hello all. after much studying and reading alot of boring information that took me back to my economic geography degree, me and my mate have decided on berlin/germany to try and make a few quid. the advice we need is more from a practical finance point of view as we have got off our butts and done most of the research ourselves. the result is

aim- capital appreciation over no fixed time period-we are prepared to be patient.

we have a max deposit of 18k to include all fees etc.(not going to get us far but thats all we have)

if we had to we would put 400pound a month in to subsidise the right place out of our own pocket as potential growth is more important to us as i feel there is only one way german prices can go and thats up,my attitude is its a matter of the time period not if.

rental yields are not vital to us providing they are not pi55poor.we are looking at it like a savings account if the worst case scenario unfolds and property doesnt increase much over 5 years, we would just bail with what we could get, cant do no worse than buying in the uk so not much to lose.18k gets sod all interest anyway in an ISA

1) deposit is the 1st issue, have a potential 18k between us.we are in 2 minds whether to use all or as little as possible...this is where the practical advice is needed. my knowledge of overseas mortgages is poor so any help here would be appreciated. are they based with uk or german banks? any rules on btl mortgages like in uk. would you put all, some or little?


2)as for districts in berlin, would want to go for a "safe" area, and am thinking mitte, friedrichschain, but will know more when i go, karl marx allee strike out at me because my heart tells me people are people and like historical/character buildings but maybe that may change my opinion when i go and see for myself.

3)the renting scenario.ive got quite a good understanding of the laws and potential pitfalls/tenants rights etc but again the more practical advice of actually doing it is needed....
a)would you advise going through an agent or private/pros and cons of each.what is the average cut they take and is it worth the money?
b)say if the apartments skyrockets in value and you cant stick the rent up, so want to sell and cash in, how would you do this?...bribe the tennant and bung them 10k springs to mind, any other way?
c) also how does a sitting tennant affect resale value, is it better or worse?im guessing that will depend on yield.
d)i hate being ripped off so potential EA cons and pitfalls would be appreciated that a noob investor may fall for.

4) this probably sounds daft but because of my poor knowledge of mortgages, we are having trouble establishing a what we want to spend.my gut and basic maths tells me 80-120k, but i need to get this established before i go so i target the right properties and dont waste time, so any helpful comments would be lapped up like a camel at a desert oasis.

thanks,

You have a lot of question but lets just stick to number 1 for now.

Advice - you ain't gonna get much with 18k deposit - especially on the famous karl-marx-allee/frankfurter allee where average flats (1 to 3 bed) are 130 to 200k euros (which is still a massive bargain though).

Reason - German banks are conservative and will only lend up to 60% of apartment value - and that is if you have amazing yield - and typically if you have amazing yield you will not have a nice looking apartment in a good area (though I admit it is possible sometimes) which will give poorer capital appreciation as no-one wants to buy them (as they are ugly 60's blocks) apart from professional landlords - who buy in dozens of apartments anyway. So you are left needing a very big desposit.

Add to this the cost of buying (lawyers, estate agents, property transfer tax - up to 13% of apartment value + VAT) and you are probably looking at a total budget of approx 50k euros (based on your deposit) - of which you will blow 8 to 10k on the paper work. That leaves you with 40kish euro for an apartment. There is virtually nothing for that price in the up and coming areas (some of which you mentioned) - you would have to go somewhere well on the rough side (Lichtenberg anyone?).

So conclusion is look really hard and you may find something very small (25-30 square metres maybe) or secure more finance (i'd say going in with 50k euro deposit is more realistic for some starter level apartments). And, unfortunately, you can't get more finance in UK unless you have something to secure it against (like your home).

Or if anyone with more knowledge than me can tell me how to get bigger loans in germany than the 60% rule I'd be interested to know myself.

Alternatively - skip Berlin and head for the east - risky - but places like Dresden and Leipzig and other towns will be cheaper - mass unemployment though (which is saying something since Berlin has high unemployment itself).


Didn't want to sound tough but that's the way it is in Berlin - there is no point you wasting your efforts unless you know what to expect. If Berlin was that easy everyone would be doing it and prices would be much higher.

However - if you do manage to sort out your finance it is a great place to own - less risky (because you have a bigger deposit), great rental (tennants stay for an average of 5 years), beatiful apartments at a good price compared to every index (yields, average earnings etc etc) and of course the appreciation - Berlin is just starting the cycle and my apartments in Friedrichshain went up 20% last year.

Hope it helps in you assessing what your options are.

Cheers

Lex

Congratulations, you started to screw up the Berliners. I am sure they are very happy about Brits coming to wreck their market.

Berlin is a bit different to the UK. If people want to buy, they can - it is the banks who prevent them - affordability is fine compared to average salary. I don't think at 12% ownership and the strongest tennancy laws in europe anybody is going to screw up anything for the Germans. A few thousand people from UK buying 1 or 2 investment apartments ain't gonna do anything to the pricing in a city of 3.5 million people. It is never going to be some top second home destination like France or Spain.

And judging by the amount of near derelict buildings that are being turned from slums into nice apartments the Berliners are quite happy too. So try not to judge what is happening in Berlin until you've actually been there, spoken to Berliner's about how pleased they are to get injection of capital (housing funds struggling to maintain buildings properly due to cash flow problems) and how former property blights are making neighbourhoods more desirable. And no - it does not effect their affordability as you cannot ramp up rents because of the strong tennancy laws.

Don't believe me - please ask the local Berlin government whether they think foreign investors in their cash strapped city with high unemployment and near broke housing associations is a good idea or not. I will not be surprised at the answer but you might.

That sounds very interesting but I can't help but be sceptical when I hear of property getrichquick schemes. There was a thing on the telly the other night about people who had bought flats in Leipzig and lost quite a lot of money.
Apparently 1 in 10 flats there is empty but it still doesn't stop loads of renovation work going on and for sale banners hanging everywhere. Also banks are loosing up a bit as far as the lending standards go.

thanks lexter, just brought my ideas in line somewhat, maybe i have champagne taste and lemonade money.lol, but over in the east what is the score with polish immigrants seeking work? isnt this much of a factor? as i know a polish immigrant in the uk who says that although alot come to the uk to find work, many also hit germany, holland, denmark. just a thought.

can anyone take pity on me and tell me where to stick my money? as i refuse to pay 800quid a month for the next lifetime to get a dolls house 2 up 2 down new build in rotherham, where prices are so much cheaper compared to nearby sheffield and the south.how on earth do you southerners survive?
i think i am seeing the benefit of renting a nice 3 bed semi in a nice area+big garden for 425 a month. either save my pennies until interests rate increases take effect on prices or invest abroad are my 2 choices.

at the minute my paultry wedge of cash is in a stocks and shares isa which is a load of tosh.my numerous hours of looking into germany seem to have got me knowhere :-(, but at least i havnt wasted my plane ticket so i thank you lexter.maybe i will look more to the east...or a big rethink somewhere else. goa, india?


thanks though

Houses_do_my_hea... Sounds like you have a good head on your shoulders. You have identified what I consider to be a good medium to long term market with low risks and fairly high potential appreciation. Lexter and others have made good points that I can see you have taken on board. There is a least one solution I can see, one you have already gone towards by teaming up with your friend. Many of your costs to acquire a property will be fixed and seriously eat into your deposit monies, limiting what you can afford. If you could find a 3rd person willing to invest with you & put in £18k or so then you could find something rather nice in a good area (better appreciation prospects) without the acquisition costs eating into the kitty too much.

That's just a thought. It might strike you as odd or a risk too far to bring in someone else you don't know. Most people I kow that do this do it to help create a spread in their investments (exposure to a market without having to part with 100% of funds needed to acquire the property.) Your situation is different, but you have identified what most here consider as a good safe investment for the long term, so you you may have a chance of finding someone to come in with you.

I should add that I'm not such a person - not for now anyway.

Another option, which can bring big returns in a short space of time (100%+ in 3 to 4 years) is to invest in closed ended funds. If both of you are determined to invest abroad with such a limited budget then this may be an option worth consideration. I wouldn't recommend it for you as the risks can be higher than for the route you have identified. There is much I could say on this matter, but rather than plaster it all over a German thread I'll simply refer you to a thread on this forum that appears three pages ago titled “Estonia & Latvia Property Fund.” The latter pages may prove more useful (I had built up a better understanding by then) but I’d recommend you read them all. If what you read interests you then get in touch (you may need to ask the administrator to enable your PMing facilites.) I should add that I became an introducer for those running that particular fund, but I don’t act as an introducer for anyone else. You will find funds for Germany (tend to be geared to medium / long term), but there are funds coming along all the time. Some will target other countries you had considered but perhaps discounted as property prices there were outwith your budget. Most will be geared towards the shorter term.

I like Goa, but repatriating the funds when you come to sell (appreciation element) is an issue. Others that post on here have placed rather large question marks over potential rentals there. Some that have lived in Goa for a good few months point to some cheap apartments being rented for little more than a couple of pounds a night. So the rentals may not be as good as first thought. (I'm sure you thought they would be lower than the agents were saying, but they could be lower still.) That said, I know travel agents that paint a rather different picture. Direct Holidays can not get enough beds to satisfy demand over our winter months.

Finally, just back from a weekend in Lake District (meeting the partner’s folks.) One of the things that struck me was that almost every barn we passed, that was constructed from the local stone and hadn’t been done up, was for sale. I do think prices in UK have / are peaking right now. Many overseas markets present better opportunities than back home in my mind ….. and I can see in yours too.

Head in,
For the sort of money you are talking about as a deposit in Berlin you can buy whole houses with a little land in other areas of Mecklenburg-Pomerania, Sachsen, Brandenburg, Thuringia etc. Done it many, many times.
They will not be immediately habitable but do your homework and you'll find something that doesn't back on to an oil refinery or have structural problems. Some will just need a little basic repairing and TLC others will need very deep pockets indeed. Get local assistance, keep your wits about you and be prepared to walk away if your advisor tells you to. Alternatively your pot of gold will stretch to a down payment in one of the small towns, on a railway line into Dresden/Leipzig/Halle or even Berlin. Quite a substantial down payment too. See your profile PM's. Good luck.

thanks for the advice and reassuring comments. scared i might get flamed being a noob.lol.one thing for sure is i wont rush into anything but i like a gamble, and if i lose my wedge then it could be worse...i could have a variable mortgage over 40 years interest only, to pay for a chicken shed apartment, that will undoubtedly quadruple in value over the next year.

the property laddder is a social construction, something that is not real but imagined, a ladder that doesnt really exist, and it could slide from under you at any minute when mr bank of england decides to let go...get your crash helmets on. anyway i have always been scared of heights.lol

going back to germany as a whole. ive just been thinking about factors that affect property values as a whole within a geographical space within a developed country that has good infrastructure which germany undoubtedly has( biggest exporter in europe right?). . maybe im thinking too much uk here but just a thought, here goes....

its not ONLY the property within capitals/large financial centres increase when they do...eventually, but also areas near to the R&D sectors as many highly skilled professionals work in research, design and technology. these generally take up alot of land and these firms like to be close together and close to universities to share information/knowledge this is called"economies of scale and scope" i think. read a few papers, interesting stuff.

going back to my degree....yawn... areas like these tend to be CLOSE to financial hubs but not IN them, for example think of cambridge in the uk or the south east in general where a LARGE amount of highly skilled people are employed in Rand D research, and command salaries that rival city wages in London. the pull factors of these places, some of which are affected by cultural beliefs which shouldnt be ignored, ie uk people have an affinity with the countryside, most french like the city life, maybe too much of a generalisation so i apologise in advance if im a bit off with that, but i hope you get my point.

also traditional retirement areas in the uk, ie south west/devon have historically seen larger increases than say the north east, just scratching at the surface with this one but,
these are 2 factors that have seen prices historically in the uk go up more than the traditional manufacturing north, as wages are generally lower here.

the upshot is.................

maybe its not only berlin that looks like a good investment because it seems the obvious choice within germany, if it is germany where i have a punt, i may need to open my eyes to other areas within germany that show nearly as much potential but with lower comparitive prices.

dont suppose anybody knows the german equivalent of cambridge/ south east uk R and D sectors do they?is there a belt where Rand D firms generally locate together in germany. i would put my bottom dollar on prices in these areas to not be far behind berlin when they eventually do sky rocket.

anysupporting comments to these thoughts are am i talking textbook drivvel?

maybe its not only berlin that looks like a good investment because it seems the obvious choice within germany, if it is germany where i have a punt, i may need to open my eyes to other areas within germany that show nearly as much potential but with lower comparitive prices.

dont suppose anybody knows the german equivalent of cambridge/ south east uk R and D sectors do they?is there a belt where Rand D firms generally locate together in germany. i would put my bottom dollar on prices in these areas to not be far behind berlin when they eventually do sky rocket.

anysupporting comments to these thoughts are am i talking textbook drivvel?
[/quote]

Hi,
I will out myself first as I am a property agent in Berlin though my background in the UK was urban planning/ regeneration.

I like your thought process and have a similar theory in Berlin/ east Germany. There are of course development hubs in W.Germany in particular around Freiburg but these areas are already expensive.

In Berlin, most capital is chasing the very central areas, so the best parts of zone 1. There are clusters outside this that have potential in my opinion and are not receiving as much attention so still have reasonable yields. In particular the SE (though still avoid Neukölln as there are still issues of falling values in some areas) as there are several factors, the largest R and D development cluster in east Germany at Adlershof which is beginning to take off and the expansion of the airport which will be the biggest single investment in E. Germany since reunification and is expected to become the countries major hub after Frankfurt after it opens in 2011. The airport should have been built a long time ago as this has restricted the economical development of the city. To the north of the city is an area called Buch which is quietly becoming a major medical research centre.

Outside of Berlin, Brandenburg to the south of the city is most likely to benefit. Ive been watching prices in Brandenburg in general over the last couple of years purely out of personal interest and prices have not moved, but the areas not in the flight path and with good infrastructure will do well.

The airport is being built to the south of the city so the cities of Dresden and Leipzig benefit via easy access and of course fast train connections (ICE). Both of these cities have expanded in research and development though when I am in Leipzig I feel there is just so many apartment blocks standing empty, and friends who live there all want to be in the Südstadt for obvious reasons when you are there.

For what its worth, I spent quite a while last year writing this up and have put it on our web site:
http://www.berlinprofile.com/ under sections search advice and research.

I hope this is of interest
brit in Berlin

I own a property in Berlin as I lived there 4 years ago - it's in Zehlendorf which is the upmarket part of former West Berlin where most Berliners would prefer to buy / live. All I can say to you from my experience is that Berlin property is not going to go anywhere fast and it can cost you quite a bit of money so I wouldn't plough my life savings into it. Things to note are:

1. You will have to pay Grundsteuer (land tax) of about 30 EUR per quarter - not a fortune but something to keep in mind as you'll need to ensure that your bank account from which you pay the mortgage to your lender (assuming you're not paying direct from the UK) is topped up with cash as the Steueramt (tax office) take the money out by direct debit and if there aren't sufficient funds in your account (e.g. you've just paid the mortgage and not noticed that another injection of cash is due) they have legal authority to freeze your bank account until the amount is paid. To unfreeze it you need to call them up or get someone to call them and clarify the situation. So point 1: German bureaucracy is a nightmare so you'd be advised to hire someone to deal with these things for you unless you speak German and are familiar with the laws / culture.

2. Tenants have a lot of rights in Germany so you won't be able to put the rent up on your flat unless your tenants voluntarily vacate and you then set the rent for new tenants at a higher price. Rent is also quite cheap in Berlin so your rental yield would be pretty low unless you have little or no mortgage. You need to reckon with the idea that your rental income might not go up with inflation at all over 10 or more years. That could be hard to deal with if you don't have sufficient cash in the UK to keep meeting the payments. On the upside, once a tenant's in there you will probably have guaranteed income for a long time as tenants tend to stay at least 5 years and flats are also rented out unfurnished so you won't have to worry about them damaging your belongings. You also get a higher quality of tenant than in the UK, if you have a property in the right area. So point 2: rental yields are low but tenants are better and stay longer.

3. With regard to what area to buy in: it all depends on what your plans for the property are. If you want a place you can rent to students or as a holiday let then Mitte, Kreuzberg, Friedrichshain and P. Berg are all good areas. These are the most popular areas to live in in terms of rental desirability. Germans / Berliners themselves will tend to buy in the more suburban areas so if you're looking for a property you can sell easily that has long-term desirability then Zehlendorf, Lichterfelde-West, Dahlem and other upmarket areas in the south-west are a good bet.

4. Whether you own or rent in Berlin, you're obliged to be registered with the factors who run the building and you pay them a fee each month. As an owner-occupier that translates into you being a member of the residents association which meets every couple of months to decide on key issues such as repairs, maintenance etc. I'm not sure if that's the same across all of Berlin but certainly in the residential apartment blocks in the West it's the norm. If you are letting the flat, you're obliged to pay a fee to a property management company. That's actually very useful as they will manage repairs and liaison with the tenant and they aren't half as rapacious and disreputable as their British equivalents. They'll send you minutes of the residents meetings and notice of any repairs as well as full records for future sales. If you want to sell (to a German at least) you'll need a full record of any repairs carried out and money spent on the property. As a foreigner / a person living abroad with a property in the city, it's great for peace of mind.

5. I would make sure that you have personal liability insurance as a landlord - if your tenants burn down your flat then you could be liable for the cost if you don't have this type of insurance. Normal German house insurance doesn't really cover it. I got my policy with Allianz so maybe you could enquire with them. Believe me, if you don't get insurance you will be bankrupted in a German court if anything goes wrong: a German's favourite refrain is: "don't you have insurance?" It's regarded as the individual's responsibility to be insured for any event in any circumstances and they will sue you over anything if something goes wrong. It's not like Britain where the nanny state steps in to hold your hand.

In conclusion, I would say that I've found Berlin property to be stable compared to the UK (where it looks like a crash is a major risk) but I can't see myself making much money out of it. If I'm lucky I'll probably be able to sell for the price I paid in 2001 (just as the market was dipping). If you're thinking of investing your life savings in Berlin, I would say absolutely NO. It's no harm as a savings account, as you say, but you really must make sure that you can afford it and that you have sufficient cash to cover repairs and maintenance. In general, you must remember that German laws and provisions are also different and owning a property there makes you liable for all kinds of taxation and insurance. That's why Germans don't buy as they view it as too high risk. I wouldn't rush this decision if I were you - investing in Germany is not as straightforward as people think.

Just my experience but I wouldn't like to see someone overstretch themselves or take on a risk they're not prepared for when the chance to make money is not great. There are many complex and valid reasons why German property is underpriced currently and those reasons aren't due for a change any time soon, in my view.

Good advice from Lex.
But maybe that's a good reason to buy, since property prices tend to be reasonable where the banks
are conservative (and unreasonable where they are not.)

There's certainly room for the banks to start pumping up the market by raising their LTV.

I have just returned from Berlin, and wrote a report on an auction etc.:
http://www.greenenergyinvestors.com/index....c=810&st=20

There's always risk in buying property.
The funny thing is:
+ When prices are low, people are aware of the risk,
+ when prices are high, they forget about it