary, rent payments, dividends, etc.) and decrease your expenses (living expenses, loans, etc.). Secondly, it is an advantage if you have already built up wealth. Then the bank sees that you can save and not spend everything. The bank concludes that you have no problem with an additional home loan. In addition, you could raise equity on the property purchase and pay for problems such as sudden repairs. Third, a bank likes to see more collateral. The bank can use this collateral to hedge the risk of the new loan and thus give you a better interest rate. This can be another property, a share portfolio, life insurance, home savings contracts and other things.Fourth, the bank looks at your experience as an investor (track record). If you've already bought a few properties, the bank would rather see that than if you're a beginner. The bank sees that you have experience in the business and have already made good deals. In addition, the bank sees that you diversify and spread your "default risk". Read: My financing strategy for rapid growth house bank The first step will certainly be to your house bank. So the bank where you have your account and with which you have been working for a long time. That's how it was with me too. The bank has known you and your financial behavior for quite some time and can assess you. Therefore, the bank is more willing to give you a loan than a new bank. However, the bank often reaches its limits when the properties are outside of its region. The savings banks and Volksbanks in particular have the regional principle. My Braunschweiger Sparkasse initially made an exception and financed my first three apartments in Leipzig. After that she drew a line. She only wanted to finance in her region of Braunschweig, Wolfsburg, Wolfenbüttel. But since I'm buying real estate in Leipzig, I had to look for new banks. Write to new banks After the house bank, other banks come into play. Either you already have contact with other banks or just write to them. All banks have a website with e-mail addresses or contact forms there. There you can write to the new banks with a request for "real estate financing". You should write to as many banks as possible in order to have a large selection. For example, I wrote to ALL savings banks and VR banks in Saxony to get financing for Leipzig. If you get a lot of rejections, you shouldn't let that irritate you. I myself have received around 90% rejections. But three or four banks that want to work with me got stuck. All in all it was four hours of work in one evening, but it was worth it. You do this work once a year and can then always fall back on the contacts you have made. Contacts: Financing throughout Germany financing intermediary Another possibility is the financing broker. These intermediaries have contacts with various banks and know the banks' requirements for new customers. They will help you to compile all the documents, look for a suitable bank for you and accompany you through the financing process. All of this is free of charge for you, since the financing brokers are paid by the banks if they are successful. You can just try it, even if nothing comes of it in the end. funding strategy The bank can offer you various conditions for financing. These conditions depend heavily on your real estate strategy. If you want to be on the safe side, bring a lot of equity with you, set a high repayment and take a long fixed interest rate. If you – like me – want to grow quickly, then you mortgage the property very high and choose short fixed interest rates. Read: Why I choose fixed interest rates for only 5 years You can also choose between annuity loans, building savers, repayment vehicles, full repayments and many other options. Everything depends on your strategy and your credit rating. For example, I have a strong growth strategy and align my financing accordingly. Read: 6 strategies on how to buy and finance real estate without equity The purchase process – notary and land register The buying process is actually pretty simple. Basically, the notary does everything, that's what he gets his money for. As soon as you have agreed on the details with the buyer, a notary will be sought and a purchase contract will be commissioned. Since the buyer usually pays the notary, he can choose the notary himself. The notary can be near the property or around the corner from you. Even abroad is possible. Sometimes the seller or the agent pretends to be a notary because it is easier for them. Don't let that fool you. You pay, so you choose. In case of doubt, the seller can obtain approval from a notary in his area. Purchase contract The purchase contract is drawn up by the notary and contains all legal matters. You don't have to understand them in detail, I don't either. We have the notary for that. He ensures that everything is legally correct and that all laws and permits are observed. For example, all deadlines are clarified. So when the purchase price payments and when the transfer of ownership takes place. It is clarified which tasks the buyer and which the seller has. There are often standardized purchase contract drafts from the notary, which are supplemented by your additional requests. There is freedom of contract and you can – to a certain extent – write everything possible into the purchase contract. For example, you can specify which costs the buyer and which the seller bears. The notary will regularly send you the draft of the purchase contract and all supplements. This process creates the purchase contract, which you sign at the notary appointment. And even at the notary appointment, adjustments can still be made. The notary continues to take care of all permits and communication with the land registry. In the end, all you have to do is pay the bills. Read: Deal fell through before the notary appointment. What now?After permission It often happens that the buyer and seller live in different places or the property is far away. In order to save travel time and travel expenses, one can split the approval of the sales contract. The buyer notarizes with a notary and the seller with another notary. The first would be the notary appointment to notarize the purchase contract and the second appointment would be the subsequent approval. The costs of the subsequent approval are generally borne by the subsequent approver. For example, I always had my purchase contracts notarized in Constance, as that was the nearest notary for me. The seller then always approved it in his city. This saved us hundreds of kilometers of driving. A great deal can be written on the subject of taxes. However, this is not tax advice and everyone has to look at it individually. Nevertheless, one can say that there are generally two things to consider.Read: Why you don't have to pay taxes as a real estate investor Private or GmbH In general, you can buy real estate privately, in a limited liability company or in another form of company. Both have advantages and disadvantages and depend on your strategy. Everything is easier with a private purchase (private tax return) and you have some tax advantages such as tax-free sale after 10 years. Read: My tax return 2016 However, you must tax your real estate income at your private tax rate, which may be 45%. In a GmbH you have several requirements such as your own tax return, accounting, formalities and no tax-free sale. You can reduce the tax burden to 15%, for example with an asset-managing GmbH. Such constructs are somewhat more complicated and require careful planning. Long-term wealth accumulation or commercial real estate tradingIf you want to build up wealth in the long term (buy & hold), then taxation when selling a property should not be an issue for you. After all, you're not selling. So you can tax your income as normal privately or in the GmbH. But if you do fix & flip or generally want to sell real estate more often, then this can quickly fall under commercial real estate trading. In the case of commercial real estate trading, the income is subject to income tax/corporate tax and, in addition, to trade tax. Even if you only sell a few objects, all objects (including the Buy & Hold objects) count as commercial. You then "infected" the other objects, and that comes with an additional tax burden. Therefore, professionals differentiate their objects according to their purpose. Buy & hold Objects are bought privately or in a GmbH and objects for sale are bought in another, separate GmbH.Conclusion: Overall, there are many options and control strategies. Explaining all of them would be too complex in this chapter. First of all, it is important to know the tax difference between wealth accumulation and real estate trading and then to align the strategy accordingly. I buy all objects privately because I don't want to sell and only build up assets. Contacts – the be-all and end-all Good contacts are very important in every industry, especially if you have your own business. As an employee, you don't have to pay so much attention to this, as you often get the tasks and contact persons from the boss. But if you are self-employed and/or have a company, you have to take care of the contacts yourself. Many contacts can be found online these days. Simply fire up the search engine and enter "Notar Berlin" or "Electrician Leipzig", for example. The contacts that rank at the top of Google are usually quite reliable. There's a reason they rank high on Google. They either do good marketing or are recommended by many customers. This principle always applies when there is a buyer or customer market. That is, when there are many providers and the service is not very specific. But if the service or the product is very rare, then good contacts are required. Certainly there are many brokers on the market. You can easily find many properties. But often these are the junk properties that nobody wants. The good real estate often goes under the hand or to a selected group of interested parties of the broker. It is therefore important to get into this group of interested parties, to get in good contact with the broker and to build up trust in him. Now you are probably asking yourself the question, how do I get good contacts? Ultimately, it is a combination of two parameters: awareness and trust. notorietyWhen you're just starting out in real estate, no one knows you. Therefore nobody can offer you good deals. You need to get better known. It helps to write to many brokers, go to trade fairs, ask friends, hand out business cards, etc. A digital presence such as a blog with a wide reach also helps. Make sure that as many people as possible know what you do and what you are looking for. Let yourself be included in the "customer files" of the brokers, administrations and sellers. Even if an offered property doesn't suit you, the broker might introduce you to another property standard mail ("I'm looking for condominiums in Leipzig for the price of XXX…"). This is how I found my first two properties. Trust The second important criterion is trust. It won't do you any good if a thousand brokers know you but they don't trust you. Because, for example, you only discuss and cause work for the brokers, but never buy a property. The brokers need to see that you act professionally and that you push deals. So the brokers can make money with you. If you have bought an apartment from a broker, then you have built up trust in the broker and he will introduce you to other properties. If you don't always haggle with the broker about every cent, if you are well prepared (financing commitment and quick processing), then he will remember you well. All this applies not only to brokers, but also to craftsmen and banks. If you pay on time and make a professional impression, the tradesmen love you and will give you preferential treatment. If you prepare your personal documents well and pay your loans on time, then the banks love you. They see that you're not a "babbler," but that you know a lot about real estate investments. Then they'll trust you more and give you better financing conditions. Especially with banks, you can measure the level of interest by the level of trust. The higher the trust, the lower the interest rate. Conclusion: Advertise yourself and get in touch with many service providers. Let her know what you're looking for. Write to many brokers, bankers, tradesmen, etc. Not just one. Work professionally, always pay your bills on time and build up a relationship of trust with your contacts. re-letting There are three ways to look at the issue of re-letting. The first thing you can do is have a separate property management (SEV). This includes automatic re-letting in the event of a change of tenant. This is done very negligently by some administrations. It often costs a surcharge and is contracted out to an outside broker. He also works slightly unmotivated, since he has a general contract with the administration and therefore little motivation to do the whole thing carefully. This brings us to option two, handing over the new rental directly to the agent if it becomes necessary. So you become a customer of the broker. You pay him his commission directly. He then wants to do the job very properly because he wants to get the commission quickly and keep you as a customer for the future. Depending on the contract with the broker, he takes care of the advertisements, credit checks, inspections, moving out of the previous tenant, minutes, rental agreement and key handover. As a rule, this costs 1.5 – 2 monthly rents. As a third option, you can do everything yourself, which is the cheapest but also the most complex. Don't underestimate the time you spend on sightseeing. Especially if you live further away. No matter which option you choose, you should always check the new tenant carefully. It is better to examine and search longer than to quickly get involved with a bad candidate. For the check, you should always request a tenant self-assessment, a Schufa information, a previous tenant certificate and proof of income (payslip, child benefit, pension, Hartz4, etc.). In addition, with the copy of the identity card you have a good overview and, in addition to the personal impression of you (or the broker), a good decision-making aid. I always take option two and engage a broker as soon as I receive notice from the previous tenant. Read: previous landlord certificate Conclusion: You can take care of the new rental through the administration, the broker or yourself. In any case, you should check the prospective tenant carefully using various documents. rent increasesAs a landlord, you will sooner or later deal with rent increases. Rent increases help to increase returns, cover costs or increase the value of the property. There are various rent increases with different legal regulations and deadlines. The most common types are rent increases according to local comparable rents, rent increases according to the rent index, rent increases for operating costs, graduated rents and index rents. A rent increase must be announced sufficiently early and approved by the tenant. Laws such as caps, annual periods and maximum amounts are regulated in the German Civil Code. Read: Rent increase? How does it work? Management of rental payments Rent payments and especially the controlling of rent payments are becoming a constant in the monthly administrative tasks as the number of properties increases. In the beginning you were crazy about the first rental entrance, but at some point it becomes routine. Especially if the loan and house money go out of the account at the same time. As with all administrative and clerical tasks, at some point there will be a desire for automation or easy tracking / reporting. How do I monitor my rental payments? Which tools do I use? What should be considered in general when paying rent? Which legal issues do you have to consider? You can read all of this in my post on paying rent.
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