Buying a home in three steps – Part 1: What should owner-occupiers look out for?
Buying a home in three steps – Part 1: What should owner-occupiers look out for?
If you buy a shirt in the wrong size, a faulty electrical appliance or even an impractical piece of furniture, it’s annoying, but in most cases the wrong purchase can be exchanged using the receipt. Buying a property, on the other hand, is a lifetime decision, which is why it is better to avoid mistakes and make the most of the potential. Strict regulations apply to property purchases in Germany – especially for your protection as a buyer. What should you know about buying a property and what rights and obligations does a condominium entail? Our three-part beginner’s series covers all aspects of buying a home. The most important question is whether it should be a new-build or an old apartment and whether it should be used by the owner or rented out as an investment. This is because there are different criteria for choosing the right property.
Your own home – your own property as a home
Many people dream of owning their own home: no monthly rent to pay into someone else’s pocket or fear of being given notice and rising rents. As the owner of a property, you also have the freedom to renovate and convert your home according to your own ideas. If you decide to use your property yourself, you should above all feel comfortable in it. The question arises as to whether the property suits your family plans: Does the home have a sufficient size for future children’s rooms or the desired garden for planned pets? Of course, the location and surroundings are also crucial. Depending on your personal taste and individual lifestyle, factors such as the commute to work, transport infrastructure, leisure and cultural activities, local recreation areas or daycare centers and schools within walking distance are decisive. A home can later serve as a good retirement provision. After all, if the loan is paid off by the time you retire and the property is therefore unencumbered, you are not far away from the desire to live free of charge. Only the ancillary costs will still have to be paid. If you decide to sell your property, you will have access to a financial cushion in old age.
Real estate instead of a savings account – the capital investment
In contrast to owner-occupiers, investors benefit from a steady cash flow. Regular rental income can provide a second, passive income beyond retirement and is therefore a popular retirement provision. You can also register your own requirements in old age and live in the property yourself. Above all, real estate as an investment has tax advantages. Depreciation and ongoing maintenance costs are tax-deductible. Even if you as the landlord generally have to pay for repairs or the costs of property management etc., various costs for street and building cleaning or garden maintenance can be apportioned. If you are planning to rent out a property you have purchased, the macro and micro location plays a major role in the search for a suitable apartment: is the location attractive to potential tenants and does the floor plan appeal to different tenant groups? A look at the demographic distribution in the district makes it easier to assess demand. If the district is dominated by singles and young families, two- to three-bedroom apartments are more in demand than oversized properties. If a property has three well-divided rooms, for example, an office, children’s room or an additional hobby room can be set up as required, thus appealing to several potential tenant groups. Depending on demographics, factors such as proximity to schools and leisure facilities, doctors or bars and restaurants are also decisive. If supply and demand match, renting is a very viable option. There is no general answer to the question of whether a property should be used for owner-occupation or as an investment. The decision depends on many personal factors and the location of the property and must be weighed up individually. In the next FORTIS blog, you will find out everything you need to know about suitable financing for your property.