How To Get Rich With Real Estate (in Germany)

Embarking on a real estate wealth journey? Let’s delve into the German Economic Institute’s podcast-backed insights.

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Introduction: How To Get Rich With Real Estate

Embarking on a quest for financial prosperity through real estate in Germany? Join us as we dissect insights gleaned from the German Economic Institute’s podcast, a treasure trove backed by data from the German Bundesbank. Diving deep into the intricate realm of real estate wealth, this guide aims to distill scientifically-backed concepts from social media myths.

From the average vs median net worth of German households to the country’s homeownership landscape, we unravel the intricacies guiding your path. Together, we’ll explore how real estate ownership correlates with affluence and unveil a three-step roadmap to guide you from initiating your real estate journey to potentially joining the ranks of Germany’s wealthiest households. Ready to uncover the secrets of getting rich with real estate in Germany? Let’s dive in.

Average Vs Median Net Worth Of German Households

In order to navigate the complicated terrain of personal finance in Germany, it is important to understand the dynamics of household net wealth. As the podcast from the German Economic Institute shows, the average net wealth of German households has risen to an all-time high of €316,500. The median, an important indicator for assessing the distribution of wealth, stands at €106,600.

This divergence emphasizes the pronounced inequality in wealth distribution, which is exacerbated by the influence of outliers, including billionaires, on the average value. Analyzing both benchmarks not only highlights the unequal economic structure in Germany but also provides individuals with a comprehensive overview of their financial standing compared to their peers. In this landscape of financial entanglements, a nuanced understanding of wealth dynamics is essential for informed decision-making.

Homeownership Rate of Germany

One notable finding of the podcast is the second-lowest homeownership rate in Europe at 49.9% (only Switzerland has an even lower homeownership rate). This statistic is of great importance for the formulation of property investment strategies. The low rate is attributed to the fact that homeowners have almost only disadvantages compared to property investors.

Over time, banks’ increasing down payment requirements have made homeownership more difficult to access, particularly in major cities such as Berlin and Munich. The advice to focus on property assets is clear: start with small rental properties. Take advantage of the associated tax benefits for property investors and consider the possibility of converting to home ownership later, if at all.

In the complicated world of property ownership, this strategic approach is proving to be a key maneuver in navigating the German property landscape and exploiting the potential for wealth creation.

How Rich Are YOU Compared To Other German Households?

A look at the wealth distribution of German households reveals a convincing correlation between wealth and property ownership. A chart in the study by the German Institute for Economic Research illustrates the net wealth of households in various quantiles and reveals an important finding: the higher the wealth of households, the greater the importance of property in their portfolio. 

The top 10% of households with net assets of EUR 1.85 million have a remarkable 60% of their portfolio in property investments, which clearly demonstrates this correlation.

This trend continues across all income brackets and emphasizes the fundamental role that property plays in the wealth creation process (see image). The pattern illustrates a strategic path for individuals looking to move up the wealth ladder in Germany and emphasizes the indispensable role of property in promoting financial prosperity.

3 Steps To Get Rich With Real Estate

The path to property wealth requires a strategic roadmap.

  1. Build +10k Equity: For those starting with minimal funds, our German property marketplace opens the doors to investment opportunities with as little as €100 and democratizes access to property ownership.
  2. Buy Your First (Rental) Property: In the second step, as your savings grow, you need to decide whether you want to buy a rental property or an owner-occupied home. This decision depends on your priorities: a lifestyle-oriented decision in favor of a home of your own or a financially-oriented decision in favor of a rental property. The latter proves to be advantageous as it brings you more benefits and can accelerate your path to financial prosperity.
  3. Scale To The Next Property With “Free Equity”: For those who want to be among the richest 10% of Germans, the way to go is to keep ownership of the property, pay off the mortgage diligently, and use the accumulated free equity to venture into the purchase of the next property.

This three-step strategy is a practical approach for people who want to navigate the complicated landscape of property in Germany and build lasting wealth.

Conclusion: How To Get Rich With Real Estate

To conclude this journey through the intricacies of property wealth in Germany, the symbiotic relationship between property ownership and prosperity is the central focus. As the findings of the German Economic Institute underline, property is an important part of the wealth portfolio of Germany’s affluent households. Our German property marketplace offers aspiring investors an easily accessible entry point to translate these findings into actionable steps.

The strategic decision-making process of whether to choose rental property or home ownership plays a central role in shaping one’s financial destiny. For those looking to move into the upper echelons of wealth, a disciplined approach that includes holding the property, paying the mortgage, and utilizing the equity accumulated opens a path to sustainable prosperity. When navigating the German property landscape, these insights serve as a compass to guide individuals toward informed decisions and ultimately the prospect of lasting financial prosperity.

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The Rise and Fall of Europe’s Top Real Estate Company: Vonovia

Vonovia, Europe’s property giant, once reigned supreme but shockingly lost 74% of its market value. Unearth the story of the rise and fall of Vonovia and its prospects.

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Introduction: The rise and fall of Vonovia

In the world of real estate, Vonovia’s story is nothing less than an epic rollercoaster ride. Imagine for a moment that you had invested in Europe’s largest real estate company, Vonovia, during its heyday. Your expectations would naturally skyrocket, wouldn’t they? But what if we told you that you had to watch 74% of your hard-earned money vanish into thin air within a few weeks?

That’s the compelling story we’re going to tell in this article. We will dive into the story of Vonovia – from its meteoric rise to its tumbling fall. We will examine the complicated web of factors that contributed to this unexpected and dramatic downfall. And finally, we will address the question on everyone’s mind: Is Vonovia a wise investment decision in the current real estate landscape?

Vonovia’s performance is a testament to the volatility and unpredictability of the real estate market, a world where fortunes can be made or lost in the blink of an eye. So if you’re an investor, a prospective investor, or just someone curious about the complicated dance of money and real estate on a grand scale, read on. The rise and fall of Vonovia is a compelling lesson for us all, and it all starts right here.

Vonovia's Ascension to the Top

Vonovia, previously known as Deutsche Annington, embarked on its journey in the early 2000s with over 4 billion Deutsche Mark from its parent company, Nomura Holdings. This marked the beginning of its real estate acquisitions, starting with 64,000 flats formerly owned by the German National Railway company, Deutsche Bahn. The company further expanded its real estate portfolio by acquiring thousands of flats from various sources, including energy companies and the German government.

In 2013, Vonovia initiated its first attempt to go public with an IPO, but the reception was lukewarm due to their considerable debt. However, their second IPO attempt in 2013 was successful. Armed with fresh capital, Vonovia set its sights on acquiring its biggest competitor, Gagfah, for 3.9 billion Euros in 2015. This acquisition marked a significant turning point and laid the foundation for Vonovia to become the largest real estate company in Germany.

Vonovia’s journey to dominance continued with its foray into the Austrian, French, and Swedish real estate markets. Their relentless pursuit of growth bore fruit, with Vonovia recording profits exceeding 1 billion Euros for the first time in 2018. Finally, in 2021, Vonovia solidified its position by gaining majority ownership of Deutsche Wohnen SE, a goal they had pursued for five years.

The Elements Leading to Vonovia's Demise

How did Vonovia, a company that had experienced meteoric growth, suddenly find itself losing 74% of its market value? There are several key factors that contributed to this precipitous decline.

One fundamental factor was the rapid inflation of property prices in Germany. In 2018, average property prices adjusted for inflation rose by 7.2%, in 2019 by 9.3%, in 2020 by 9.6%, and in 2021 prices rose by 14.2% after deducting inflation. In 2022, property prices adjusted for inflation fell by -0.7%. These fluctuations were partly attributed to high inflation rates, particularly in the construction sector, which escalated construction costs.

Vonovia’s massive debt burden and plummeting stock price led to a crisis. To address their financial woes, the company considered a capital increase and a fire sale of properties. The outcome of these decisions will significantly impact the company’s future.

Conclusion: Should You Invest in Vonovia?

Now, the pivotal question arises: Is it a wise decision to invest in Vonovia at this juncture? While the temptation to buy in hopes of a miraculous recovery may be strong, the altered economic landscape surrounding Vonovia must be considered.

Investing in Vonovia at this point is a speculative venture. The probability of a swift recovery to previous highs must be weighed against the risks of further financial turbulence or a scenario akin to past corporate collapses. The once-favorable environment has shifted, which should temper expectations.

Ultimately, the decision to invest in Vonovia should be made cautiously and with a full awareness of the evolving financial challenges facing the company. Before you decide to invest in Vonovia, it’s imperative to conduct thorough research, and consider your own investment goals. Remember, investing always carries inherent risks, and it’s essential to make informed decisions based on your own financial situation and objectives.

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Property Development: How Real Estate Developers Utilize Your Investments

Ever wondered how property developers leverage your investments on the GermanReal.Estate marketplace? 🤔 Explore the financial intricacies in this FAQ.

Key Takeaways

  • Property developers use investor funds for land acquisition and construction in the German real estate market.
  • Private individuals finance property purchases, including down payments and closing costs, with flexibility.
  • Property developers bear only a fraction of closing costs based on the land’s current value.
  • Property development entails a multi-year timeline from investment to property completion.
  • Investors can profit from property development by contributing to projects through platforms like GermanReal.Estate.
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Introduction: How are your investments being used?

Have you ever thought about the inner workings of your investments on the GermanReal.Estate marketplace? It’s a question on the minds of many, but one to which there is often no comprehensive answer. In this comprehensive GermanReal.Estate FAQ, we will uncover the background and reveal how exactly real estate developers use your investments. The conventional answer may suggest that they simply build buildings, but it’s the fine details that make up the whole picture.

We will look at the differences between retail investor financing and developer strategies. If you’ve always wanted to know where your investment money goes and how property development works, here’s your chance to gain an insight into this complex world. So if you want to know how property developers handle your investments, read on.

Financing For Private People Explained

When it comes to private individuals venturing into real estate investment, the journey typically begins with the need to finance a property purchase. This financial commitment encompasses not only the actual price of the property but also a range of associated closing costs. These expenses can encompass notary fees, land taxes, and other miscellaneous charges. However, the key distinguishing factor in this process is the flexibility that’s often at your disposal.

The pivotal question often revolves around down payments. These can fluctuate significantly and are contingent on a myriad of factors, including your personal financial situation and the property’s specific characteristics. Essentially, the percentage of the property’s total price that you need to provide upfront can be influenced by variables like your creditworthiness, the market’s overall conditions, and the property’s perceived quality. This flexibility can be empowering, offering both seasoned investors and newcomers opportunities to tailor their investments to their unique financial circumstances.

Financing For Property Developers Explained

The financial landscape for property developers differs significantly from that of private individuals. Property developers engage in substantial investments when they acquire land for development projects. However, a crucial point of divergence lies in the realm of closing costs. Unlike private investors, property developers only shoulder a fraction of these expenses.

The key to understanding this discrepancy lies in how these costs are calculated. For property developers, closing costs are determined based on the current value of the land they acquire, not on the prospective future value of the property they intend to construct. This distinction makes property development a particularly enticing prospect from a financial standpoint. It allows developers to initiate projects with relatively low initial capital outlays compared to the potential returns on the completed properties.

In essence, property development hinges on leveraging current land values and future property appreciation, offering property developers a financially attractive avenue for investment. This financial model enables developers to engage in larger-scale projects and explore opportunities for substantial financial growth over time.

Timeline of a property development

Property development follows a carefully structured timeline that involves various stages. At the outset, property developers make significant upfront investments, often involving substantial capital. These initial funds are essential for acquiring the land and covering preliminary expenses.

Following the land acquisition, the project moves into the planning phase. During this stage, developers engage in tasks such as architectural design, securing necessary permits, and obtaining construction approvals. This planning phase can extend over several months, depending on the project’s complexity and regulatory requirements.

Once the planning is complete, the construction phase commences. This is where the physical development of the property takes place, involving hiring contractors, procuring materials, and overseeing the construction process. The construction phase can be the most time-consuming, lasting for several months or even years, depending on the project’s scale.

Throughout these phases, property developers invest their own capital to cover various project expenses. This investment includes not just the land acquisition but also construction costs, labor, and other related expenditures. Consequently, developers’ funds are tied up in the project for an extended period, limiting their financial flexibility until the properties are ready for sale.

The timeline of property development underscores the importance of securing funding, whether through private investments or alternative financing models, to support ongoing projects and ensure their successful completion.

Your investments contribute to project financing, and in return you receive fixed interest rates and share in the profits generated. So what are you waiting for?

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Conclusion: How You Profit From Property Development

Investing in property development holds significant profit potential for both developers and individual investors. By gaining insights into the financing dynamics and the development process, you can better appreciate how your investments directly impact these ventures and the potential returns they can generate.

Property development is an intricate undertaking, and understanding its financial aspects allows you to see the bigger picture. As an investor, you play a crucial role in facilitating these projects. Platforms like GermanReal.Estate enables you to actively participate in property development endeavors. Your investments contribute to project funding, and in return, you stand to earn fixed interest rates and share in the profits generated.

This mutually beneficial arrangement not only offers investors attractive investment opportunities but also assists developers in expanding their efforts. By channeling capital into multiple projects simultaneously, developers can scale their operations more effectively. This synergy creates a win-win situation, making property development a compelling investment avenue for those looking to grow their wealth while supporting real estate projects in Germany.

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Is Germany in a Real Estate Bubble?

Amidst the debate on a German real estate bubble, this analysis delves into property price surges, bubble inception, and whether it’s time to invest.

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Introduction

The specter of a real estate bubble looms large over Germany. As property prices continue their seemingly unstoppable ascent, a debate rages about whether this market is in the throes of a speculative bubble. In this episode of the GermanReal.Estate Blog, we embark on a data-driven exploration of the German real estate landscape, dissecting the factors contributing to soaring property prices and weighing the arguments for and against the existence of a bubble.

Germany’s real estate market has been on a remarkable upward trajectory, with significant price increases observed in recent years. However, the question that lingers is whether this growth is sustainable or if it’s a precursor to a market correction.

To unravel this complex issue, we’ll delve into the five key stages of a real estate bubble, analyze Germany’s property price development, and examine the catalysts behind these substantial price hikes. We’ll also explore the factors that could potentially lead to a bubble burst, such as rising mortgage rates and increased supply. Finally, we’ll present arguments both for and against the existence of a real estate bubble, offering insights to help you navigate this dynamic market landscape.

Whether you’re a prospective buyer or simply curious about the state of German real estate, this analysis will provide valuable insights into one of the most debated topics in today’s property market.

Property Price Development in Germany

To fathom the current situation, we must first examine property price development. Over the past few years, Germany has experienced a remarkable property price surge. Statistically speaking, the index of rents in Germany increased by 8.4% from 2015 to 2022, averaging just over 1% year over year. On the surface, these figures could suggest a thriving and sustainable market. But before we draw conclusions, we must probe deeper into the forces behind this price surge.

Rising property prices, especially in urban centers like Berlin, Frankfurt, and Munich, have indeed been a noticeable trend. However, it’s essential to dissect the factors driving this growth. To do so, we need to consider elements such as demand, supply, economic health, and interest rates. While nominal property prices may have surged, a comprehensive analysis must also consider real prices adjusted for inflation.

By scrutinizing these underlying factors, we can gain a more nuanced understanding of the dynamics at play in Germany’s property market and assess whether the current price development is sustainable or a precursor to a market correction.

+7,2% Property Prices in 2018
+9,3% Property Prices in 2019
+9,6% Property Prices in 2020
+14,2% Property Prices in 2021

How a (Real Estate) Bubble Starts

Real estate bubbles are born from a complex interplay of factors, and their emergence isn’t as straightforward as many presume. The conventional narrative often revolves around historical price comparisons, but this oversimplification misses the intricacies. In reality, bubbles originate from a series of steps. To understand whether Germany is in one now, we must analyze these stages and the events leading up to them.

Bubbles begin with a surge in demand surpassing available supply, leading to sellers asking for increasingly higher prices. This uptick in property prices doesn’t necessarily indicate a bubble; it can respond to genuine market conditions, such as low-interest rates and a strong economy. Assessing whether this is a bubble or a normal market fluctuation requires a deeper dive into the market’s structural aspects. 

To truly understand the situation, we need to explore why property prices have risen significantly in Germany, looking at factors like interest rates, economic health, and demand-supply dynamics. This nuanced perspective is essential to determine whether the market is in a bubble or merely experiencing a period of robust growth.

Why Property Prices Increased So Much

A multitude of elements has contributed to the astonishing price growth in Germany. The country’s allure as a safe haven for international investors amid global economic uncertainty is a significant driver. Moreover, the tangibility and stability of real estate have made it a preferred investment choice. Demographic shifts, such as urbanization, have further amplified housing demand, particularly in major cities.

Low interest rates, a long-standing feature of the European Central Bank’s monetary policy, have made borrowing cheap and fueled the property market. This combination of factors has propelled demand and, subsequently, property prices to remarkable heights.

Furthermore, Germany’s robust economy and job prospects have drawn people from around the world, creating additional demand for housing. Cities like Berlin, Frankfurt, and Munich, with their vibrant economies and cultural attractions, have been at the forefront of this urban migration, driving up property prices in these areas even more.

Understanding these drivers is crucial to assessing whether the German property market is in a bubble or experiencing a genuine growth phase.

Do you want to invest in real estate without buying a property directly? Then go to our marketplace!

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Why a (Real Estate) Bubble Is Bursting

Real estate bubbles, by nature, pose the risk of bursting. The fifth stage in the bubble cycle entails buyers being unwilling to pay the inflated prices, which leads to a market correction. An oversupply of properties can also trigger a downturn. While some argue that Germany’s real estate market has reached this stage, others contend that the market still has potential for growth. Factors such as increasing mortgage rates and international events, like the Ukraine conflict, have introduced uncertainties. Ultimately, the answer to whether the bubble has burst remains elusive.

The recent increase in mortgage rates, driven in part by global events, has made property ownership more expensive. This shift may discourage some potential buyers, especially in a market where prices have already surged significantly. However, the true extent of the impact of these changes on the German property market is a matter of ongoing debate.

Furthermore, Germany’s housing shortage remains a critical issue, especially in major cities. Even a slowdown in price growth doesn’t necessarily indicate a bursting bubble but might signify a market correction towards more sustainable levels. The future trajectory of the real estate market hinges on a complex web of economic, political, and social factors.

Pro Bubble Vs. Con Bubble Arguments

The debate surrounding a German real estate bubble is far from one-sided. Proponents of the bubble theory point to staggering property price increases, particularly in major cities like Berlin, Frankfurt, and Munich. The German Bundesbank and Swiss bank UBS have deemed properties in some cities to be significantly overvalued, with up to a 40% premium. Conversely, opponents argue that Germany’s mortgage lending regulations prevent the subprime lending crisis that triggered the 2008 US housing market crash. Most German mortgages have fixed rates for 10 to 15 years, potentially delaying the impact of recent interest rate hikes. The outcome of this debate remains uncertain.

While some indicators suggest that the German real estate market may be overheating, it’s essential to consider the broader economic context. Germany’s economy, though facing uncertainties, remains robust compared to many other countries. This economic stability could continue to support the real estate market, even in the face of potential headwinds.

Ultimately, the decision to buy property in Germany hinges on a range of personal factors, including individual financial circumstances and long-term goals. While the debate over a bubble persists, there are still opportunities for well-informed and strategic real estate investments in the country.

Should You Buy a Property Right Now?

The decision to invest in German real estate today hinges on a multitude of variables, many of which are unpredictable. Mortgage rates, inflation, construction rates, salaries, net migration, and more all interplay in the complex real estate market equation. 

While 2022 and 2023 witnessed a slowdown, it’s unlikely that all issues will resolve swiftly, ushering in the return of double-digit price increases. Nevertheless, opportunities persist, albeit requiring deeper exploration to unearth. For those interested in investing in German real estate, the GermanRealEstate Marketplace offers an accessible entry point, with a minimum investment of just €100. The path ahead in the German real estate market remains both challenging and promising, demanding careful consideration before making investment decisions.

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How to Invest in Real Estate in Germany?

In this comprehensive GermanReal.Estate FAQ, we dissect five crucial steps that will guide you through the intricacies of real estate investment in Germany.

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Introduction

Investing in real estate is often seen as a direct route to financial stability – purchase a property, let your tenant cover the mortgage, and watch your wealth grow. However, beneath this simplicity lies a complex web of details that can determine the success of your investment.

In this comprehensive GermanReal.Estate FAQ, we dissect five crucial steps that will guide you through the intricacies of real estate investment in Germany. From setting realistic expectations to securing the right mortgage, choosing the ideal property, and scaling your investment, these steps will pave the way for your success in the world of German real estate.

Step 1: Set Realistic Expectations

The foundation of a successful real estate investment journey in Germany begins with setting realistic expectations. It’s essential to evaluate several financial and personal factors that can significantly influence your investment path. Some circumstances can be outright deal-breakers. For instance, if you’re currently unemployed, it can be challenging to secure a mortgage. Similarly, if you’ve recently started a new job and are still within the probationary period, banks might view your application with caution. Launching a self-employed venture without a proven financial track record can also raise red flags.

Excessive debt and a lack of savings can be significant hindrances to your investment prospects. Therefore, gaining a clear understanding of how these factors might affect your investment goals is vital. By doing so, you’ll be well-prepared to navigate the complexities of real estate investment in Germany and make informed decisions about your financial future. This initial step is about ensuring you’re on solid ground before moving forward with your investment plans.

Step 2: Choose the Right Strategy & Property

Investing in real estate in Germany involves adopting a strategy tailored to its unique market dynamics. Unlike the United States, where real estate investment strategies like wholesaling and flipping are prevalent, Germany leans towards traditional property ownership. Here, the typical approach entails purchasing a property with a mortgage, gradually paying off the debt, and eventually expanding your real estate portfolio.

The critical decision in this step revolves around selecting the right type of property for your investment goals. New constructions, such as the community portfolio we acquired in Dusseldorf, offer the advantage of lower maintenance costs, especially in the initial years. On the other hand, older properties may come with a more affordable price tag but often require renovations, which can be a valuable strategy if you have a high tax rate. Ultimately, there’s no one-size-fits-all answer. Your choice depends on your financial situation and the strategy that aligns best with your goals.

Step 3: Secure Your Mortgage

Securing a mortgage is a pivotal step in your real estate investment journey. To enhance your prospects of obtaining one, it’s crucial to address potential deal-breakers. Ensure you have stable employment with a regular income and avoid job changes within the probationary period. Additionally, if you’re self-employed, wait until you have a proven financial track record, typically demonstrated by three years of tax declarations.

Managing your finances is equally vital. Prioritize saving money and clearing any outstanding personal loans. Maintain a strong credit score, as this is a key factor that banks consider when evaluating your mortgage application.

It’s worth noting that different banks may have varying criteria for approving mortgages, so it’s important to select one that aligns with your financial situation and goals. If navigating this process seems daunting or if you’re not ready to commit to the traditional real estate investment route, Real Estate Security Tokens provide a simplified alternative, offering a more accessible entry point into real estate investment.

Do you still need a little time to save up for your first property? Then use our real estate securities to save!

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Step 4: Decide If You Want to Buy the Property

Now that you’ve gathered all the pertinent financial details, it’s time to make a critical decision – should you proceed with the property purchase? This is the moment when you must carefully evaluate whether the property aligns with your investment objectives.

Calculate all the associated costs, including the property price, closing fees, potential rental income, and mortgage rates. The key question here is whether these numbers align in a way that makes the investment financially viable for you. Your primary goal should be to ensure that you will have an acceptable cash-flow, meaning that if you have a negative cash-flow, you are able to pay the additional monthly costs.

If your calculations reveal that the property doesn’t meet your expectations or doesn’t offer a reasonable return on investment, it’s crucial to have the discipline to walk away from the deal. However, if the numbers add up and the investment aligns with your financial goals, you can proceed confidently to the notary to finalize the purchase. This step is where your real estate investment journey takes a concrete form.

Step 5: Scale With the Next Property

Congratulations on your first successful real estate investment! As you bask in the satisfaction of this achievement, you’ll find that the journey toward additional investments becomes notably smoother.

By successfully navigating your initial investment, you’ve accomplished several critical milestones. Firstly, you’ve established trust with financial institutions, proving your creditworthiness and responsibility as an investor. Secondly, you’ve begun to build equity, an essential asset in real estate. Lastly, you’ve gained valuable experience, which is an invaluable asset as you move forward.

Now, with these assets at your disposal, building a diversified real estate portfolio becomes far more feasible. The process of acquiring subsequent properties will be less intimidating, and your financial goals will draw closer with each new investment. Scaling your real estate ventures is where the true power of real estate investment lies – it’s a journey that can ultimately lead to significant financial security and prosperity.

Conclusion

Investing in real estate in Germany can be a highly rewarding endeavor, offering a stable path to wealth accumulation and financial security. However, it’s essential to approach it with realistic expectations and a thorough understanding of the process. By following the five essential steps outlined in this guide, you can navigate the complexities of real estate investment with confidence.

Remember that while traditional property ownership is a tried-and-true method, there are alternative options like Real Estate Security Tokens that offer a simplified entry into this lucrative market. Whichever path you choose, careful planning and diligence can pave the way to a successful and fulfilling real estate investment journey in Germany.

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Understanding Interest Rates and Profit Shares

Diving into real estate investments? Unravel the complexities with our simple timeline. Discover how Real Estate Security Tokens work for your financial future.

Key Takeaways

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Introduction

Investing in real estate often seems like a difficult undertaking, full of potential misunderstandings that can cause confusion. In this edition of the GermanReal.Estate wiki, we aim to untangle this complexity and provide clarity on how real estate security tokens work.

Our approach is to simplify the process by using a clear timeline and using real-life examples to illuminate every facet of this investment path. When we’re done, you’ll have a firm understanding of how real estate security tokens really work, so you can navigate the world of real estate investing in Germany with confidence.

So let’s go on this journey together, breaking down the intricacies and clearing up any misconceptions that may have affected your understanding of this investment opportunity.

Start of Your Investment

To kick off your investment journey, you make the decision to invest €100, the minimum required on our GermanReal.Estate Marketplace. For a clearer understanding, let’s use the example of “Welcome Home” in Mönchengladbach. This particular investment comes with an enticing offer: a 4% fixed interest rate and a 20% profit share. However, it’s crucial to note that this doesn’t imply you’d only receive €4 if no profit share is realized, leaving you with an €88 loss.

The reality is a bit more nuanced, and to truly grasp the mechanics behind it, we need to delve deeper into the investment timeline and process. So, let’s embark on this journey of understanding, breaking down each phase and element, and dispelling any misconceptions that might have caused confusion in the past.

Interest Period(s)

Now, let’s turn our attention to interest periods. This aspect can vary depending on the specific investment you choose. Some investments may involve just one interest period, while others might have multiple. In the case of “Welcome Home” in Mönchengladbach” the example investments we’re discussing, they both feature a single interest period. This period runs until the investment reaches maturity.

Interest periods are an essential component of your investment journey, as they determine when and how you receive the returns on your investment. Understanding the dynamics of these periods is pivotal to comprehending the overall investment process.

So, as we continue to unravel the intricacies of investing in Real Estate Security Tokens, keep in mind that each investment may have its unique terms and conditions. As such, it’s crucial to delve into the specifics of the investment you’re interested in to make informed decisions about your financial future.

Minimum Duration

Moving along our investment timeline, let’s focus on the minimum duration. This aspect holds considerable importance in your investment journey. Essentially, the minimum duration signifies the earliest point at which you, as an investor, have the opportunity to reclaim your initial investment.

However, it’s vital to introduce a crucial caveat here. While the minimum duration sets a theoretical date for potential returns, it doesn’t necessarily guarantee that your investment will be concluded at this point. Why? Because the issuer of the investment holds the authority to extend it further, pushing the timeline closer to the maximum duration.

This extension option is an essential facet of real estate investments, especially in property development. Factors such as bureaucratic processes, supply shortages, or other unforeseen circumstances can lead to extensions. It’s a standard practice within the real estate industry, particularly in Germany.

In light of this, it’s advisable for investors to approach investments with a degree of flexibility. While the minimum duration provides a glimpse of when you might see returns, the actual timeline can be subject to change based on various factors beyond your control.

Maximum Duration

Within our investment timeline, the maximum duration represents the outer boundary of your investment horizon. In simpler terms, it designates the furthest point in time to which your investment can stretch. For example, in the case of “Welcome Home,” this maximum duration extends through the entirety of 2023.

However, here’s the critical point to grasp: this maximum duration isn’t set in stone. It possesses a degree of flexibility. The issuer of the investment retains the authority to make a pivotal decision – whether to extend the investment period further beyond the initial maximum duration.

Such extensions are not uncommon in the real estate investment realm, particularly in property development ventures. Factors like construction delays, market dynamics, or even regulatory changes can contribute to these extensions. Therefore, as an investor, it’s crucial to understand that while there’s a defined outer limit to your investment, this limit may be subject to change based on the issuer’s decisions and external circumstances. Flexibility and adaptability are key attributes for real estate investors.

Summing Up Your Investment Profit

As we reach the culmination of your investment journey, let’s summarize what happens when your investment matures. At this juncture, you will receive several components:

  • Initial Investment Return: You’ll receive your initial investment back. For instance, if you invested €100, this amount will be returned to you.
  • Accrued Fixed Interest: The fixed interest rate, calculated annually, will be added to your returns. If, for example, you invested for more than a year due to an extension, your interest payment will reflect this.
  • Profit Distribution: This portion is where the excitement lies. Your share of the profit distribution hinges on the actual profit generated by the property development. In our example, if the profit amounts to €100, you, as an investor, will receive €20 (assuming a 20% profit share). It’s important to note that this sum will be divided among all available tokens for that particular investment.

Both issuers like FiveRocks and investors are incentivized to see higher property prices, as this directly impacts the profit share. This shared interest in profitability aligns both parties toward maximizing returns.

To stay informed about precise profit details, updates will be readily available on our website, newsletters, and YouTube channel.

Investing in Real Estate Security Tokens holds the potential for wealth accumulation. Understanding this investment process empowers you to make informed and strategic decisions. Happy investing!

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The German Real Estate Market: Is a Crash Happening Now?

In 2022, German real estate made headlines with a 0.71% price drop. Is it a crash or an opportunity? Let’s uncover the truth.

Key Takeaways

  • German property prices soared over 40% in 4 years, a remarkable feat even with inflation.
  • A 0.71% dip in 2022 property prices, but 6.9% inflation means a 6.2% nominal rise.
  • Compare interest rates with the 6.9% inflation rate for a real perspective on returns.
  • Our community portfolio showcases the power of real estate investment despite rising interest rates.
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Introduction

In 2022, the real estate world was abuzz with reports of a 0.71% decrease in German property prices. For some, this immediately raised alarms and triggered concerns of an impending real estate crash. However, as seasoned investors know, things in the real estate market often go much deeper than sensational headlines.

The German real estate market has seen an impressive historical trajectory, with property prices experiencing substantial growth over the years. Postbank’s annual Wohnatlas report, which tracks average property price development in Germany, showcased an impressive 40% price increase over just four years, even when factoring in inflation.

Moreover, when examining the 0.71% decrease, it’s crucial to consider the impact of inflation. The German inflation rate for 2022 was 6.9%, significantly higher than in previous years. This means that property prices, when looked at before inflation, actually increased by 6.2%. These figures paint a different picture and reveal that the market still holds strong potential for investors, especially when compared to other investment options like the stock market.

So, is the German real estate market crashing? Let’s explore further to uncover the nuances behind the headlines.

Historic Property Returns in Germany

Before jumping to conclusions about a potential real estate crash in Germany, it’s essential to examine the historical context. Over the past 4 years, the German property market has displayed remarkable growth. In 2018, property prices increased by 7.2%, followed by a 9.3% surge in 2019, a 9.6% rise in 2020, and an astonishing 14.2% surge in 2021. This cumulative increase amounts to over 40% in just four years, even when accounting for inflation.

These figures highlight the robustness of the German real estate market, which has consistently delivered impressive returns to investors. Even though 2022 saw a nominal 0.71% decrease in property prices, when inflation is factored in, property prices rose by 6.2%. This means that property investments in Germany when viewed in the broader context, have remained highly profitable, particularly when compared to other investment avenues like the stock market.

So, while the headlines may raise concerns, a deeper examination of the historical trends suggests that the German real estate market is far from crashing.

+7,2% Property Prices in 2018
+9,3% Property Prices in 2019
+9,6% Property Prices in 2020
+14,2% Property Prices in 2021

German Property Prices in 2022

Let’s address the headline news: the 0.71% decrease in German property prices in 2022. However, there’s an important nuance to consider. When we factor in the inflation rate of 6.9%, the picture changes significantly. In reality, property prices didn’t decrease but rather rose nominally by 6.2%.

This perspective is crucial because it highlights the impact of inflation on investment returns. In an environment with rising inflation, which many countries worldwide are experiencing, the real value of money decreases over time. Therefore, even though the nominal value of assets may appear to decline, their purchasing power can remain steady or even grow.

In the case of German real estate, despite the nominal drop in prices, the assets have actually retained their value and continued to provide positive returns when viewed in light of inflation. This is a notable advantage for real estate investors, especially when compared to other investment options that may struggle to keep pace with rising prices.

Mortgage Rate vs. Inflation Rate

To truly grasp the significance of these numbers, it’s essential to compare the inflation rate with prevailing interest rates. Currently, within the European Union, nominal interest rates range from approximately 3.73% for flexible savings accounts to as much as 5% for fixed-term savings. However, when you consider the context of a 6.9% inflation rate, the implications become clear.

In simple terms, with an inflation rate outpacing interest rates, you’re effectively losing almost 2% of your hard-earned money each year in real terms. This scenario underscores the challenge of preserving and growing wealth in an environment where inflation erodes the purchasing power of your savings.

Here’s where real estate investments shine. Real estate investors often use leverage, typically in the form of mortgages, to acquire properties. This leveraging strategy can be particularly advantageous during periods of high inflation. As inflation erodes the real value of debt, investors find their mortgage balances decreasing in real terms, effectively reducing their debt burdens. Consequently, this can enhance the overall returns on real estate investments, making them a potentially attractive option in an inflationary economic landscape.

Example: Return of Our Community Portfolio

Let’s put these concepts into perspective with a real-life example: our community portfolio investment. This case illustrates why real estate continues to be an appealing investment option. Despite the backdrop of rising interest rates, our 4% mortgage rate is starting to look like a steal, especially when viewed through the lens of inflation steadily chipping away at the value of your money.

In just one year since we acquired the property in Dusseldorf, our investment has yielded substantial profits. This impressive performance comes even before we factor in some key advantages yet to be realized. We haven’t even begun to leverage the full potential of this investment.

These initial results highlight why real estate is often viewed as a robust hedge against inflation. While other investments might struggle to keep pace with rising prices, the dynamics of real estate, particularly when used strategically with leverage, can lead to wealth preservation and growth even in inflationary times. So, despite the evolving economic landscape, the fundamentals of real estate investing remain robust, making it a compelling choice for savvy investors.

Do you want to profit from the rising real estate market in Germany? With our real estate security tokens you can conveniently invest in the German real estate market.

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Should You Invest in Real Estate Right Now?

Is it the right moment to venture into German real estate? Absolutely, with a word of caution. Smart investing requires a strategic approach. The days of haphazard property purchases and the hope for instant riches are behind us.

At the GermanReal.Estate Marketplace, we provide a means to make informed investments in top-notch German real estate, even in these uncertain times. With potential returns reaching an impressive 12%, it remains a savvy decision. So, if you’re contemplating real estate investments, remember that doing it right can still yield substantial rewards. Happy investing!

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Top 4 German REITs: Comparing the Best REITs in Germany

Discover the performance of the top German REITs in this comprehensive analysis. We examine Alstria Office REIT, Deutsche Konsum REIT, Fair Value REIT, and Hamborner REIT, comparing strategies, portfolio sizes, dividend yields, and past returns to help you navigate the German real estate investment landscape.

Key Takeaways

  • Explore the 4 German REITs. Therefore, we look at strategy, performance, and other factors.
  • Alstria Office REIT: Prime office investments, 108 properties, 4.7 billion euros, pivotal in German real estate.
  • Deutsche Konsum REIT: Retail focus, B & C locations, unique strategy, projected yield increase, cautious excitement.
  • Fair Value REIT: C-locations, retail & office, 7.4% dividend yield, attractive option for higher returns.
  • Hamborner REIT: Urban commercial focus, 66 properties, 7% substantial dividend yield, appealing contender.
  • We analyze the returns of REITs in times of real estate boom and show you possible differences and implications for investors.
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Introduction: How Good Are German REITs?

Discover the different Real Estate Investment Trusts (REITs) in Germany. We have already delved into the intricacies of REITs and highlighted the differences between German and global REITs. If you are interested in investing in German REITs, a crucial question arises: which German REIT really shines amidst these differences?

Join us on an insightful journey of discovery as we examine and compare the four most important REITs in Germany. By analyzing their strategies, evaluating their portfolio sizes, analyzing their dividend yields, and examining their historical performance, we aim to provide you with a comprehensive perspective that will help you in your decision-making. Our analysis is designed to provide you with a path to identify the most promising German REITs in the confusing landscape of real estate investments.

REIT in Germany 1: Alstria Office REIT

Our journey begins with a close look at Alstria Office REIT, a prominent player in the German REIT landscape. Alstria’s strategic approach revolves around capitalizing on the demand for office spaces in high-profile German cities, including Hamburg, Dusseldorf, Frankfurt, and Berlin. This strategic choice aligns well with the bustling business activities and urban dynamics of these locations. 

What sets Alstria apart is its impressive portfolio, housing a substantial collection of 108 properties collectively valued at an impressive 4.7 billion euros. This significant market presence underscores Alstria’s commitment to establishing itself as a prominent real estate player, focusing on a pivotal segment of the market that accommodates diverse businesses and industries. 

By concentrating on prime office spaces, Alstria’s approach responds to the modern workplace’s evolving needs and the ever-growing significance of thriving urban centers in Germany’s economic landscape. 

REIT in Germany 2: Deutsche Konsum REIT

Moving on to Deutsche Konsum REIT, we delve into a distinct avenue of real estate investment. This REIT stands out for its concentrated focus on retail properties, adopting a strategic approach that targets B and C locations.

While their portfolio may not be as extensive as some competitors, their selection of retail properties in these areas brings a unique and diverse perspective to their investment strategy. By tapping into these locations, Deutsche Konsum REIT aims to capture the essence of commercial activity in less prominent areas, potentially filling a vital niche in the retail market. 

Furthermore, the REIT’s projected increase in yield adds an element of intrigue for potential investors. This potential yield increase, estimated to range from five to six percent in 2025, signifies Deutsche Konsum REIT’s determination to enhance returns for its investors. 

REIT in Germany 3: Fair Value REIT

Turning our attention to Fair Value REIT, we step into a realm of niche-focused real estate investment. This REIT’s unique approach involves acquiring retail and office properties specifically situated in C-locations. By concentrating on these areas, Fair Value REIT taps into a segment of the market that might be overlooked by others, potentially offering a different avenue for growth and returns.

What’s more, their robust dividend yield of 7.4% sets them apart as an enticing option for investors aiming for potentially higher returns. This attractive yield not only serves as a draw for those seeking income from their investments but also reflects Fair Value REIT’s commitment to generating value for its stakeholders.

This REIT, which operates in the landscape of retail and office properties in C-locations, superficially offers a distinct investment opportunity for individuals looking to diversify their portfolio and explore alternative real estate opportunities. However, when looking at past performance, even this REIT does not perform well, despite the high dividend yield.

REIT in Germany 4: Hamborner REIT

Moving to Hamborner REIT, we delve into a diverse world of commercial real estate investments. With a strategic emphasis on both city centers and suburbs, Hamborner REIT has positioned itself to cater to the distinct demands of different urban environments. Their extensive portfolio comprises 66 properties scattered across Germany, reflecting their commitment to capturing opportunities in various regions.

What adds to their allure is the robust dividend yield of approx. 7%, making them a compelling contender for investors seeking income-oriented options. This notable yield underscores their dedication to providing a steady stream of returns to shareholders, which can be particularly appealing in today’s economic landscape.

Hamborner REIT’s approach underscores its adaptability to the ever-changing preferences of tenants and businesses and positions it as a major player in commercial real estate in Germany. Nevertheless, it must unfortunately also be said here that the performance, although very good compared to the other REITs, is generally very bad.

Historic Performance vs. Real Estate Boom

Examine the historical performance of these REITs against the backdrop of the flourishing real estate landscape in Germany. As property prices across the country experience a remarkable rise, it is interesting to compare this phenomenon with the returns offered by these REITs. The discrepancy between rising property prices and the lackluster performance of German REITs raises critical questions about the harmony between these investments and investor aspirations.

This divergence prompts a deep reflection on whether these REITs are indeed converting the burgeoning real estate market into lucrative returns for their shareholders. It prompts a reassessment of the strategies and management practices employed by these REITs to ensure that they are realizing the full potential of the real estate boom and, in turn, providing investors with the substantial returns they expect.

Conclusion: Insights for Informed Investors

In the complex landscape of German REITs, investors can chart their course with confidence using the insights gained from examining each provider’s strategy, portfolio, dividend yields, and returns. This comparative research provides a valuable toolkit for those looking to enter the world of real estate investment in Germany.

By understanding the unique focus of each REIT – from office buildings in prime locations to retail and office properties in diverse urban landscapes – potential investors can tailor their selection to their risk tolerance and financial goals. Moreover, assessing historical performance against the backdrop of a booming real estate market highlights the complexity underlying these investments. It becomes clear that thorough research, due diligence, and a forward-looking perspective are essential to navigate the dynamics of the real estate sector.

Armed with these insights, potential investors can navigate the German REIT space with a deeper understanding and make informed investment decisions that align with their financial perceptions and expectations.

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Surprising: Rents In Germany Are Getting "Cheaper"

Are Rents In Germany Getting Cheaper? Discover the surprising trend of more affordable real estate and why it’s a positive development for investors.

Key Takeaways

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Are Rents In Germany Getting Cheaper?

If you just read the title and clicked on the video, you’re probably thinking rents in Germany are getting cheaper, what’s going on? But it’s true, rents in Germany have indeed become more affordable over the last decade.

In this episode of the GermanReal.Estate Blog, we’ll unravel this surprising trend and provide a comprehensive analysis backed by data and statistics. Let’s explore why, despite headlines suggesting rising rents, a deeper look at the numbers tells a different story.

Understanding this shift in rent affordability is crucial for anyone considering housing in Germany or even real estate investment. So, join us as we dive into the data and uncover the truth about Germany’s rental market.

Nominal Rents In Germany Are Rising

On the surface, it might seem like rents in Germany are spiraling upwards. Demonstrations against rising rents have become common in cities like Berlin, Frankfurt, and Munich. Statistically speaking, the index of rents in Germany increased by 8.4% from 2015 to 2022, averaging just over 1% year over year. However, this is looking at nominal values, and the story runs deeper.

Nominal values can be deceiving, especially in the realm of personal finance. This is where understanding the difference between nominal and real values comes into play. Let’s delve into this distinction using an example of a nominal rate of return versus a real rate of return.

Suppose you’re investing your money, aiming for a 4% annual rate of return, which seems decent. However, in Germany, you’d typically face about 25% capital gains tax on your gains, effectively reducing your return to 3%.

Example: Nominal Rate Of Return Vs. Real Rate Of Return

Before jumping to conclusions, let’s draw a parallel with investing. Suppose you’re making a 4% nominal rate of return on your investments in Germany. After the 25% capital gains tax, you’re left with a 3% net return. But inflation also plays a crucial role. If inflation stands at 4%, your real rate of return is actually 0%. In essence, you’re not growing your wealth; you’re just keeping pace with inflation.

Understanding this concept is vital for assessing the real state of any financial metric, including rents. The headline numbers might indicate rising rents, but without accounting for inflation and other factors, it’s an incomplete picture. This is akin to assessing your investment solely based on nominal returns without considering taxes and inflation.

So, let’s apply this nuanced understanding to the situation of rents in Germany, looking beyond the nominal values to uncover the real story.

Nominal Rents Vs. Real Rents In Germany

Applying the same principle to rents in Germany, we need to factor in disposable household income to understand the true picture. It’s essential to compare rents not in isolation but in relation to the income households have left after expenses. Looking at this perspective, a different story emerges. While nominal rents might have increased, real rents, adjusted for household income, have indeed become more affordable over the years.

This approach allows us to evaluate the actual impact of rising rents on people’s lives. It considers how much of their income is allocated to housing costs, giving us a more accurate understanding of affordability. By analyzing this data, we can see that, on average, households are spending less of their income on housing compared to previous years.

So, while headlines may scream about rising rents, the reality is more nuanced. For many households, the burden of housing costs has eased, allowing them to allocate more of their income to other priorities or investments. This understanding is crucial for making informed decisions about real estate in Germany.

Rents In Germany For Different Household Types

Breaking it down further, we analyze different household types. Regardless of whether you’re a single individual, a single parent, a couple without kids, or a couple with two kids, the trend is clear. Rents in Germany are becoming more affordable for various household types, including those at risk of poverty, which is a positive step towards financial stability. So, if you’re considering investing in real estate in Germany, there’s a bright side to the rent equation, and you can explore opportunities on our GermanReal.Estate Marketplace. It’s an avenue to invest wisely in high-quality German real estate. Happy investing!

Understanding these trends can help you make informed decisions about real estate in Germany. While it may seem like rents are constantly on the rise, the reality is more complex. By considering real rents, adjusted for disposable income, it becomes clear that many households are in a better position than before. This knowledge can guide your investment choices and open up opportunities for financial growth.

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Understanding Funding Percentage on GermanReal.Estate

Learn more about the financing portion of GermanReal.Estate, a concept that often raises questions among investors. In this comprehensive guide, we unravel the mysteries surrounding this crucial aspect of real estate investment in Germany.

Key Takeaways

  • Understanding the funding percentage is vital for GermanReal.Estate investors, as it directly impacts the success of projects.
  • Contrary to common misconceptions, achieving 100% funding isn’t a strict requirement for property development to proceed.
  • Funding percentages within regulatory constraints offer flexibility for developers to adjust according to their specific financial needs.
  • Funding percentage doesn’t directly impact investor returns, ensuring fixed interest rates and consistent profit shares for investors.
  • A hypothetical example demonstrates the collaborative nature of profit sharing, benefiting both investors and developers.
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Introduction: The Significance of Funding Percentage

Do you know exactly what the financing share on our GermanReal.Estate marketplace means? Curious? Then it’s time to get to the bottom of this essential factor that determines investment opportunities in real estate.

Among the many inquiries, one question stands out: Can real estate developments move forward without reaching the pinnacle of 100% financing? In this investigation, you will gain a thorough understanding of the true nature of the financing component and its far-reaching implications.

Uncover the intricate details that demystify this numerical representation and illuminate how it directly affects investment prospects. Expect a comprehensive breakdown that will give you a clearer perspective on the role that funding share plays in shaping your investment journey.

The Role of 100% Funding

A look into the depths of the concept of 100% financing reveals its central role in real estate development. This often misunderstood metric has no absolute bearing on whether or not a project comes to fruition. Contrary to popular belief, real estate developments are not solely dependent on reaching the elusive 100% funding mark. The current funding peak of 94% in Köhn Quartier Leipzig leaves no doubt about the viability of the project. Rather, it is a matter of creating a solid foundation that will support the growth and success of the investment.

To understand the true essence of 100% financing, one must realize that it is not an arbitrary threshold that determines the fate of real estate projects. Instead, it symbolizes a benchmark for optimal financial support that enables developers to embark on projects with confidence. It signifies a collective vote of confidence from investors that confirms their commitment to the project’s potential. As you venture further into the intricacies of real estate investment, understand the nuanced importance of 100% financing as a catalyst for opportunity, innovation, and sustainable growth.

Flexibility within Regulatory Barriers

While a security token with a maximum amount of €999,999 cannot exceed this cap, a spectrum of possibilities unfolds within this threshold, allowing for precise adjustment of funding amounts based on the exact requirements of the project in question. Broken down, the funding threshold is divided into 3 ranges:

  1. Funding up to €999,999.
  2. Funding between €1,000,000 and €7,999,999.
  3. Funding from 8.000.000€.

Depending on the stage, there are different regulations that must be adhered to. For example, for a token up to 999,999€, theoretically, a single person can acquire all tokens. With a token that is between €1,000,000 and €7,999,999, a single investor may invest a maximum of €25,000.

These findings highlight the complex and dynamic nature of real estate collateral, for which there is no one-size-fits-all solution. The ability to fine-tune financing proportions represents a strategic dimension that developers can leverage to achieve optimal results. It embodies a delicate balance between financial feasibility and investor commitment and ensures that the financing landscape can be adapted to different investment scenarios.

Are you interested in investing in our real estate security tokens? Then click on the link below to access our marketplace.

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Impact on Investor Returns

You need to know that the coverage ratio itself has no direct influence on the investors’ return. Regardless of whether the coverage ratio is 50% or 100%, the fixed interest rates promised to investors remain stable and secure. This guarantees investors a constant and predictable income stream, regardless of the funding ratio achieved.

The profit-sharing area is also unaffected by fluctuations in the funding ratio. Investors can be confident that the profit shares to which they are entitled will be distributed in accordance with the terms set out at the outset, reflecting a commitment to transparency and fairness.

It is important to note that the focus of the funding share is primarily on the obligations of the developers. This mechanism ensures that developers meet their financial obligations to investors so that the investment process remains reliable and trustworthy. Understanding this dynamic allows investors to navigate the investment landscape with confidence, knowing that their returns are secured by the terms of the real estate securities in which they are investing. This clarity allows investors to make informed decisions that align with their financial goals while understanding the broader context of funding percentages in the GermanReal.Estate investment space. You can read about further risks here.

Real-world Example of Profit Sharing

To illustrate the subtleties of profit sharing, let’s look at a concrete example of a project with a maximum funding amount of €100,000 and an active participation of 94%. In this scenario, each investor is entitled to an annual interest rate of 12% and a profit share of 18%, illustrating the double benefit of this investment.

Let’s imagine a hypothetical example for this case. Here we assume a profit share pool of €100,000. The conditions are therefore a funding threshold of €100,000 and a profit of €100,000 at which 100% profit share is distributed. At 94% funding share, the profit share for investors would be €94,000, while €6,000 would be retained. This dynamic illustrates how the profit-sharing mechanism rewards both investors and developers and fosters a cooperative relationship where profits are shared proportionally.

By visualizing this example, the cooperative nature of real estate investment on GermanReal.Estate becomes clear. Investors can see how their participation translates into tangible returns and developers can fulfill their commitment to delivering profit shares, cementing trust and transparency within the investment ecosystem. Such real-world examples illustrate the nature of profit-sharing and the symbiotic relationship it creates between investors and developers.

Conclusion

In summary, the financing component on GermanReal.Estate is a key element shaping the real estate investment sector. It will thus clarify that 100% funding is not a prerequisite for project success and highlight the solid foundation that can be achieved within current limits.

If you want to navigate the dynamic landscape of German real estate investment, knowing the financing portion will help you make informed decisions based on the impact on investor returns and the cooperative nature of the project. With a vision for diverse investment opportunities on the horizon, your contribution shapes the future of this evolving platform.

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Will This Solution Fix the German Housing Crisis?

Germany’s housing crisis demands a holistic approach. While boosting homeownership is important, lowering entry barriers and promoting responsible renting are equally vital components.

Key Takeaways

  • Germany’s low homeownership rate, especially among young people, signals a growing housing challenge.
  • Homeownership offers retirement savings but introduces financial complexities, including maintenance and insurance costs.
  • Renting isn’t always a financial loss; it allows flexibility and potential tax benefits for investment.
  • Homeownership builds net worth through equity, but disciplined saving and investing offer alternatives for renters.
  • High upfront costs, including taxes and fees, are the primary barriers to homeownership in Germany.
  • A holistic approach, balancing renting and owning, is essential to address Germany’s housing crisis effectively.
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Introduction

Germany is currently grappling with its most significant housing shortage in the past 30 years. With a deficit of 700,000 flats today, this number is expected to balloon to a staggering 1.5 million in just two years.

In response, the German Conservative Party (CDU/CSU) has unveiled a series of measures aimed at tackling this housing crisis. One of the core aspects of their strategy is to increase homeownership in Germany, which currently stands at a meager 45 to 50 percent, making it the second-lowest homeownership rate in Europe, only surpassing Switzerland.

The Quest for Homeownership in Germany

The declining homeownership rate in Germany, especially among young people, has set alarm bells ringing in the political arena. While the homeownership rate was historically stable until 2010, it has since taken a discouraging downward turn.

A revealing statistic shows that in 2001, as many as 700,000 people dared to take the step onto the property ladder. However, this former dream has shrunk drastically, with only a fraction – less than 400,000 – reaching this milestone by 2020. This shift underscores the daunting financial challenges many young Germans face when considering home ownership.

The younger demographic in particular faces a homeownership rate of only 12%, highlighting the enormous hurdles they face in realising their desire for homeownership in the current market.

Pros and Cons of Homeownership

The conservative party’s push to promote home ownership in Germany is based on the belief that it brings several notable advantages. First, home ownership is seen as a sound method of retirement planning that effectively addresses the shortcomings of the country’s public pension system.

While home ownership can certainly serve as a retirement strategy, it is not without financial difficulties. Purchasing a property may free you from the burden of renting, but it also brings with it a new set of financial obligations. These include property maintenance, insurance cover, and possible renovation and modernization costs.

So the advantages of home ownership have to be weighed against the practical and financial realities, especially the long-term obligations involved.

Renting: A Viable Alternative

Renting isn’t always the financial pitfall it’s often portrayed to be. Let’s examine the case of two identical individuals, Bernie and Ralph, both in identical financial situations. Bernie decides to buy a home, while Ralph takes an alternative path, continuing to rent and channeling his surplus funds into income-generating properties.

Ralph’s strategy boasts several noteworthy advantages. Firstly, it presents the potential for tax benefits that Bernie, as a homeowner, won’t be able to leverage. Moreover, Ralph retains the flexibility to invest his capital in various avenues, thus diversifying his portfolio and potentially maximizing returns.

While owning a home can offer financial security and a sense of accomplishment, it’s crucial to debunk the myth that renting is a financial dead-end. Depending on one’s financial discipline and investment strategy, renting can be a practical and rewarding choice.

Do you want to invest in real estate besides, but shy away from the high entry costs? Then take advantage of our real estate security tokens.

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Building Net Worth Through Homeownership

The case for homeownership gains momentum when we consider how it can boost an individual’s net worth over the years. As a homeowner diligently pays down their mortgage, they steadily amass equity in their property. This is in stark contrast to renters, who are not structurally compelled to save in quite the same way.

However, it’s important to recognize that renters have their own avenues for wealth accumulation. They can channel their resources into disciplined saving and strategic investments, creating a solid financial foundation that can rival homeownership in terms of net worth growth.

Therefore, while homeownership is a time-tested strategy for building wealth, it’s by no means the only path to financial success. The key lies in making informed financial decisions that align with one’s individual circumstances and goals.

Barriers to Homeownership in Germany

The most formidable barrier to homeownership in Germany lies in the staggering upfront costs associated with purchasing a property. These costs encompass a notary fee of 2%, land registry fees, ground purchase taxes that span from 3.5 to 6.5 percent, and the possibility of additional real estate agent fees. A possible 10 percent down payment further compounds these financial hurdles, making property ownership a distant dream for many.

Recognizing the pressing need to increase homeownership, the Conservative Party is contemplating a range of measures aimed at reducing these barriers. By lowering these substantial upfront costs, they aspire to make homeownership a more attainable goal for a broader segment of the population. If successfully implemented, these initiatives could potentially open the doors to homeownership for many who have long yearned for a place to call their own.

Conclusion

In conclusion, the housing crisis in Germany is a complex challenge that demands a multifaceted solution. While boosting homeownership rates is a vital component, it’s equally crucial to explore other strategies. Lowering the formidable entry barriers, fostering affordable housing projects, and encouraging responsible renting all play pivotal roles in tackling this issue holistically.

Striking a balance between renting and owning could well be the linchpin in addressing this crisis comprehensively. By embracing a combination of these approaches, Germany may pave the way for a brighter housing future, where more individuals can access suitable homes, whether as renters or homeowners.

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How Real Estate Can Make You Rich: Exploring Investments, Leverage, and Tax Benefits

Discover the potential of real estate investment in creating wealth and financial success. 🤑 Explore the world of investments, leverage, and tax benefits associated with real estate.

Key Takeaways

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Introduction

If you’re looking for a path to financial wealth and success, real estate investment emerges as a powerful and potentially lucrative avenue. In this episode of the GermanReal.Estate FAQ, we will delve into why real estate can offer superior returns compared to traditional savings plans like ETFs.

While the definition of wealth may vary from person to person, let’s take the milestone of becoming a millionaire, as it is a commonly shared aspiration. Join us as we explore the potential of real estate to help you reach your financial goals, discussing investments, leveraging debt, and the tax benefits associated with this investment strategy.

The Path to Becoming a Millionaire

To comprehend the journey towards becoming a millionaire, two key factors come into play: the time frame and the return on investment. When considering historical data, the stock market has demonstrated an average return of around 7% per year over a long period. However, it’s important to note that this return does not account for fees, taxes, or inflation. Nevertheless, let’s examine the amount of money you would need to save each month to accumulate one million euros based on a seven percent return.

Suppose you aim to achieve this milestone over 30 years. In that case, you would need to save approximately 850€ every month, factoring in the compounding interest. However, if you have a shorter time frame and desire to become a millionaire in just 10 years, the required monthly savings would skyrocket to around 5.820€. This significant increase in monthly savings is primarily due to the limited compounding interest within a shorter duration.

Understanding the correlation between time, savings, and returns is crucial when considering the path to millionaire status. The longer the investment horizon, the more time you have to accumulate wealth through the compounding of returns. Conversely, attempting to achieve this financial milestone in a shorter period demands significantly higher monthly savings to compensate for the reduced time available for your investments to grow.

Challenges of Traditional Savings Plans

Traditional savings plans present numerous challenges that can hinder individuals from achieving their wealth goals. Firstly, these plans often necessitate a substantial salary to consistently invest the required amount. Saving nearly 2.000€ every month for at least 20 years can be an overwhelming task for many. Furthermore, investing your net salary lacks tax efficiency, as any profits earned from investments are subject to an additional 25 percent capital gains tax.

It becomes apparent that a more effective solution is needed to overcome these challenges and increase the likelihood of achieving wealth. That’s where real estate investment comes into play. By exploring alternative avenues, such as leveraging other people’s money and utilizing tax benefits, you can enhance your wealth-building journey and increase the potential for substantial returns.

Real estate investment provides a promising solution to overcome the limitations of traditional savings plans. Instead of relying solely on personal savings, you can tap into the power of leveraging other people’s money. This involves obtaining mortgages or loans to finance the purchase of income-generating properties. By using borrowed funds intelligently, you can amplify your investment potential and diversify your portfolio across multiple properties.

Leveraging the Power of Debt

The renowned author Robert Kiyosaki emphasizes the importance of leveraging other people’s money to create wealth. However, it’s crucial to differentiate between good and bad debt. Good debt involves acquiring assets that generate long-term returns and increase in value over time. One of the most prominent examples of good debt is obtaining a mortgage to purchase income-generating properties.

Contrary to popular belief, even individuals with significant financial resources prefer leveraging mortgages instead of buying properties outright. By doing so, they can diversify their investment portfolio and increase the potential for future earnings. Rather than investing all their capital in a single property, they opt to purchase multiple properties with smaller down payments, which allows them to scale their investments.

This strategy offers several advantages. Firstly, it mitigates risk by spreading investments across multiple properties, reducing the potential impact of market fluctuations. Additionally, leveraging mortgages enables investors to benefit from the compounding returns on multiple properties simultaneously. The power of leverage amplifies wealth-building potential, as long as the investor is willing to assume the associated risks.

Making Your Wealth Journey Tax-Efficient

Optimizing tax efficiency is a crucial aspect of wealth building. Real estate investment offers various tax benefits that can help individuals maximize their returns and reduce their tax liabilities. In Germany, when you purchase a rental property, numerous expenses associated with the transaction, such as closing costs, notary fees, and real estate agent fees, become tax deductible.

Moreover, when you own a rental property, all expenses related to its management and maintenance, including interest payments on the mortgage, property management fees, insurance costs, and even depreciation, can be deducted from your taxable income. This deduction not only reduces your overall tax burden but also contributes to generating a positive cash flow from your rental property.

Furthermore, income from real estate investments falls into the same category as income from work. This means that if you experience a taxable loss from investing in rental properties due to tax-deductible costs, your overall tax rate may decrease. In essence, your tenant’s rent payments, combined with the tax benefits associated with rental properties, can help offset your mortgage payments, leading to increased financial freedom and accelerated wealth accumulation.

SPVs simplify the mortgage process and provide instant diversification. To take advantage of this, just go to our GermanReal.Estate marketplace.

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Conclusion

Real estate investment, when approached strategically and with careful consideration, can be a potent pathway to wealth and financial success. By leveraging other people’s money, diversifying investments, and capitalizing on the tax benefits associated with rental properties, you can maximize your returns and minimize tax liabilities.

When combined with a well-selected property in a prime location, real estate investment holds the potential to propel your journey towards financial abundance. Stay tuned to our site and explore our other articles to dive deeper into the intricacies of successful real estate investing.

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The Shocking Truth About the German Real Estate Boom

This eye-opening article delves into population growth, building permits, and supply-demand dynamics, shedding light on the factors fueling the surge in property prices and rents 👀.

Key Takeaways

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Introduction

In the world of real estate, sensational headlines often grab our attention, painting a picture of an impending bubble or crash. However, these headlines only scratch the surface of a complex reality.

In this GermanReal.Estate blog, we embark on a deep dive into the factors fueling the remarkable surge in property prices and rents across Germany. By meticulously analyzing population trends, building permits, construction rates, and the intricate dynamics of supply and demand, we unearth the truth behind the German real estate boom.

Join us on this journey as we navigate through a wealth of data and statistics, unveiling the underlying forces that shape the trajectory of the market. Prepare to gain a comprehensive understanding of the factors driving this growth and discover the fascinating intricacies that lie beneath the surface of headlines.

You can also help Germany to build more properties. With our real estate security tokens, you can support project developers to create more living space.

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Population Growth and Its Impact on Real Estate

Understanding the German real estate market requires acknowledging its intricate relationship with population growth. Despite the prevailing notion of a declining population, the reality is revealed through migration statistics. While Germany has witnessed a persistently higher death rate than birth rate since the 1970s, the country has experienced a crucial influx of migrants. In recent years, Germany has welcomed a staggering net migration of 1.5 million individuals, marking the highest recorded figure to date. This substantial population surge has sparked an unprecedented demand for housing, thereby intensifying the need for an increased supply of properties.

The significance of population growth in shaping the German real estate market cannot be overstated. With each new wave of migrants, the demand for suitable accommodation rises, pressuring the housing market to adapt and expand accordingly. As the number of residents increases, so does the requirement for residential spaces, ranging from apartments to houses. This surge in demand has a cascading effect on the overall real estate landscape, stimulating construction activity and fostering opportunities for property developers and investors alike.

Building Permits and Construction Rates

In analyzing the German real estate market, an essential factor to consider is the correlation between housing demand and the number of building permits issued. Building permits serve as a vital indicator of future construction activity and offer insights into the supply side of the market. Unfortunately, recent data paints a concerning picture. Building permits have experienced a significant decline of nearly 30% compared to the previous year.

This decline in building permits is particularly noteworthy given the context of the all-time high population figures. With the demand for housing steadily rising due to population growth and migration, the decrease in building permits exacerbates the supply-demand imbalance in the market. As fewer building permits are granted, the construction of new properties slows down, further intensifying the scarcity of available housing options.

The decline in building permits poses significant challenges to addressing the growing demand for housing in Germany. It not only hampers the expansion of the housing supply but also contributes to rising property prices and rents. The lack of new construction projects aggravates the existing housing shortage, creating a competitive environment for prospective buyers and tenants.

Renovations and Living Space Expansion

While new construction projects may be declining, the overall supply of living space in Germany continues to expand, primarily driven by the renovation and repurposing of existing properties. By breathing new life into old buildings, the number of available properties for living purposes increases. However, upon closer examination, it becomes apparent that this growth is insufficient to keep pace with the expanding population.

From 2000 to 2021, the number of properties for living purposes in Germany grew by a modest 14.7%, with an annual increase of just 0.7%. A similar trend can be observed in the growth of flats, which saw a 12.2% increase over the same period, equating to a yearly growth rate of 0.6%. These figures highlight the challenge of meeting the housing needs of a rapidly growing population.

While renovations contribute to the overall supply of living space, the growth rate falls short of matching the increasing demand. With the population continuing to expand and the square meters per person on the rise, the demand for housing outpaces the growth in available properties. This supply-demand disparity exerts upward pressure on property prices and rents, making housing affordability a growing concern.

Supply-Demand Dynamics and Price Trends

The interplay between population growth, limited new construction, and modest supply expansion has created a pronounced supply-demand gap within the German real estate market. With the ongoing growth of the population and an increase in square meters per person, the scarcity of available properties has become more pronounced, leading to escalating prices and rents. This supply-demand imbalance exerts upward pressure on the market, fueling the upward trajectory of property prices.

The House Price Index from Europace, a prominent mortgage software provider, reveals a slight decline in property prices in early 2022, driven by factors such as inflation and global events. However, the market quickly rebounded, illustrating the resilience and robustness of the German real estate sector. Despite occasional fluctuations, the overall trend points towards sustained growth and an upward price trajectory.

The supply-demand dynamics within the German real estate market underscore the persistent demand for housing amid limited availability. This imbalance presents challenges for both prospective buyers and tenants, as they contend with rising prices and fierce competition. It highlights the need for a comprehensive approach that addresses the growing demand through increased construction and innovative solutions to bridge the supply-demand gap.

Conclusion

Contrary to sensational claims of a real estate bubble, the truth about the German real estate market lies in the supply-demand dynamics influenced by population growth and limited new constructions. Insufficient supply to meet the growing demand has led to escalating property prices and rents. However, the market remains fundamentally healthy, with prices driven by genuine supply constraints rather than speculative forces.

As the German Real Estate marketplace, we strive to contribute to the solution by supporting property developers in funding their projects and creating more properties. Join us in making a positive impact while earning attractive returns. Visit the GermanReal.Estate Marketplace.

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Easy Real Estate Investing With a Property Manager

Are you considering investing in real estate in Germany? If so, you have two options, which we will look at in this article: You can manage the property yourself or use the services of a professional property manager.

Key Takeaways

  • When buying a property, you can choose between two options: To manage it yourself or hire a property manager.
  • Property managers use their expertise to recruit and screen potential tenants to ensure responsible tenants for your rental property.
  • Property managers oversee property maintenance, repairs, and renovations, using their network of trusted professionals.
  • Property managers handle rent collection, financial accounting, and payment distribution for accurate financial management.
  • Property managers take care of administrative tasks, such as liaising with local authorities and ensuring legal compliance.
  • Property managers take care of tenant changes, carry out inspections, repair damage, and find new tenants promptly.
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Introduction

Investing in real estate can be a lucrative venture, but it comes with its fair share of challenges. When it comes to buying a property in Germany, you have two options:

  1. Managing the Property Yourself: Self-managing rental properties requires significant time, effort, and expertise to handle various tasks effectively. It entails responsibilities such as tenant acquisition and screening, property maintenance, rent collection, financial management, and handling administrative tasks. While this option offers full control and potentially higher profits, it can be demanding and time-consuming, especially for landlords with multiple properties or limited experience.
  2. Hiring a Professional Property Manager: A property manager serves as a dedicated link between you, the owner, and your tenants, taking care of various responsibilities on your behalf. They have the expertise, resources, and network to handle tenant acquisition, property maintenance, rent collection, financial management, and administrative tasks. By outsourcing these responsibilities to a property manager, you gain peace of mind, time savings, and the assurance that your property is being professionally managed. This option is particularly beneficial for landlords who prefer a hands-off approach, have limited time or expertise, or own multiple properties.

In this GermanReal.Estate Wiki, we delve into the benefits of having a property manager and how they can make your life as a real estate investor much easier. Whether you’re a tenant looking for a reliable landlord or a landlord seeking peace of mind, understanding the role of a property manager is essential in navigating the complexities of real estate ownership effortlessly.

Task 1: Finding a New Tenant

Finding a new tenant is a crucial responsibility of a property manager, and their expertise in this area can significantly benefit landlords. Property managers leverage their knowledge of the rental market to effectively market the property and attract potential tenants. They employ various strategies such as online listings, advertising, and networking to reach a wide audience of prospective renters.

In addition to attracting tenants, property managers conduct thorough screening processes to ensure that only qualified and responsible people are selected. This involves reviewing rental applications, verifying employment and income, checking references, and conducting background checks. By meticulously screening tenants, property managers aim to find reliable people who will pay rent on time, take care of the property, and adhere to the terms of the lease agreement.

The experience and expertise of property managers enable them to identify warning signs and red flags during the tenant screening process. They have a keen eye for identifying potential issues and can make informed decisions about tenant selection. This helps to minimize the risk of late payments, property damage, and eviction.

By entrusting the task of finding a new tenant to a property manager, landlords can save time and ensure that the property is occupied by responsible and reliable people. Property managers handle the entire process from marketing the property to screening applicants, allowing landlords to focus on other aspects of property management or enjoy a hands-off approach to their rental investment.

Task 2: Handling Technical Tasks

Handling technical tasks is a vital responsibility of property managers, ensuring that rental properties are well-maintained and in optimal condition. Property managers leverage their network of trusted professionals, including maintenance workers, contractors, and repair specialists, to address any issues that may arise.

Property managers are responsible for promptly responding to maintenance requests from tenants and coordinating necessary repairs or replacements. They have the expertise to assess the urgency and severity of maintenance issues, ensuring that appropriate action is taken in a timely manner. Whether it’s a leaky tap, a faulty air conditioner, or a broken appliance, property managers coordinate with skilled technicians to resolve the problem efficiently.

In addition to addressing maintenance issues, property managers also handle property renovations and upgrades. They work closely with contractors and vendors to plan and execute renovation projects, ensuring that the property remains competitive and attractive to tenants. From cosmetic enhancements such as painting and flooring to major renovations like kitchen or bathroom remodeling, property managers oversee the entire process to ensure quality workmanship and timely completion.

By entrusting technical tasks to property managers, landlords can have peace of mind knowing that their rental properties are well-maintained and in good condition. Property managers’ expertise and network of professionals enable them to provide prompt and efficient solutions, minimizing disruptions for tenants and maximizing the value and appeal of the property.

The properties in our portfolio on the GermanReal.Estate marketplace all come with a property manager.

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Task 3: Managing Financial Tasks

Managing financial tasks is a crucial aspect of property management that ensures smooth financial operations for rental properties. Property managers take on the responsibility of rent collection, financial record-keeping, and payment distribution, relieving landlords of the burden of handling these tasks.

Property managers implement effective rent collection strategies, ensuring that tenants pay their rent on time. They handle all aspects of rent collection, including setting rental rates, sending out rent invoices or reminders, and following up on any late or outstanding payments. This ensures consistent cash flow for landlords and minimizes the risk of rent delinquencies.

In addition to rent collection, property managers maintain accurate financial records for the rental property. They track income and expenses, including property maintenance costs, repairs, and other financial transactions. This meticulous record-keeping allows landlords to have a clear overview of the property’s financial performance and facilitates easy tax reporting and preparation.

By entrusting financial tasks to property managers, landlords can ensure efficient and accurate financial management for their rental properties. Property managers’ expertise in rent collection, record-keeping, and payment distribution ensures that financial operations run smoothly, providing landlords with peace of mind and allowing them to focus on other aspects of property ownership.

Task 4: Dealing with Administrative Tasks

Property managers play a crucial role in handling administrative duties, including interactions with local authorities, service providers, and ensuring compliance with legal regulations. This relieves landlords of time-consuming administrative tasks and ensures smooth operations for their rental properties.

Property managers act as a liaison between landlords and local authorities, dealing with various administrative requirements. They stay up-to-date with local laws and regulations, ensuring that the property complies with all necessary permits, licenses, and safety standards. By handling these administrative responsibilities, property managers save landlords the time and effort required to navigate complex legal requirements.

Additionally, property managers ensure compliance with legal regulations related to renting and leasing properties. They handle tasks such as drafting and enforcing lease agreements, conducting tenant screenings, and addressing any legal issues that may arise during the tenancy. This ensures that landlords remain in full compliance with local rental laws, protecting their interests and minimizing potential legal risks.

By entrusting administrative duties to property managers, landlords can focus on other aspects of their lives while having peace of mind that their rental properties are being managed efficiently and in compliance with legal requirements. Property managers’ expertise in administrative tasks saves landlords time and effort, allowing them to enjoy the benefits of property ownership without the administrative burden.

Task 5: Tenant Turnovers

Property managers play a crucial role in efficiently managing tenant turnovers, conducting property inspections, addressing damages, and promptly finding new tenants to minimize vacancies.

When a tenant decides to move out, property managers handle the process seamlessly. They conduct thorough property inspections to assess any damages or necessary repairs. This ensures that the property is in optimal condition for the next tenant. Property managers also coordinate those repairs and maintenance.

Simultaneously, property managers initiate the tenant search process to minimize vacancies. They utilize their marketing expertise and extensive networks to attract potential tenants. Property managers screen applicants rigorously, verifying their background, credit history, and rental references to ensure reliable and responsible tenants for the property.

By efficiently managing tenant turnovers, property managers help landlords avoid extended vacancies that can negatively impact rental income. They streamline the process, minimizing the time between tenants and ensuring a smooth transition for all parties involved.

Conclusion

Hiring a property manager can alleviate the stress and workload associated with managing a rental property in Germany. From tenant acquisition and screening to handling technical, financial, and administrative tasks, property managers bring expertise and efficiency to ensure the smooth operation and profitability of your investment.

Whether you are a seasoned investor with a portfolio of properties or a first-time landlord, entrusting the management of your rental property to a professional property manager can provide peace of mind and enable you to focus on other aspects of your real estate investment journey.

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the Top 10 Most Expensive German Cities for Real Estate Investments in 2023

Are you curious about the most expensive German cities for real estate in 2023? 🤔 Discover the top 10 cities that have witnessed skyrocketing property prices and explore their fundamentals.

Key Takeaways

  • Freiburg’s presence in the top 10 list raises the question of whether the high property prices are justified in comparison to other cities.
  • With almost same prices and additional amenities nearby, Erlangen is proving to be an alternative to Freiburg for property investment.
  • Similar to Freiburg, Rosenheim’s fundamentals are unclear, raising concerns about its place among Germany’s most expensive cities.
  • Hamburg’s solid fundamentals and attractive location make it a preferred investment location despite increased ground transfer tax.
  • The marginal price difference between Berlin and Potsdam reflects their close proximity and highlights Berlin’s soaring rental market.
  • Düsseldorf’s proximity to Cologne and strong fundamentals justify its position among the most expensive cities for real estate.
  • Stuttgart has solid economic fundamentals but an expensive real estate market, so it can make sense to look in the suburbs.
  • With only a slight price difference compared to Stuttgart, Frankfurt offers a variety of fundamentals and benefits as a financial hub.
  • Munich’s high property prices reflect its position as a safe and prosperous city, making it an expensive but perhaps safe investment.
  • The Leipzig region presents an attractive investment opportunity with substantial growth and high returns for real estate investors.
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Introduction

Investing in real estate has always been a popular option for individuals seeking a stable and potentially lucrative asset. However, in recent years, the German real estate market has witnessed a significant surge in prices, with certain cities standing out as particularly expensive.

In this GermanReal.Estate blog post, we will explore the top 10 most expensive German cities for buying real estate, shedding light on their appeal, potential risks, and investment opportunities. The article is based on a table from Statista for the fourth quarter of 2022.

10. Freiburg - Surprising Entry in the Top 10

Freiburg (7.065€/sqm), known for its charming old town and prestigious university, has surprisingly made its way into the list of the most expensive German cities for real estate. However, the underlying fundamentals that justify its high property prices compared to other cities raise questions among investors.

Despite its appealing features, such as the beautiful Altstadt, Freiburg seems to lack significant amenities when compared to cities like Erlangen, which offer more attractive options.

As a result, investors may question whether Freiburg’s premium pricing is truly warranted given the seemingly limited benefits it offers in terms of amenities and potential returns on investment.

9. Erlangen - A More Attractive Option Than Freiburg

Erlangen (7.116€/sqm), located just 50 kilometers from Nürnberg, emerges as a highly compelling alternative for real estate investment. While Freiburg may captivate with its scenic surroundings and renowned university, Erlangen presents a more enticing proposition with its attractive pricing and additional amenities. Notably, the presence of the third-largest university in Bavaria adds a significant advantage to the city.

Investors looking to acquire property in Erlangen can benefit from lower costs, thanks to ground purchasing taxes that are 1.5% lower than in Freiburg. This reduction in closing costs further enhances the value proposition of investing in Erlangen. With its combination of affordability, amenities, and potential returns, Erlangen proves to be an alluring choice for those seeking value and opportunity in the German real estate market.

If you are not yet financially ready to invest in real estate but want to invest, you are welcome to check out our GermanReal.Estate marketplace.

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8. Rosenheim - Unanswered Fundamentals

Rosenheim’s (7.205€/sqm) inclusion among Germany’s most expensive cities raises concerns regarding its underlying fundamentals. While the city enjoys the advantage of its proximity to Munich and its picturesque landscapes, investors may struggle to justify the inflated real estate prices within Rosenheim itself.

However, there may be potential for more affordable and attractive investment opportunities in the suburbs and surrounding areas of Rosenheim. Exploring these neighboring regions could reveal hidden gems with more favorable pricing and potential for growth.

By venturing beyond the city limits, investors may discover untapped potential and find properties that align better with their investment goals. Thus, while Rosenheim’s central area may present challenges in terms of pricing, expanding the search to the surrounding areas could unlock more promising opportunities for savvy real estate investors.

7. Hamburg - A Solid Choice for Investment

Hamburg (7.271€/sqm), renowned for its vibrant culture, bustling harbor, and robust economic fundamentals, solidifies its position as one of Germany’s top 7 A-locations for real estate investment. Despite the recent increase in ground purchasing taxes, Hamburg continues to be a preferred choice for investors.

The city boasts a resilient economy, providing a stable foundation for real estate ventures. Additionally, Hamburg offers promising growth potential, with ongoing developments and infrastructure projects enhancing its desirability. The city’s strategic location as a major port and its diverse job market further contribute to its appeal among investors.

Hamburg’s thriving cultural scene, rich history, and high quality of life add an extra layer of attraction. For those seeking a stable and prosperous market, Hamburg presents an excellent option for real estate investment, showcasing its resilience and potential for long-term returns.

5 & 6. Berlin and Potsdam - Minimal Price Difference

The marginal price difference between Berlin (7.424€/sqm) and Potsdam (7.378€/sqm) can be attributed to their close proximity and interconnected real estate markets. These two cities share a symbiotic relationship, with developments in one often impacting the other. Berlin, in particular, has garnered significant attention due to its skyrocketing rental prices, which have piqued the interest of investors. However, it’s essential for investors to be aware of the potential risks associated with the recent dynamics in the rental market. Regulations and policies can impact rental yields and property values, requiring careful consideration and due diligence.

Both Berlin and Potsdam offer distinct advantages that make them intriguing options for real estate investment. Berlin’s international appeal, cultural vibrancy, and thriving tech scene make it a magnet for young professionals and creatives. Potsdam, on the other hand, boasts a rich history, stunning architecture, and a serene ambiance. Both cities continue to develop, with ongoing infrastructure projects and urban revitalization initiatives enhancing their desirability.

Investors considering these markets should carefully evaluate their investment strategies and goals. While Berlin’s rental market offers potential for high yields, it’s crucial to understand the associated risks and navigate the evolving regulations. Potsdam, with its charm and proximity to Berlin, presents opportunities for those seeking a more tranquil and historically significant real estate investment. By assessing factors such as market trends, rental demand, and long-term growth prospects, investors can make informed decisions in the dynamic real estate markets of Berlin and Potsdam.

4. Düsseldorf - A Top 7A Location

Düsseldorf’s (7.521€/sqm)prominent position among the most expensive German cities for real estate is well-justified by its strategic location near Cologne and its status as one of the top 7 A-locations in the country. While the premium pricing in Düsseldorf may raise questions for some investors, the city’s strong fundamentals and accessibility to major economic centers make it an alluring destination for real estate investment.

The city’s strong fundamentals, including a robust economic infrastructure, stable job market, thriving business landscape, excellent transportation links, a diverse cultural scene, and renowned educational institutions, contribute to its appeal. Düsseldorf offers a high quality of life, attracting a skilled workforce and fostering a prosperous environment for businesses. This combination of factors makes Düsseldorf an attractive destination for both domestic and international investors looking to capitalize on the city’s promising real estate market.

While the premium pricing in Düsseldorf may require a higher initial investment, the city’s strong fundamentals and potential for long-term returns make it a compelling choice for real estate investors. By carefully assessing market trends, exploring different neighborhoods, and conducting thorough due diligence, investors can uncover valuable opportunities and leverage Düsseldorf’s position as a top 7 A-location for their real estate investment strategies.

3. Stuttgart - Strong Fundamentals Amid Price Challenges

Stuttgart (7.916€/sqm) distinguishes itself with strong economic fundamentals, thanks to the presence of renowned car manufacturers and a stable job market. The city’s thriving automotive industry and related sectors contribute to its economic resilience and create a favorable environment for real estate investment. However, property prices within Stuttgart itself can be prohibitively high, posing a challenge for some investors.

To find a balance between price and fundamentals, many investors are exploring the suburbs and nearby regions of Stuttgart. These areas offer more affordable options without compromising on the advantages associated with Stuttgart’s economic strength. By venturing beyond the city limits, investors can discover attractive opportunities that align better with their budget and investment goals.

By considering the suburbs and nearby regions, investors can leverage Stuttgart’s robust economic fundamentals without bearing the burden of exorbitant property prices within the city itself. Careful research and analysis of these surrounding areas can lead to rewarding real estate investment opportunities in the Stuttgart region.

Profit from the real estate market even without the high acquisition costs. With our real estate security tokens, you can participate in rising real estate prices from the comfort of your own home.

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2. Frankfurt - A Close Rival to Stuttgart

Frankfurt (7.983€/sqm), renowned as a financial hub, and its close proximity to Stuttgart bolster its appeal as a highly competitive real estate investment location. The city boasts numerous advantages that attract investors from around the world. Excellent connectivity, including an international airport and a well-developed transportation infrastructure, facilitates easy access to global markets and enhances Frankfurt’s status as a prominent financial center.

Moreover, Frankfurt offers a diverse range of job opportunities, particularly in the financial and banking sectors. The presence of multinational corporations and renowned financial institutions creates a dynamic and robust business environment, making it an attractive destination for professionals and investors alike. The city’s thriving cultural scene, encompassing world-class museums, theaters, and music venues, adds to its allure and contributes to a vibrant and cosmopolitan atmosphere.

While the price difference between Frankfurt and Stuttgart may be relatively small, investors can find distinct benefits in both cities. Frankfurt’s status as a global financial hub provides unique opportunities for those interested in the financial and commercial sectors. On the other hand, Stuttgart’s automotive industry and strong economic fundamentals present an appealing investment landscape. 

1. Munich - The Unsurprising Champion

Munich (11.234€/sqm), the capital of Bavaria, holds the prestigious title of being the most expensive city for real estate in Germany. The premium prices in Munich are a testament to the city’s unparalleled status as a safe, prosperous, and highly sought-after place to live. Munich boasts a robust economy driven by diverse industries, including technology, automotive, and finance. Its world-class education system, which includes renowned universities and research institutions, further contributes to its appeal.

The high quality of life in Munich is another key factor that attracts both investors and residents. The city offers a plethora of cultural attractions, picturesque surroundings, and a well-preserved historic center. Munich’s vibrant culinary scene, abundant green spaces, and efficient public transportation system add to its allure.

However, the exorbitant costs associated with Munich’s real estate market can be a deterrent for some investors. The demand for housing in Munich consistently outstrips supply, driving prices to unprecedented heights. The limited availability of land and strict regulations on new construction contributes to the scarcity of affordable properties.

The Leipzig-Chemnitz Triangle - A Hidden Gem

In the midst of the high-priced real estate market dominating major German cities, the Leipzig-Chemnitz Triangle emerges as a hidden gem for savvy investors. This region, with Leipzig at its forefront, has witnessed remarkable growth and transformation in recent years, making it an enticing prospect for those seeking substantial returns and untapped potential.

Leipzig, in particular, has become a thriving economic and cultural hub. The city boasts a rapidly expanding job market, attracting a talented workforce and driving economic growth. The presence of renowned universities and research institutions further contributes to Leipzig’s appeal, creating a vibrant intellectual and innovative environment.

One of the key advantages of investing in the Leipzig-Chemnitz Triangle is the comparatively lower real estate prices when compared to major German cities. This affordability provides investors with an opportunity to enter a market with significant growth potential and capitalize on the upward trajectory of property values.

Moreover, Leipzig offers a dynamic cultural scene, featuring a wide range of artistic events, festivals, and vibrant nightlife. The city’s rich history, architectural heritage, and well-preserved city center add to its charm, attracting both residents and tourists alike.

Conclusion

Investing in real estate in Germany’s most expensive cities demands careful consideration of various factors, including location, fundamentals, and price trends. While Munich takes the top spot, it comes with a significant premium. However, exploring alternative cities like Leipzig in the Triangle region can offer attractive opportunities for savvy investors.

When deciding where to invest, investors should conduct thorough research and seek advice from real estate professionals. Each city has its unique appeal and potential for growth, but it’s crucial to align investments with individual financial goals and risk tolerance. Moreover, staying updated on the latest market trends and regulations can help investors make informed decisions.

Before committing to any real estate investment, consider factors such as local job markets, economic stability, rental demand, and infrastructure development. Diversifying investment portfolios by exploring multiple locations can help mitigate risk and ensure long-term financial stability.

In conclusion, the German real estate market presents various options for investors seeking to capitalize on the country’s economic strength and stability. While the most expensive cities like Munich and Frankfurt offer undeniable benefits, they may not be suitable for all investors due to their high costs. Exploring cities with solid fundamentals and growth potential, like Leipzig, presents exciting opportunities for real estate investment in Germany.

As with any investment, it’s essential to approach the real estate market with diligence and caution. Conduct thorough research, seek expert advice, and consider your financial goals and risk tolerance before making any investment decisions. By doing so, you can position yourself for success in Germany’s dynamic and competitive real estate market.

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What Are the Risks When Investing in Real Estate Security Tokens?

Investing in real estate security tokens can offer attractive rewards, but it’s crucial to understand the accompanying risks. In this article, we delve into the potential pitfalls and advantages of investing.

Key Takeaways

  • Real estate security tokens provide fixed interest rates and profit shares, offering potential rewards for investors.
  • Legal documents, such as terms and conditions, provide detailed information about the investment, including risks and rewards.
  • We employ risk-mitigating measures, including due diligence processes and debt capital structures, to safeguard investors’ interests.
  • You should take responsibility for protecting your funds, for example by doing research and diversifying your investments.
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Introduction

Investing in real estate has long been considered a sound strategy for building wealth and diversifying one’s investment portfolio. However, with the advent of technology and blockchain innovation, a new avenue has emerged that offers investors the opportunity to participate in real estate through security tokens. These tokens represent fractional ownership of real estate assets and offer a number of benefits including liquidity, transparency, and accessibility.

While the potential benefits of investing in real estate security tokens are enticing, it is important for investors to have a full understanding of the risks involved. In this article, we dive into the world of real estate security tokens and explore the various risks and benefits associated with this investment approach. By gaining insight into these factors, you can make informed decisions and protect your financial interests.

Rewards Of Our Real Estate Securities

Real estate security tokens offer several rewards that appeal to investors. One of the key advantages is the fixed interest rate provided by the issuer. This fixed interest rate serves as regular passive income for investors. For example, our latest property development project, Köhn Quartier Leipzig, offers a fixed interest rate of 12% per year.

It is important to note that the interest rate and payout period can vary between investments. While some investments pay interest annually, others may pay semi-annually or quarterly. We always strive to cater to our investors’ preferences, so we appreciate your feedback on the frequency of interest payouts.

In addition to fixed interest rates, investors can also benefit from profit shares associated with the underlying properties. The profit share depends on the specific property or properties involved in the investment. Existing properties typically distribute profits on a yearly basis, while property development projects, like the investment on Bodensee in Überlingen, pay out profits upon the completion and maturity of the project.

However, it is essential to acknowledge that property development projects may experience delays. Various unforeseen factors can contribute to these delays, such as external circumstances beyond the control of the property developer. To mitigate such risks, each investment has a specified duration, allowing the property developer sufficient time to address any potential delays.

Risks Of Our Real Estate Securities

While exploring the rewards is enticing, it is equally important to understand the risks associated with real estate security tokens. The risks are outlined in the legal documents prepared by our lawyers, which are available on each investment’s website. These documents include the terms and conditions of the real estate investment, issuer information, interest rates, profit shares, property details, and other essential information required by financial regulators. It is crucial for investors to thoroughly review these documents before making any investment decisions.

One key risk that is highlighted in these legal documents is the potential for losing the entire investment. This risk statement may seem alarming, but it is important to recognize that it is a common aspect of investing. In fact, even well-established investment vehicles like ETFs (Exchange-Traded Funds) include similar risk statements. For example, iShares Core DAX ETF, Deca MSCI World ETF, Vanguard FTSE All-World ETF, and many others acknowledge the possibility of financial loss.

It is essential to understand that investing inherently involves risks. No investment is completely immune to the potential for loss. It is precisely because of these risks that investors have the opportunity to earn returns. However, as responsible investors, it is crucial to evaluate these risks and take proactive measures to protect your investments.

How We Minimize Risk For Our Investors

As an investment platform, we have implemented risk-mitigating measures to safeguard our investors’ interests. For instance, we conduct thorough due diligence before offering an investment opportunity. This ensures that only reputable projects with strong potential for success are presented to our investors.

Additionally, our real estate securities are structured as debt capital, providing an added layer of protection. In the event of an issuer’s bankruptcy, our investors would be prioritized for repayment before the property developer receives any funds.

Do you want to benefit from the high fixed interest rates or profit shares of real estate securities? Visit our marketplace now.

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How You Can Minimize Risk When Investing

While investment platforms strive to minimize risks, investors also play a vital role in protecting their investments. It is imperative to educate yourself about the investment opportunities before committing to any funds. Take the time to thoroughly research and understand the nature of the investment, including the associated risks and rewards. Ensure that our real estate securities align with your personal financial goals and risk tolerance.

Diversification is another key strategy for managing risks. Rather than investing all your funds in a single investment, consider spreading your investments across different real estate securities. By diversifying your portfolio, you can minimize the impact of potential losses on your overall investment.

Ultimately, the responsibility lies with each individual investor to make informed decisions and protect their financial well-being. While investment platforms strive to provide transparency and risk mitigation measures, it is crucial for you to exercise due diligence and take proactive steps to protect your investments.

Conclusion

In conclusion, investing in real estate security tokens offers potential rewards, such as fixed interest rates and profit shares. However, it is important to recognize the inherent risks involved. By thoroughly reviewing legal documents, conducting due diligence, and diversifying investments, you can make informed decisions and protect your funds.

Remember, investing is a journey that requires careful consideration, research, and ongoing evaluation. By staying informed and proactive, you can navigate the risks and reap the rewards of real estate security token investments.

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5 Tips for Successful Real Estate Investing in 2023

In this GermanReal.Estate blog, we provide expert advice on successful real estate investing in 2023. Discover five essential tips to navigate the changing landscape and make informed decisions.

Key Takeaways

  • Financial preparation is a crucial factor. This affects the financial situation when it comes to closing costs and mortgage interest.
  • Take your time, relax, and make informed decisions. This is the case as the property market in 2023 is much more relaxed than before.
  • Due to the price recoveries in B and C locations, these locations currently offer comparatively attractive investment opportunities.
  • Concentrate on quality properties to avoid unnecessary expenses that may have to be incurred due to possible renovations.
  • Benefit from the subsidies offered by the German government. Thus, you can acquire good properties at more attractive conditions.
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Introduction

In the ever-evolving world of real estate, the landscape in 2023 is set to be vastly different from the previous decade. With these changes, many investors are wondering if it’s a favorable time to purchase properties in Germany. The answer is, it can be if approached correctly.

Uncertain times often present opportunities for those willing to seize them. However, it’s essential to have the knowledge and strategy to navigate this dynamic market successfully. To help you make informed decisions, we have compiled five tips for successful real estate investing in 2023.

Tip 1: The Importance of Financial Preparedness

It may seem obvious, but one of the first considerations in real estate investing is having sufficient funds. While there may have been outdated advice suggesting that properties could be acquired with little to no initial investment, the reality has changed.

When purchasing a property in Germany, there are various costs to account for, such as closing costs, land registry fees, notary fees, and potentially real estate agent commissions. These expenses can easily amount to approximately 10% of the property value. While it’s not necessary to have all these costs in cash, having a substantial amount readily available can improve your creditworthiness and potentially lower your mortgage interest rate.

Speaking of mortgages, the current standard interest rates, which range from 3.5% to 4%, mean that relying solely on rental income may not generate immediate passive income. Considering these factors, it is prudent to explore alternative investment options to build equity and generate passive income, such as the opportunities available on our GermanReal.Estate Marketplace.

Tip 2: Relax, Buy, and Hold

The real estate market in 2023 is notably more relaxed compared to the preceding years. The increase in equity requirements and interest rates has filtered out many speculative buyers who were attracted to the market during the era of ultra-low mortgage rates.

This development is positive because it leaves only committed individuals with stable financial situations and realistic expectations. Investing in real estate is a long-term game, and rushing into decisions can lead to suboptimal outcomes. Take your time, conduct thorough research, and focus on finding a truly exceptional property.

Tip 3: Focus on B and C Locations

With the adjustments in mortgage rates and a cooling market, property prices in Germany have experienced a slight decline. According to the McMakler study, property prices in the top seven German A locations have remained relatively stable, while B locations have seen a more significant decrease.

This makes B and C locations even more attractive for investors. These locations often offer excellent value for money and potential for future growth. Investing in properties in these areas can be a wise strategy in 2023, taking advantage of favorable market conditions. For more information about the locations, read our location ranking.

Tip 4: Invest in Quality Properties

While location plays a significant role in real estate, the condition and quality of the property itself should not be overlooked. A property might be situated in a prime location, but if it requires extensive renovations or is in poor condition, it can lead to significant expenses and setbacks.

Opting for properties that are in good or new condition can save you time, effort, and money in the long run. Investing in properties with high-quality construction and energy standards can also provide additional benefits, such as government subsidies and tax advantages.

By investing in real estate security tokens, you can leverage the tax benefits provided by the special purpose vehicle (SPV) that holds the properties.

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Tip 5: Leverage Government Benefits

Real estate investors can benefit from various tax advantages. Unlike homeowners, real estate investors can take advantage of tax benefits, making renting an attractive option from a financial standpoint.

Investing in real estate security tokens allows you to indirectly access tax benefits. By investing in real estate security tokens, you can leverage the tax benefits provided by the special purpose vehicle (SPV) that holds the properties. Additionally, owning a sustainable property with a high energy standard opens up possibilities for getting a KFW mortgage.

With the right property, you can further increase your tax benefits, potentially leading to higher overall returns. Explore government subsidies and programs available for sustainable properties, as they can provide additional financial incentives for your real estate investment.

Conclusion

In conclusion, 2023 presents unique opportunities and challenges for real estate investors in Germany. By following these five tips for successful real estate investing, you can navigate the changing landscape with confidence.

Ensure you have the financial means to make a sound investment, take advantage of the relaxed market conditions, focus on attractive locations, prioritize property quality, and leverage government benefits to maximize your returns.

Remember, real estate investing is a long-term game, so exercise patience and make informed decisions. With the right approach and diligence, you can secure a great real estate investment in 2023 and set the path for financial success in the years to come.

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Tax Benefits When Investing in Real Estate in Germany: Depreciation

Depreciation can help you save thousands of Euros when investing in real estate. 🥳 We discuss depreciation (“Abschreibung”) – what it is, and how it can save you thousands of Euros annually.

Key Takeaways

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Introduction

Are you interested in real estate investments and the possible tax advantages they offer? Then you’ve come to the right place because this Germanreal.Estate Wiki explains the concept of depreciation. Discover how depreciation can save you thousands of euros annually when you invest in real estate. In the field of German real estate, depreciation is one of the most important tax benefits for investors (homeowners do not get tax advantages from depreciation).

In this article, you will learn who benefits from depreciation, how it is calculated, and what advantages it offers for both existing and new properties. We will also discuss the tax advantages associated with investing in GermanReal.Estate.

Who Profits From Tax Benefits With Depreciation?

First and foremost, it is important to know that the tax advantages through depreciation apply exclusively to real estate investors and not to homeowners. Consequently, investing in real estate proves to be an attractive investment option due to the numerous tax advantages in Germany as well as passive income.

Unlike homeowners, who do not benefit from depreciation, real estate investors can use this tax trick to their advantage. As real estate investors ourselves, we prefer renting and owning rental properties because it makes financial sense, especially considering the numerous tax benefits, of which depreciation is the most important.

Calculating Your Tax Benefits With Depreciation

As a real estate investor, your tax liability is based on the net rent you receive. Let’s take an example: You own a property worth 100.000€ and receive an annual net rent of 3.000€. Theoretically, this 3.000€ net rent would be subject to income tax, which could be as high as 42%, which would mean 1.260€ in tax (net profit: 1.740€). However, as an investor, you have the advantage of being able to deduct various expenses from your rental income, such as mortgage interest, property management fees, repairs, renovations, and depreciation.

Depreciation, a unique concept in German tax law, takes into account the fact that the value of your property naturally decreases over time due to wear and tear caused by tenants. This grants real estate investors significant tax advantages. Unlike homeowners, who are solely responsible for the maintenance of their properties, investors can benefit from this theoretical decrease in value. It is worth noting that property prices generally rise in the long term, which reinforces the profitability of depreciation.

By using depreciation, real estate investors can effectively reduce their taxable income and save taxes. In this way, they can maximize their investment returns and create a more favorable financial position. The combination of rental income and tax benefits, especially through depreciation, makes real estate investment an attractive path for wealth accumulation and long-term financial success.

Depreciation brings real estate investing to the next level. Investors can not just profit from depreciation through direct real estate investments but also by investing in our real estate security tokens.

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Tax Benefits (Depreciation) With Existing Properties

Let’s go back to our example with the 100.000€ property that brings in 3.000€ net rent. With a depreciation rate of 2% over a period of 50 years, we can deduct 2.000€ from our net rent every year. Consequently, our taxable profit would be reduced to 1.000€, which means a tax saving of 840€ (with a 42% tax rate). It is even more advantageous if the real value of the property increases by 2%. In this case, we can take advantage of the discrepancy between the depreciation and the increase in value. If we subtract the 2.000€ attributable to depreciation and add the 2.000€ from the increase in value, we have an extra 4.000€ in our pockets (net profit: 2.580€).

By using depreciation strategically, real estate investors can not only minimize their tax obligations but also benefit from potential increases in the value of the property. This combination offers a double-edged advantage that increases the overall profitability of the investment.

Tax Benefits (Depreciation) With New Properties

The tax benefits associated with depreciation become even more enticing for real estate investors when it comes to properties built in 2024 and later. As part of a significant tax reform, depreciation rates for these new properties have been increased by 50%. This change offers investors an exceptional opportunity to take advantage of improved tax benefits. We proactively acquired a property in Düsseldorf on the GermanReal.Estate Marketplace to take full advantage of these increased tax benefits. By investing in projects currently being developed through our platform, our investors can benefit even more from this tax reform.

Investing in new properties under the changed tax framework not only offers potential appreciation and rental income but also significantly improves the overall financial result due to the increased tax benefits related to depreciation. With the GermanReal.Estate Marketplace, you can discover and invest in new properties that meet your investment goals while benefiting from the increased tax advantages that depreciation offers.

Tax Benefits When Investing On GermanReal.Estate

An investment in GermanReal.Estate also offers the opportunity to benefit from additional tax advantages as an investor. One of the main advantages is that you do not have to worry about the tax returns of the individual properties and you still benefit including depreciation. This ensures a seamless and hassle-free process so you can focus on maximizing your return.

Furthermore, if the properties are held by an SPV, investors can benefit from higher returns due to the tax advantages associated with depreciation in combination with the tax advantages of the SPV. By entrusting your investment to us and utilizing our expertise, you can benefit from the optimized tax structure and increased profitability that comes with investing in SPV-owned real estate.

Conclusion

In summary, depreciation is an effective tool for real estate investors to maximize their tax benefits. Unlike homeowners, investors can use depreciation to offset taxable gains, resulting in significant savings. The concept of depreciation recognizes that property naturally depreciates over time, so investors can claim this depreciation for tax purposes.

Whether you own existing property or are looking to invest in new, it is important to understand the tax benefits associated with depreciation. By taking advantage of the tax reform that increases depreciation rates for new properties, investors can further maximize their tax savings.

Investing in real estate through our platform offers a convenient way to benefit from these tax advantages while giving you the chance to invest starting from just 100€. We take care of all the necessary tax returns, including depreciation, and allow investors to seamlessly optimize their returns.

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Comparing Median Rents in Germany: Cities with Lowest and Highest Rent

Are you looking to rent in Germany? Whether you’re seeking the lowest rent possible or want to explore cities with the highest rent and rent increases, this blog post is for you.

Key Takeaways

  • The average rent growth between 2010 and 2022 for the cities with the lowest rent increases was 1% – 2% per year.
  • The largest rent increase in the last twelve years took place in Berlin, where rents rose by 112% or almost 10% per year.
  • Hagen and Chemnitz are the only two cities that remain among the cities with the lowest rents.
  • Unsurprisingly, Munich and Frankfurt are the cities with the highest rents in 2010 and will remain so in 2022.
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Introduction

If you’re renting in Germany, finding affordable rent and minimal rent increases is crucial. On the other hand, real estate investors seek higher rents that increase significantly to maximize passive income. In this blog post, we will dive into four different aspects of median rents in Germany:

  1. the cities with the lowest rent,
  2. the cities with the highest rent,
  3. the cities with the lowest rent increase since 2010, and
  4. the cities with the highest rent increase since 2010.

By analyzing data from various studies, including ImmoWelt studies comparing rents from 2010 to 2020, as well as other studies covering rents from 2020 to 2022, we aim to provide valuable insights into the German real estate market.

Profit from rising rents in Germany by investing in our real estate security tokens. You don’t even have to search for the right property or deal with tenants. Security tokens are as easy as it gets!

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Cities with Lowest Rent in Germany

Let’s begin by exploring the ten cheapest cities to rent in Germany. Comparing the rents in 2010 and 2022, we can see significant variations. However, some cities remain consistently affordable, despite changes in rent prices over time. For example, Leipzig, with an increase of 46% over the past 12 years, has emerged as one of the top 20 German cities with substantial rent increases.

Investors are drawn to Leipzig due to its growth projections, exemplified by property development projects such as those by the Eteon Group. By investing in Leipzig through the GermanReal.Estate Marketplace, you can benefit from attractive interest rates and seize opportunities in this promising market.

Cities with Highest Rent in Germany

Moving on, let’s focus on the most expensive cities to rent in Germany. Unsurprisingly, Munich and Frankfurt consistently rank as the most expensive cities in the country. However, it’s noteworthy that Berlin, once considered more affordable, has experienced a drastic shift in rental prices. In 2010, Berlin had a rent of 5.90€ per square meter, but in 2022, it soared to 12.50€ per square meter, placing it fourth on the list of the most expensive German cities to rent.

As a result, experts advise against purchasing properties in the city centers of these expensive “A” locations and recommend exploring more favorable “B” or “C” locations to maximize investment potential. To understand the location ranking, you can read the linked article.

Cities with Lowest Rent Increase in Germany

Next, let’s look at the German cities that experienced the lowest rent increases from 2010 to 2022. Let’s look at Chemnitz for this. At a supposed 13%, the rent increase doesn’t seem so bad, but if we break this down to the individual years, it means a rent increase of only 1% per year.

Even in the better cities with the lowest rent increases in Germany, the rise is only just under 24%, such as Jena and Solingen. Here the increase per year is only about 2%.

Cities with Highest Rent Increase in Germany

Now, let’s turn our attention to the cities that witnessed the highest rent increases in Germany. Frankfurt and Offenbach are at the lower end with a 4.5% year-over-year increase, followed by other cities that experienced substantial growth rates. Surprisingly, Heilbronn, a city between Stuttgart and Mannheim, stands out with a remarkable 64% increase in rents.

However, the most astounding rent increase over the last decade occurred in Berlin, with a staggering 112% or almost 10% year-over-year increase. This trend underscores the booming rental market in Berlin, as confirmed by ImmoWelt recent study highlighting a significant 27% increase in rents in just the last three months.

Conclusion

In conclusion, understanding the rental landscape in Germany is essential for both renters and real estate investors. While some cities remain consistently affordable, others have experienced drastic shifts in rental prices over the years. Leipzig has emerged as a promising investment opportunity with significant rent increases, while Munich and Frankfurt maintain their positions as the most expensive cities to rent in Germany.

In conclusion, the German rental market offers a diverse range of cities with varying rent prices and growth patterns. While some cities remain affordable and stable, others have seen dramatic increases in rental costs. For renters, it’s crucial to explore options in more affordable locations, such as Leipzig or other “B” and “C” cities, to find the best value for your money. Meanwhile, real estate investors should consider the potential for growth and profitability in cities like Frankfurt and Berlin but also keep an eye on emerging opportunities in less expensive locations.

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0,01% Mortgage From German KfW Bank For Energy-Efficient Properties

In this blog post, we are explaining in detail how you can secure the 150.000€ mortgage with a 0,01% interest rate from KfW and how it will help you when buying or building a property here in Germany.

Key Takeaways

  • KFW is the credit institution for reconstruction. It was founded by the German government and supports real estate, for example.
  • Everyone can apply for the KFW mortgage, but there are certain criteria that your property must meet in order to get the loan.
  • In order to secure the 0,01% mortgage rate, there are two options for residential buildings and non-residential buildings to consider.
  • Your exact profit from KfW financing depends on the energy efficiency of the building and also on your individual financial situation.
  • The KfW mortgage will help higher earners by lowering their interest rates. It will hardly help families with average incomes.
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Introduction: 0,01% mortgage from KfW bank

Are you dreaming of owning a property in Germany? Imagine securing a 150.000€ mortgage with an unbelievably low 0,01% interest rate. It may sound too good to be true, but it’s possible with the KfW mortgage program. In this comprehensive guide, we’ll delve into the details of this remarkable opportunity and show you how you can benefit from it. In particular, we will explain the following:

  1. Why is KfW giving out free money?
  2. Who can get a 150.000€ mortgage?
  3. How can you get 0,01% interest?
  4. What’s your exact profit?
  5. Will this mortgage actually help you?

Why Is KfW Giving Out Basically Free Money?

KFW, short for “Kreditanstalt für Wiederaufbau“, is the credit institute for reconstruction established by the German government after World War II. Today, we’ll focus on their largest business segment, which involves providing subsidies and highly affordable mortgages for energy-efficient and sustainable buildings.

The new KfW program we’re discussing is part of the German government’s climate protection act, highlighting its ongoing commitment to fostering environmentally friendly initiatives. Interestingly, the previous KfW program gained immense popularity and was abruptly discontinued after distributing a staggering 14.2 billion in subsidies. Given that the current KfW program has a budget of 750 million, it’s crucial to act swiftly when submitting your application to secure your spot.

Who Can Get A 150.000€ Mortgage From KfW?

Are you wondering how to obtain a virtually free 150.000€ mortgage with a 0.01% interest rate? The process involves applying for a KfW mortgage through either yourself or your mortgage broker. While it may sound straightforward, there are specific criteria that your property must meet. The great news is that anyone can apply for the KfW mortgage, regardless of whether you’re a future homeowner or a real estate investor.

At our Marketplace, we’re actively applying for KfW mortgages for the properties we offer, ensuring that investors can also benefit from reduced mortgage interest rates. If you’re unable to apply directly with your property, we invite you to explore the properties listed on our website to maximize your returns through the subsidy.

To qualify for the KfW mortgage, your property needs to comply with the energy standard EH40. This means that your property should have only 40% of the primary energy consumption compared to the reference property outlined in the German Building Energy Act. Meeting the EH40 standard makes you eligible for a 100.000€ mortgage from KfW. Moreover, if your property also receives the QNG quality label for Sustainable Building, you can secure a 150.000€ mortgage from KfW. While the terminology may seem unfamiliar, your architect or property developer can provide detailed information on whether your property fulfills these requirements. Be assured, our focus is on sustainable properties that align with these standards.

Remember, understanding the eligibility criteria and the benefits of a KfW mortgage is essential to make the most of this opportunity. By securing a mortgage with favorable terms and reduced interest rates, you can significantly enhance your investment returns. Act now to explore sustainable properties and seize the potential advantages offered by the KfW mortgage program.

You can invest in our Real Estate Security Tokens while building capital to buy a property. Our property development tokens usually have a short run time and give you both a nice interest rate and profit share

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How Can You Secure 0,01% Mortgage Rate From KfW?

Let’s uncover the details of obtaining a KfW mortgage. Now, you might be wondering about the interest rate and how to secure a mortgage rate as low as 0.01%, essentially free money. There are two options to consider.

  • Firstly, for residential buildings, everyone is eligible for the 0.01% mortgage rate, regardless of risk or personal financial situation. It’s truly remarkable when you think about it. The only requirement is a fixed interest rate for a duration of 10 years. This opportunity is simply incredible.
  • Secondly, for non-residential buildings, the interest rate varies based on your risk classification, and the fixed interest rate period is five years. It’s evident that the government aims to support the construction of more living spaces, a pressing need at present. We discussed this topic in a recent article.

It’s important to note that KfW recalculates the interest rate nearly every day, so the exact rate may differ from the time you read this article. To stay updated, here is a link to the currently valid KfW interest rate. This ensures you have the most accurate information to guide your decision-making process.

What Is Your Exact Profit From This KfW Mortgage?

Are you interested in the possibility of obtaining 150.000€ practically for free? However, this amount alone may not be sufficient to purchase or construct a property or apartment in Germany. So, let’s delve into how much you can genuinely benefit from the KfW mortgage program. Let’s assume you have a property in mind valued at 500.000€. Due to the specific energy standards required to qualify for a KfW mortgage, your property may cost slightly more—let’s say 550.000€ as an illustrative example. Please note that the figures mentioned here are purely for demonstration purposes to help you understand the potential impact of a KfW mortgage on your personal circumstances.

To acquire the property, you’ll require a regular mortgage of 400.000€, which typically carries an interest rate of around four percent in today’s market (May 2023). Depending on your financial situation and the property itself, you might secure a slightly lower rate, perhaps 3,8 or 3,9%. For the remaining 150.000€, you can benefit from the KfW mortgage with a 0.01% interest rate, or let’s assume it’s zero percent for this example.

Considering the scenario outlined above, a standard mortgage would entail a mixed interest rate of 2,91%. This would require a monthly mortgage payment of 2.250€ to the bank. However, with the KfW mortgage, your interest rate is significantly lower, resulting in savings of 500€ per month compared to a flat interest rate of four percent. Over the fixed 10-year interest period of your KfW mortgage, the accumulated savings in interest amount to over 48.000€. That is undeniably a considerable amount of money.

How Will The KfW Mortgage Help You?

The new KfW mortgage appears to be a great opportunity for aspiring property buyers and builders in Germany. However, the effectiveness of the assistance for the individual ultimately depends on the individual financial situation. We have doubts about whether the KfW mortgage will truly benefit the intended target audience. In recent years, skyrocketing property prices and mortgage rates have increasingly excluded average earners from the real estate market.

While saving 500€, as demonstrated in our earlier example, is certainly advantageous, it falls short of addressing the core issue faced by average-income families—difficulty in securing a mortgage and affording a home. This program primarily benefits above-average and high earners who are already capable of purchasing property, with or without the assistance of KfW. It’s worth noting that KfW is reportedly developing a new program aimed at families with children and a maximum household income of 60.000€ per year. However, even with an attractive interest rate, it remains unlikely that a family earning a maximum of 60.000€ annually would be able to afford a property in most parts of Germany.

If the objective is to assist average earners in acquiring property, alternative measures might be more effective. For instance, abolishing the ground purchasing tax could be considered. This tax, amounting to up to 6.5% of the property value, requires individuals to pay taxes on money they have already been taxed on. It seems unreasonable to subject individuals to double taxation on the funds used for property purchases.

Nevertheless, we hope that the new KfW mortgage proves helpful to those seeking to buy property in Germany. Happy investing to everyone!

Conclusion

The opportunity to secure a 150.000€ mortgage with a 0,01% interest rate from KfW is an incredible chance for aspiring property owners and investors. While it may seem too good to pass up, it’s important to assess how it aligns with your personal financial situation and real estate goals. The KfW mortgage program primarily benefits above-average and high earners. However, keep an eye out for future programs that may cater to average earners in their quest to enter the real estate market.

Remember, the clock is ticking, and the availability of funds for the KfW mortgage program is limited. Don’t miss out on this exceptional opportunity to secure your dream property with an unprecedentedly low-interest rate. Visit our website germanreal.estate to explore the properties listed on our marketplace and take the first step towards profiting from reduced mortgage interest rates.

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Real Estate & Passive Income: Which Property Should You Invest In?

GermanReal.Estate gives investors the chance to invest in real estate and receive passive income. With 1€ real estate investments, this is the easiest way to invest in the German property market.

Key Takeaways

  • When investing, you get to pick the right combination of interest rate and profit share! This is depending on your personal strategy.
  • Property developers need at least 10% to 20% equity to get financing – that’s where you as an investor come in!
  • Our Community Portfolio is an example of how long-term investing in the real estate market in Germany work.
  • Leipzig is a location in Germany with one of the highest potential growth rates. We have several investment opportunities here.
  • GermanReal.Estate is going international. We will launch our first two international projects in Croatia and Dubai soon.
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Real Estate & Passive Income: Which Property Should You Invest In?

If you want to invest in real estate and receive passive income at the same time, there are a lot of different options available to you. Since we’ve been adding several properties to our website over the last weeks, with many more to come, some of you have been asking what you should invest in.

In this article on the GermanReal.Estate FAQ, we’ll be ranking all available properties, and looking at upcoming projects, based on the passive income and the profit share to be paid when the property gets sold.

Fixed Interest Rate & Profit Share Explained

There can be many differences between the different real estate investments you’ll read about here, but what matters from an investment perspective are mainly two things:

First is the fixed interest rate you will receive for your investment. Depending on the investment, you can get interest payments every quarter, half year, or year. To make investment returns easier to compare on our website, we always present the fixed interest rate on an annual basis.

Second is the profit share when the underlying property, or properties, gets sold. To use a simple example, when the profit from the property development is 100€, and the profit share is set at 10%, all investors together would receive their share of 10€. 

In case you are confused about how this works and want more information on how we made it possible for you to invest in real estate in Germany for 1€, you can have a look at this article that explains the process of tokenization and how you can invest in all the different properties that are described here.  

Our First Property next to Düsseldorf

The first property we launched last year is a beauty located close to one of the top seven cities in Germany, Düsseldorf. 

The property is currently under construction, and when you help fund the property development, you will receive a 4% fixed interest rate as well as a 20% profit share when the property is eventually sold. 

Why Are Property Developers Paying High Interest Rates?

Since 4% is a pretty good interest rate, and there are a lot higher interest rates to come, many of you will have the question, “Why are you paying such high-interest rates? Is this a scam?”.  

First of all, if we wanted to scam you, we would give you a 14.000% interest rate, such as you get promised on some of these crypto websites. And no, we won’t tell you which websites are promising such crazy interest rates because we don’t want you to lose your money!  

Second, if you understand the business model of a property developer, it makes sense that they pay us a high-interest rate when helping them to fund their projects. No property developer gets 100% financing from the bank. To get a loan from the bank, property developers have to bring at least 10% to 20% equity to the table to get financing from the bank.  

When constructing a 5 million € property, that would be a 1 million € down payment! Property developers pay us a nice interest rate because they can use our investment as a down payment to qualify for bank financing. More so, they can use our investment as rolling equity to start multiple projects at the same time. We’ll get into this topic in more detail in another article.

As An Example – 4% Interest + 100% Profit Share

When the construction in Düsseldorf is done, our plan was to buy the entire property, tokenize it, and then rent it out to earn steady passive rental income for our investors. A project like this in a good location could have a rate of return of 4% each year. 

Then, when a good market opportunity presents itself, all investors could come together and vote to sell, with the profit being split among investors. We still don’t have enough investors and might not manage to do this for this project, but this is definitely something we want to do with a future project! What do you think?

The Community Portfolio - 2% Interest + 50% Profit Share In Düsseldorf

This was the idea behind launching our Community Portfolio in February 2023. The first property in our community portfolio is a property in Düsseldorf. Our investors voted that 50% of the returns would be paid out and 50% would be reinvested to grow the portfolio, so the numbers are half of the prior example.

So far, we’ve been very happy with the investments we’ve received, and if this growth continues, we will soon be reaching out to investors to vote on which property to add to the portfolio next. We already have several different options on the table.

In our view, this is the big benefit of Real Estate Security tokens – that we can come together as a community and use our swarm intelligence to vote on what is in the best interests of all of us! 

Two New Projects Launched

We just launched two new investments a few days ago. One project is the construction of a property in Leipzig with a 7% fixed interest rate and a 7.5% profit share when the property gets sold. A second project is a portfolio with a 9% fixed interest rate and a lower 5% profit share once any property in the portfolio gets sold. 

This is the idea! As an investor, you get todecide what is important to you. If you want regular passive income, you can choose a high fixed interest rate. However, if you want to profit long-term from rising property prices, you can choose projects with a higher profit share. 

Our recommendation would be to diversify to spread your risk and invest in multiple different properties.

Let’s move on from the investments currently available on our website and take a sneak peek at what’s to come.

Sneak Peek: 6% Interest + 20% Profit Share In Croatia

We’re going international! Croatia recently joined the Eurozone, and a company in Croatia reached out to us seeking investment in a villa. They wanted us to tokenize it for them for an estimated long-term 6% fixed interest and a 20% profit share. Probably. At the time of publishing this article, we’re still working on the details, and the numbers in the final offer might be slightly different.

Sneak Peek: 10% Interest + 10% Profit Share In Dubai

When investing in German real estate, the B and really good C locations are the absolute sweet spot! Someone with expertise and connections in the Dubai property market reached out to us and told us it is the same there. Properties in B and C locations in Dubai are where the money is being made. 

So we decided to get involved! We’re about to launch our first property portfolio in Dubai, giving our investors the chance to invest in this exciting country. The investment will have a 10% interest rate for passive income and a 10% profit share.

GermanReal.Estate has been online for exactly half a year now, and we’re about to have nine different investments in three countries. This is incredible, and we can’t thank you guys enough for your support!

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Two More Before We Go!

Two more properties should be going live in April 2023. Again, we’re staying in Leipzig for these two, as it is one of the most attractive real estate locations in Europe at the moment!

First, a Fix and Flip with a 10% fixed interest rate and a 5% profit share, and second, a construction project with 12% passive income and a 5% profit share. 

Check out all the details of the projects described in this article on the GermanReal.Estate Marketplace, and educate yourself about the projects before investing. 

Thank you, investors! And happy investing!

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How To Buy Real Estate Despite High Prices

How to buy real estate despite high prices in order to have a great investment? We compiled a list of 3 steps on how you can buy any property in Germany you like (within your financial capacity).

Key Takeaways

  • The three steps to invest are: Spend less money, start saving and investing money, and start on your real estate investing journey!
  • The big question that everybody asks when you’re ready to get started is – is now the right time for investing in real estate?
  • We think 2023 is still a good time to buy a property. It’s a simple case of supply and demand that we face in the German market!
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How To Buy Real Estate Despite High Prices

Real estate prices in Germany went to the moon in the last few years! 

  • 7,3% property price increase after inflation in 2018
  • 9,3% property price increase after inflation in 2019
  • 9,6% property price increase after inflation in 2020
  • 14,2% property price increase after inflation in 2021

That is more than 40% in the last four years! 

So the question is, should you invest in real estate in Germany right now, and if so, how do you do it because properties are getting more and more expensive? These are good questions that we will try to answer in this article on the GermanReal.Estate Blog.

If you want to buy a property here in Germany, regardless of the price, location, or type of property, there are always three things you need to do. These steps build on each other, so you cannot skip the first two steps and start buying a property immediately. 

As we mentioned in a recent article, it is not possible to buy a property in Germany with a bad financial situation. If that’s what you’re expecting, rather go and watch one of the fake Internet gurus selling overpriced courses that promise you’ll get rich with real estate regardless of your financial situation.

+7,2% Property Prices in 2018
+9,3% Property Prices in 2019
+9,6% Property Prices in 2020
+14,2% Property Prices in 2021

Three Steps To Investing In Real Estate – Don’t Skip Any

Step 1: Live Below Your Means

We believe every property purchase starts with you living below your means and saving money. It isn’t exciting, but that’s the reality. If you want to borrow hundreds of thousands of Euros from a bank to invest in real estate, you need to show them that you have a decent financial situation.

Step 2: Start Saving & Investing

If you live below your means, savings should start to accumulate slowly but steadily. To make the savings part as exciting and efficient as possible, you might want to get a bank account that actually pays you some interest. 

Over on the PerFinEx website, we have some calculators that show you bank accounts with a little over 2% interest, plus you could get a 50€ bonus on your new account if you open it through the website. Flexible savings accounts are currently paying up to 2.2% interest, while fixed-term savings accounts are paying up to 4.5% interest. Hopefully, that makes the savings part a little more exciting for you. 

Alternatively, if you think real estate is an exciting investment type, which is likely since you clicked on this blog article, you do have some options! For example, you can invest in our Real Estate Security Tokens while building capital to buy a property. Our property development tokens usually have a short run time of just two years and give you both a nice interest rate and profit share.  

At the time of publishing this blog, we are getting ready to release our 8th token. Depending on when you read this, it may still be online, or we may have even more projects available. Our 8th token is going to have a fixed 12% interest rate. You can get more information and invest in our Real Estate Security Tokens on our website GermanReal.Estate.

Step 3: Buy The Property

Moving on to Step 3, the idea is to use the capital you have saved to buy a property. Before doing so, it is necessary to ask the all-important question:

You can invest in our Real Estate Security Tokens while building capital to buy a property. Our property development tokens usually have a short run time and give you both a nice interest rate and profit share

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Is Now The Right Time To Buy A Property?

The clear and definitive answer to this question is … it depends. We’re not giving this answer to make fun of you! It really does depend. It depends on what you expect from your real estate investment. The 10 years before 2022 were the Golden Age of real estate. You saw the growth rates we cited at the beginning of this article. 

We had these insane property price increases for three reasons.

Reason 1:

The German population is at an all-time high of 83 million people right now, the highest in German history. Over the last more than 10 years, around 300.000 to 400.000 people migrated to Germany. This is net migration, after deducting people that moved out of Germany! 

In 2015, which was a big year, more than one million people migrated to Germany. It happened again in 2022. We don’t have the final numbers for 2022 yet, but it is estimated that more than one million people migrated to Germany from Ukraine alone. The German population will continue to increase, not just from Ukraine where some people expect 1.4 million this year, but from other countries as well.

Reason 2:

Reason two is that the German economy, and with it the salaries, have been growing continuously. In this graph, you can see that the German economy has been growing by 1% per year over the last 10 years, this might sound low, but that’s after inflation.

Here you can see that gross salaries in Germany have been rising by about 3% – 5% per year over the last more than 10 years. So there was a lot of money in people’s pockets over the last 10 years, and not a lot to do with it because interest rates have been at zero for many years.

Reason 3:

Only in 2022, interest rates have started to rise again after falling constantly since the early 90s. Despite this, interest rates are by no means high, as some people are claiming. 8% is high, and 10% is high, but the current rates of 3% to 4% that we have right now can be considered quite normal.

Because of these three reasons, real estate prices in Germany have increased so much, and they could have increased even more.

Why It Is Still A Good Time To Invest In Real Estate Right Now?

The last point to make here is that it is still a good time to invest in real estate in 2023. This isn’t just hype for the internet, it is something we truly believe at GermanReal.Estate. In fact, we just recently purchased a property in Düsseldorf for all of us to invest in together as a community. We purchased the property in Düsseldorf, one of the top seven cities in Germany, with a special purpose entity and then tokenized it. Now everyone can buy small fractions of it and invest together with us.

An important reason why it is still a good time to invest in real estate in Germany, despite interest rates in 2022 and 2023 starting to rise, is simply supply and demand. The German government wants 400.000 new Flats every year to satisfy demand for living space and normalize rents. This high demand is also why property prices have exploded in Germany over the last few years. 

The issue is that we are far from reaching 400.000 new flats every year. In fact, a total construction of 300.000 new flats has been achieved only once in the last 20 years. The average of the last 20 years is 243.000 per year, meaning that 157.000 are missing every year. That is, 3.14 million flats missing over the last 20 years, as depicted in this chart.

Now you know the three steps to buy any property you like and if it’s a good time to buy a property right now. If you want to start investing in real estate in Germany right away and in the easiest way possible, check out the properties currently available on our GermanReal.Estate Marketplace.

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56 Ways To Make Money With Real Estate In Germany

Would you like to make money with real estate (in Germany)? Then this article is for you! 🤑 We will go through 56 ways to make money with real estate in Germany.

Key Takeaways

  • To make money in real estate through traditional methods, a full-time job is necessary.
  • Build a digital presence by producing online content that helps you build a following community for your brand.
  • Many real estate services require special training and qualifications. So you have to start at a different point.
  • To create a successful real estate product, you need to stand out from the crowd and offer something unique that does not exist yet.
  • Real estate investments have the potential to be lucrative, but make sure you understand the business before you get involved!
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Do You Know All Ways To Make Money In Real Estate? Try these 56!

One of our viewers sent over an article describing just how easy it is to make money with real estate. The article includes a list of 55 ways to make money with real estate! Just for kicks, we added one more. 

With so many ways to make money with real estate, and with it being so easy, we can’t imagine why anyone is still working a normal job! But what do we know? In this GermanReal.Estate FAQ, we’ll take a look at all 56 ways to make money with real estate, and how realistic they really are. 

To give some structure to this long list, it is divided into 5 different categories. We’ve also grouped things within each category so that we don’t discuss each method of making money individually. Otherwise, this would end up being a very long article.

Number 56 on the list, of course, is the item we added ourselves – our Real Estate Security Tokens!

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Traditional Jobs In Real Estate

The first 14 items on the list, so-called “traditional methods” of making money in real estate, are already questionable in our opinion. 

Ways 1 -3 to make money with real estate

In our humble opinion, we don’t consider the first two points on this list as making money with real estate. As an office manager, you work a full-time job like any other person. The one making money with real estate, in this case, is the guy owning the building, not the office manager. Property inspectors or appraisers are regular jobs too. 

The property inspectors we work with in Germany are highly trained, usually, architects or construction engineers, that write 40-page reports after inspecting a property inside and out. Also, just becoming an appraiser to make money with real estate on the side is probably not going to work for the majority of us. 

Ways 4 - 7 to make money with real estate

The next four jobs on the list, all types of property managers, are the same. At GermanReal.Estate, we buy properties for you guys to invest in. Since these properties are spread around Germany, we don’t manage the properties ourselves. We have professional property management companies taking care of our investments. If that’s what you want to do, start working for one of these companies and gain experience. Because, if you would offer to manage our properties with absolutely no experience we would decline, and so will everyone else who owns real estate. 

Ways 8 -10 to make money with real estate

Experience in the real estate industry is a key factor for the next three points on the list as well. You cannot start your own brokerage company, coach real estate agents, or get millions of Euros from other investors to manage their fix and flips for them without it! You need significant experience in the real estate industry to get your foot in the door. And how do you get this experience?

Ways 11 - 14 to make money with real estate

The last four points in this category are a good way to start if you want to work in the real estate industry and gain the experience you need. Start as a real estate agent or a similar position, and work your way up. No career ladder starts at the top, they all start at the bottom.

Real Estate Online Content

The next category is creating online content around real estate. For example, that is what we are doing with the GermanReal.Estate and PerFinEx YouTube channels. 

We agree with the article author that creating content gives you the chance to demonstrate knowledge in your niche and show your viewers, readers, or listeners that you are not one of those fake online gurus that just pretend to have experience. Some people consuming your content will not like you, and that’s okay. But others will like what you put out there, and that gives you the chance to build a community. 

Ways 15 - 16 to make money with real estate

Once you build a community around your content, you can start to monetize that content with affiliate links. This could be an affiliate link to an external service or product or your own product or service.

For example, the Real Estate Security Tokens available on our GermanReal.Estate Marketplace. This is by far the easiest way to invest in real estate in Germany, and much more affordable than buying a property yourself. You can start investing in our Real Estate Security Tokens for just 100€.

You can also put ads on your content. It can be mostly free to place adverts on your social media or your website. It’s fine to have ads to support a content creator. The issue is that you will need hundreds of thousands or even millions of clicks before you make significant money from ads. But if you can reach this, it’s great passive income.

Ways 17 - 18 to make money with real estate

The last two ways to make money from real estate online content require an even bigger audience. Before you have the opportunity to do sponsored content or hide your content behind a paywall, you need a lot of followers or subscribers.

Real Estate Services

The next category to make money with real estate is different kinds of real estate services.

Ways 19 - 24 to make money with real estate

The first six ways to make money in this category are pretty unrealistic. You cannot just become a tax advisor specializing in real estate taxation or fix roofs as a side hustle, you need specialized knowledge and skills. In fact, the article says becoming a notary is super easy, and you can make a little easy money on the side. It seems becoming a notary in the US is not the same complicated process as in Germany!

Ways 25 - 32 to make money with real estate

The other eight jobs in this category are easier than becoming a notary, but still, as in the traditional methods category, these are full-time jobs. They don’t involve making quick or easy money with real estate, as one could have assumed when reading the clickbait title of this article. We sincerely question if you can make a lot of money with real estate when painting or cleaning someone else’s property.

Real Estate Products

Let’s move on to real estate products.

Ways 33 - 36 to make money with real estate

The first four ways to make money in this category feel similar to creating online content. Of course, you can do all these depending on what you’re good at, whether writing, making videos, or shooting photos. However, there is so much content already out there. So, before you decide to publish the 20th eBook or online course about being successful with real estate, realize that to be successful in this real estate product category, you need to create something truly unique! Something that separates you from the rest. You then also need people to believe that you are unique.

Way 37 to make money with real estate

The last item in the real estate product category is equipment rental. It can work if you do a lot of research to figure out what people want to rent. You will also need to make a large upfront investment to buy all the equipment. Then you need to find the people that want to rent equipment and hope they don’t damage your equipment. 

Real Estate Investments

The category probably most of you are interested in is the real estate investments category.

Ways 38 - 43 To Make Money With Real Estate​

To start, we can list the six common types of properties to invest in. Before buying any of these properties, you probably want to do a deep analysis because they all work very, very differently.

Ways 44 - 46 To Make Money With Real Estate​

Also, based on the different property types, the renting out process works very differently. If you are interested, we can do a separate video or blog on this topic. 

Ways 47 - 48 To Make Money With Real Estate​

Fix-and-flip and wholesaling are similar to traditional methods or real estate services jobs. In other countries, it might work that you can start a side hustle easily and with little bureaucracy. However, here in Germany, the Finanzamt (our tax authority), IHK (our Chamber of Commerce), or the Gewerbeamt (the local trade office) will cause you many problems if you do anything without first registering a business and getting all the licenses and insurances that you need!

Ways 49 - 56 To Make Money With Real Estate​

For the last eight methods on the list, we covered several in our YouTube videos and blog articles. For example, on the topics of REITs and crowdfunding. Number 56 on the list, of course, is the item we added ourselves – our Real Estate Security Tokens!

That concludes the list of 56 ways to make money with real estate. This comprehensive guide has provided you with valuable insights and ideas on how to make money in the real estate industry. Whether you are a seasoned real estate investor or just starting out, there are numerous opportunities to grow your wealth and achieve financial freedom through real estate investing.

From flipping houses to rental properties, commercial real estate, and real estate security tokens, the possibilities are endless. You can choose to invest in properties locally or explore opportunities in different regions and even countries. With the right strategy, mindset, and resources, you can build a thriving real estate portfolio that generates passive income and long-term wealth.

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Germany Needs To Build More Properties

A recent study revealed that more than 700.000 flats are missing in Germany right now. No wonder rents and property prices have exploded in the last few years! 🫠

Key Takeaways

  • Germany has not been building enough properties for years, and that is why Germany now has a housing crisis!
  • Overcrowding has increased enormously. This means that there are fewer people living in a flat than there are rooms available.
  • Up to 33% of households are affected and it is getting worse!
  • To meet the current demand for housing in the property market, at least 700.000 more homes need to be built.
  • The housing stock is over-aged – up to 50% will definitely have to be rebuilt in the next 40 years.
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Breaking News: Housing Shortage In Germany

The German Economic Institute, which we love here at GermanReal.Estate because they rely on cold, hard data and the truth instead of myths and assumptions, just published a report saying that the need to build properties here in Germany is as high as it was in the 1990s! Based on that, the chances for Real Estate Investors here in Germany will be tremendous, right? Well, maybe… 

In this article on the GermanReal.Estate Blog, let’s see what the German Economic Institute means with the term “housing shortage”, what they propose as a solution, and how you can profit when investing in real estate in Germany.

Germany has had a high demand for living space for many years because we are not constructing enough properties to keep up with our growing population. That is also the reason why rent and property prices have been exploding in the last 10 years. Check out the linked articles for more on these topics.

GermanReal.Estate wants to be part of the solution for affordable housing by offering real estate security tokens to you guys.

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Overcrowded Housing Explained

A new report recently came out showing how severe the problem of living space actually is. Eurostat, the home of high-quality statistics (it’s their punch line, not ours), defines overcrowded housing as there being fewer rooms than people living in the flat. If a couple is living in a flat like the one on the right, it’s fine because it’s a two-room apartment. In some other countries, you would count two rooms only if it is two bedrooms, but in Germany, the apartment depicted above counts as a two-room flat.

By the way, that is a two-room flat that GermanReal.Estate was bought in December 2022 for you guys to invest in. Check that out on our GermanReal.Estate Marketplace if you’re interested.

Two room flat

Back to our example! If the couple has a child, Eurostat would call it overcrowded because three people are living in a two-room apartment. The couple with a child in a three-room flat like the one on the right would be fine. If they have two kids, it would be considered overcrowded again. You get the point.

Apartment with three rooms

The Real Situation In Germany

How is the overcrowded housing situation in Germany according to a recent study by the German Economic Institute? 

Looking at the yellow line, you can see that it is rising. The black line represents under-crowded housing, for example, if a single person would live in a four-room flat. Overcrowded housing was down to a little over 4% in the 2000s and is now well above 6%. Perhaps you think that’s not too bad, but this rise does represent a 50% increase in the last 10 years! 

Anteil Mieterhaushalte in Großstädten

Now think about this: This statistic shows the percentage of households renting in large German cities with more than 100.000 inhabitants. When we are looking at cities only, could it be that the statistic is looking less severe than the problem actually is? Maybe, yes. 

Because who’s living in the large German cities? Let’s look at the infographic from Statista on the right.

Mainly single people! In the largest German cities, about 50% of all households are single-person households. And single-person households, by definition, cannot be overcrowded! For this reason, the German Economic Institute factored out single-person households to find out that 1 in 3 households is overcrowded in German cities! Not 6% as seen in the chart, but 33%!

Now you know why we love the German Economic Institute. They don’t just publish the data. They analyze the data to give an accurate evaluation.

Großstädte bestehen aus Singlehaushalte

How To Solve The German Housing Shortage

All right, so we are working with 33% overcrowded households in large German cities. This is the highest it’s been in the last 30 years! How do we deal with this? Let’s look at one proposal from the German Economic Institute, and then we’ll give a second proposal from our perspective.

Proposal 1: German Economic Institute

If we look at the chart above one more time, we can see that over- and under-crowded housing are both at roughly 6%. Therefore, the German Economic Institute sees some trading potential! And people are doing that. If you check the popular German Real Estate websites or Facebook groups, some households try to get a larger or smaller flat by exchanging it for their current one. So is this the solution if the people in the 6% overcrowded flats switched with those in the 6% under-crowded flats?

Unfortunately, it’s not that easy, because there are many reasons why someone would live in a flat with more rooms than people in the household. Maybe they need a guest room or a home office, or their kids became adults and moved out already. There are many different reasons.

The German Economic Institute acknowledges it too – just trading flats will not solve our housing crisis. What can we do additionally?

Proposal 2: GermanReal.Estate

Our proposal to help solve the German housing crisis and normalize property prices and rents is …(insert drumroll)… to build more properties! Who would have thought!?

In our opinion, Germany is going through the worst housing crisis of the last 30 years because we are not building enough living space. A recent study shows that 700.000 flats are missing in Germany right now. We even think that number’s way too low considering how many properties were constructed in the last 20 years, but let’s take the 700.000 to be conservative.

You can go ahead and bring your real estate bubble arguments, but property prices in Germany have been exploding anyway. And we think it’s because of the insane housing shortage. And it’s only going to get worse!

Why The German Housing Shortage Will Get Worse

In this statistic, you see how old the 42 million flats in Germany are. 13% are older than 100 years, which is usually the average lifespan of a building. So they need to be rebuilt now. They actually should have been rebuilt already. 

If you fast forward another 20 years, 24% of properties will need to be rebuilt. 36% over the next 30 years, and 51% over the next 40 years. That means, within the next 40 years, half of the buildings in Germany need to be modernized or demolished and rebuilt. With the current numbers that are being constructed in Germany, that’s not going to work!

That’s why GermanReal.Estate wants to be part of the solution for affordable housing by offering Real Estate Security Tokens to you guys. Because if the real estate industry wants to construct more properties, they need one thing – money! If you want to be part of the solution, hop over to our website GermanReal.Estate and see what properties are currently available for you to invest in.

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German Real Estate in 2023

While a lot of people are talking about a real estate bubble, we compiled 6 reasons why property prices in Germany have been rising & why they will continue to rise in 2023.

Key Takeaways

  • Germany has failed for decades to produce enough living space. There is a huge backlog of construction that is needed.
  • Inflation of construction prices is a lot higher than regular inflation, making it more expensive to build properties.
  • The construction cancellation index from the IFO Institute increased significantly. Fewer constructions, less supply of properties.
  • The German population is at an all-time high and continues to increase. All while the supply of flats continues to go down.
  • The Alliance For Affordable Housing introduced 187 measures to normalize rents and property prices. Will that help?
  • Until the German government allows supply & demand in the German real estate market, the housing problem will get worse.
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6 Reasons For Rising Property Prices in 2023

Over the last +10 years, the German real estate market has been booming! Property prices in Germany have never been as high as they were in 2021. In 2022, the property market in Germany cooled down quite a bit, begging the question – What’s going to happen to German real estate in 2023? 🤔

If you think the entire real estate market will tank (like the World Bank) and the real estate bubble will burst (like the Swiss Bank UBS), you may be over-speculating. In this article of the GermanReal.Estate blog we will give you 6 reasons why we think property prices in Germany will rise in 2023.

Reason 1 For Rising Property Prices: Construction Backlog

Germany wants, and Germany needs, 400.000 new flats every single year to satisfy the current demand for living space. At least, that’s the number the government published earlier this year, claiming that this is the most important goal the government has in order to normalize the exploding rents over the last few years.

It’s great that the government is setting this goal, but if we look at the data over the last 20 years, this goal has never been met. In fact, Germany achieved 300.000 new flats in a year only once.

Germany is missing hundreds of thousands, if not millions of flats, to satisfy the demand for housing. Projections are that we will not manage to construct 300.000 flats in 2023 either.

Increased competition between buyers for the insufficient housing supply is one reason prices are not likely to fall.

Reason 2 For Rising Property Prices: Construction Price Inflation

Another reason we’re not likely to see 300.000 new flats in Germany this year is due to the impact of inflation on construction prices (and remember that we actually need 400.000 new flats to satisfy the demand for living space). Projections are that only between 200.000 and 250.000 flats are likely to be built this year.

Germany has entered a period of high inflation, and everything has become more expensive over the last few months. But what about construction prices?

The last official numbers from the Federal Statistical Office show that construction inflation is much higher than regular inflation. While the overall inflation is currently around 10%, construction prices have risen by as much as 16,9%.

Especially wood and steel prices have risen almost 30% compared to last year!

When the costs to build new properties, or to renovate existing properties, increase by 16,9%, it is unlikely that property prices will fall.

Property prices in Germany have increased a lot in the last +10 years for various reasons. In 2023, most of these reasons got “worse” – driving up property prices even more than before. Invest in German real estate here:

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Reason 3 For Rising Property Prices: Canceled Constructions

New construction projects here in Germany are getting canceled left and right. FiveRocks (property developer from our first 2 real estate security tokens in Mönchengladbach and Willich) has solid calculations and risk management which is why we continue to work with them and help them fund their projects by offering you a stake in their development projects.

But not every property developer is doing as well as FiveRocks right now. Increased costs to build because of inflation, and higher financing costs due to rising interest rates, are wiping out a significant number of property developers.

The IFO Institute publishes a construction cancellation index every month showing how severe the issue really is. In August 2022 the cancellation rate of property developments was 11,6%. In September 2022, it was at 16,7%. Staggering numbers!

We can guess what this means! Each canceled construction project today is the property price increase of tomorrow.

Reason 4 For Rising Property Prices: Population Growth

To make things even worse from a property supply and demand perspective, the German population has been growing and is continuing to grow. Just satisfying the demand for living space today won’t cut it in the future. The German population is at an all-time high of over 83 million people, and the number is rising due to net migration.

In 2021, about 1 million people moved out of Germany, but about 1,3 million people moved to Germany. A net population increase of about 300.000 people. But those numbers are nothing compared to this year and next year.

The Federal Office for Migration has published figures that so far in 2022 more than 1 million people migrated from Ukraine alone. This is not total migration to Germany just migration from Ukraine.

Some projections say that another 1,4 million people might migrate from Ukraine to Germany in 2023. All these people migrating to Germany need to live somewhere!

If we’re not constructing enough properties to satisfy the demand from the existing population, and more people continue to migrate to German, how can we expect property prices to fall over the long term?

The supply of living space in Germany continues to go down while the population continues to increase. Help the German real estate industry to construct more properties and profit at the same time by investing here:

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Reason 5 For Rising Property Prices: Increased Bureaucracy

The first 4 reasons why property prices will continue to rise in 2023 are no secret. At the same time, everybody who rents or wants to buy a property knows that buying prices and rent prices have gone through the roof in the last +10 years. A good question to ask is what the German government is doing to address the issue. 🤔

That gives us the fifth reason for increasing property prices in 2023: Increased bureaucracy. Below you can see our Chancellor Olaf Scholz, together with the German Building Minister Klara Geywitz introducing the Alliance for Affordable Housing. We hoped it can help to address the problems facing the inhabitants of Germany but so far, all they have done so far is have meetings and waste our hard-earned tax money in the process.

They have introduced a list of 187 measures that should normalize property and rent prices here in Germany to make it more affordable again.

That is at least their side of the story. If you look at the measures, it becomes quite obvious that they will not solve our housing problem. All the measures do is introduce more bureaucracy for climate reasons or social reasons.

These are important issues, but the solution the government proposes is no solution. Increased bureaucracy will further decrease investments in the real estate industry.

Reason 6 For Rising Property Prices: No Market Economics

This brings us to the sixth and last reason why property prices will rise in 2023: The German government tries to solve issues that only the market can resolve with simple economic principles. The law of supply and demand has been proven right, over and over again, for hundreds of years.

This simple economic principle has led to the great world that we are living in with incredible riches available to us. If we would allow supply and demand to come together in the German real estate market through market economics, and not by forced Government solutions, the market would find a solution.

Attempts by the German government over the last 10+ years have only caused the housing problems to become worse.

This is what we are trying to do at GermanReal.Estate – to bring market economics back into the German real estate market while giving investors a chance to make a return on their investments.

It is in your best interest to make a return for yourself, and at the same time, this will also help the German real estate market. This is what Adam Smith discovered more than 200 years ago, but still, the government tries to get in the way. Investors should follow the data, and their self-interest, rather than believing in the political ideologies of politicians only claiming to act for the public good.

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Why Real Estate Security Tokens Are Better Than REITs

REITs (Real Estate Investment Trusts) are a great way to invest in properties with a small budget. At least in other countries. How good are REITs in Germany? 🤔

Key Takeaways

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Why Real Estate Security Tokens Are Better Than REITs

Our readers are very interested in REITs, Real Estate Investment Trusts, and rightfully so. REITs are awesome if you want to invest in real estate but don’t have the money to buy a property on your own. The issue is that Germany took the very cool concept of REITs from the US and Germanized it with a lot of unnecessary regulations.

Let’s learn more about REITs in Germany in this GermanReal.Estate FAQ. We are not going to go over the concept of German REITs again because we already covered that here. In this article, we want to focus on the rules that regulate REITs in German law (in the Gesetz über deutsche Immobilienaktiengesellschaften mit börsennotierten Anteilen).

German REIT law regulates REITs to the absolute maximum. This is the reason why REITs in Germany are not as great as they are in the US. Here are 5 aspects of German regulation that make REITs in Germany an unattractive investment vehicle.

Rule #1 German REITs Must Be Publicly Traded

German REIT law demands that REITs in Germany have to be publicly traded companies. Other countries allow both public and private REITs, but Germany doesn’t. This is a huge shame because there is usually one big reason why companies go public – To get money from investors. But you don’t need to go public for that! 

Going public here in Germany takes ages and costs a lot of money. You need a Supervisory Board, admission to the Stock Exchange, a roadshow, annual shareholder meetings, and an investor relations department. All of which costs a lot of money. Who do you think pays for all of this? Investors, of course! According to Professor Wegmann, the process of going public alone, not all the running costs we just talked about, only the process of going public, costs between 6% to 12% in fees. We are talking about millions of Euros that are not in the investors’ pockets. 

Our Real Estate Security Tokens are issued in a private process, which costs not even 10.000€. Lower costs mean a higher return for you! That’s just one reason why we are convinced that Real Estate Security Tokens are a better investment than REITs. If a REIT invests in the same property as we do, they have to spend millions, and we only have to spend a few thousand Euros. This is a huge benefit for investors, so check out our GermanReal.Estate Marketplace if you want to see investments that are currently available.

Are you convinced of the advantages of real estate security tokens? Then go to our marketplace.

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Rule #2 German REITs Are Allowed Maximum 45% Leverage

What separates real estate from all other investments out there, and makes it super profitable? Leverage! Let’s be real here, if mortgages didn’t exist, nobody could afford to buy a property in the first place, and real estate would be a pretty bad investment. Leverage turns good deals into great deals! 

Let’s imagine you buy a property for 100.000€, and you only cover the closing costs of around 10% with no down payment. If the property rises in value by just 10%, you have doubled your money. Unfortunately, German REIT law allows REITs to leverage only 45%. The other 55% has to be equity. Equity, of course, is money that comes from the people investing in the REIT. 

Would you invest in real estate if the bank demanded a 55% down payment from you? We wouldn’t because it makes the entire business case pretty bad from a return on investment perspective. That’s another reason why Real Estate Security Tokens are the superior product. We can leverage at whatever level we want, whatever makes the most sense to maximize returns for investors.

Rule #3 German REITs Face Restrictions When Investing In Residential Properties

Leveraged or not, REITs invest in properties, but German REIT law has restrictions for this too. When it comes to plots, infrastructure, and commercial properties, REITs can basically invest in whatever they want. When it comes to residential properties, the heart of real estate investments, REITS are only allowed to invest in properties built after 2007. 

Why is that? The government thinks that rents in Germany would increase even more if REITs would be allowed to invest in older properties. Whether or not that is a correct assumption is an entirely different topic, but the point is if REITs don’t follow these rules, they will lose their REIT status. If you check when the majority of properties in Germany were built, German REITs are only allowed to invest in 10% of properties in Germany, maybe 7% to 8%. So, only a tiny fraction of the German real estate market. This is another reason we think Real Estate Security Tokens are better. Nobody from the government controls what type of property we are investing in, it just has to make sense for investors.

Rule #4 German REITs Must Invest Passively

Many of you are interested in Fix and Flip investing. You buy a crappy shack in a great location, renovate it, and sell it again at a higher price or rent it out afterward. GermanReal.Estate is currently working on a Fix and Flip Real Estate Security Token that would give investors a 7% fixed interest rate plus a 7.5% profit share when the property is sold after the renovation. 

REITs in Germany are not allowed to do this. REITs have to focus on passive real estate management only. They are not allowed to trade properties. German REITs can shift their portfolio only once every 10 years. If they buy and sell more often, they lose their REIT status.

Rule #5 German REITs Must Earn At Least 75% Directly From Real Estates

In other countries, you have mortgage REITs that earn money from interest. That’s not really allowed here in Germany either. German REIT law demands that at least 75% of the earnings, and the assets must come from real estate directly. Earning interest from giving out mortgages is not a direct real estate activity according to German REIT law, it is only a real estate-related activity. This is a shame because that would be a good opportunity to make money for investors with the increased interest rates that we’re currently having. 

Our real estate securities are nowhere near as heavily regulated as REITs.

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Return Of The German REIT Index

We don’t want to criticize REITs too much as they’re a great way to invest in real estate with very little money. At least, this is true in other countries. Here in Germany, the government has regulated REITs so much that it’s almost impossible for them to make a profit. As proof, while property prices in Germany have gone up by about 12% per year over the last few years, the German REIT Index is down by -17% since its inception more than 15 years ago! How is it even possible??? The REIT Index should have tripled or doubled at the very least, but all German REITs have done is lose money for investors. That is the reason why Real Estate Security Tokens are better than REITs!

Return of the German real estate market

Return of the German REIT Index

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Real Return of the German Real Estate Market

Everybody knows that real estate in Germany offered investors an incredible return over the last few years. But how good was it really? 🤔 That is what we are fact-checking in this article of the GermanReal.Estate Blog.

Key Takeaways

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The Real Return of the German Real Estate Market

Is German real estate in a bubble? Real estate prices in Germany have gone through the roof in the last few years. According to several mass media sources, we’re in a real estate bubble, and that bubble is about to burst! Really?

We’ve discussed the bubble argument and the future of the German real estate market in many videos already (like here, here, and here), so today we want to focus on the real return of German properties over the years. Is it as insane at the moment as everybody is saying? And not just over the last 10 years. In this article on the GermanReal.Estate blog, we’ll look back over the last 50 years as a comparison to the current market.

Real estate prices have risen in Germany in real terms almost every year. You too can participate in this with our Security tokens.

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Return Calculation Of German Real Estate​

In a recent study, the German Economic Institute looked at the real returns of the German real estate market since 1970. We’ll summarize their findings in this article, but you can download the full study here. The German Economic Institute calculated the total return of German Properties by adding the two factors that matter most when investing in real estate:

  • Return on rent, which is calculated by dividing the yearly rental income by the purchasing price of the property to see how much passive income the property is creating, and
  • Return on equity from the increase (or decrease) in property value.

Before we look at the charts, it’s important to understand that a positive total return does not mean a positive real-life return from your real estate investment. Why not? Imagine you invest in a property and get a 1% return on rent and a 1% increase in property value. This is low, way too low if we look at the findings of the study, but this example illustrates how even with a positive return, you probably wouldn’t make a positive real-life return.

As a real estate investor, you have to maintain and renovate your property. That costs money. You probably have a mortgage with an interest rate that increased significantly last year. That costs money. Finally, inflation is always a factor and has also increased significantly over the past year. This lowers your real-life return too. For this reason, Professor Voigtländer, who authored the study, is considering only a total return of at least 3% as a real-life positive investment return. Everything below 3% probably means you made a loss with your real estate investment.

Now, let’s take a look at the charts showing the real return of the German real estate market over the decades!

Return of the German Real Estate Market - The 21st Century

The 2020s – Good So Far!

The decade didn’t start that well for real estate. Or did it? It turns out, that despite all the craziness with COVID, inflation, and the war in Ukraine, the German real estate market still showed an insane return of 12.3% in 2020 and 10.6% in 2021. It will be interesting to see how this develops in 2022 and beyond. We’ll be keeping an eye on this, so check back on our YouTube channel or our blog for updates on the German real estate market.

To summarize the 2020s, we had an 11.5% average return over the first two years of the decade. Even after you factor in the 3% cost to own real estate, you have an 8.5% rate of return after inflation. Pretty insane!

If you want to profit from the resilient German real estate market, then take a look at our Real Estate Security tokens that we offer on our GermanReal.Estate Marketplace. Tokens are an easier and much more affordable way to invest in German properties than other options.

The 2010s – The Golden Age

Let’s look now at the 2010s. This decade was a Golden Age for real estate investing with insane growth rates, and exploding rents. According to the study, 2010 didn’t start well coming straight out of the Global Financial Crisis at the end of the previous decade. However, we still saw a 3.4% total return in Germany, or 0.4% real-life positive return after inflation at the beginning of the decade. This is a big difference compared to the US House Price Index, which shows about -10% in 2010.  Seems the title of the study “Resilience of the German housing market” is accurate!

Even after the biggest financial crisis of our generation, investors still had a positive return. When investing in German real estate over the rest of the 2010s, property returns went up and up and up, achieving a maximum of 11.7% return in 2016. Overall, there was an 8.1% average annual return on German properties in the 2010s, after inflation. If you also factor in return on equity because of the leverage with your mortgage – Wow!

The 2000s – Build Up To A Crisis

In the 2000s, we see a real-life negative return for the first time. Multiple times even. In 2001, 1.5%, then 1.8% in 2004, and only 1% in 2007, which was of course the start of the Global Financial Crisis. Returns in those three years are also the reason why German real estate returns in the 2000s grew on average by only 3.8%. This is still pretty good. Over the last 20 years, you would have always made a positive return when investing in German real estate. Even after costs, inflation, and everything. Nevertheless, the 2000s saw significantly lower returns than in the 2010s or 2020s.

Return Of The German Real Estate Market - The 20th Century

The 1990s – German Reunification

The 1990s were better again with only two years that were below a 3% total return. Average total returns over the decade increased to 4.5% again. Even with the German reunification, and the cheap “OST Immobilie” available at the time, property prices went up nicely.

The 1980s – Negative Returns

The relatively mediocre returns of the 1990s and 2000s have nothing against the 1980s. Here we have negative total returns for the very first time in 1982 and 1984. Not just real-life negative but total return positive, like the bars below 3%, but negative in both senses for the very first time. If you know the history, you might be able to guess why. The Second Oil Price Crisis, as it is called in Germany, started in 1979. And shortly thereafter, the Iran-Iraq war in 1980. This goes to show you that the German real estate market reacts to the news much slower than the stock market, as it took at least two years for these events to lead to negative returns.

The 1970s – A Solid Performance

The 1970s were pretty similar to the 1990s. There were two years with a total return below 3%, and the average total return over the entire decade is 4.5% per year.

Why is German Real Estate so Resilient?

After seeing the real return of the German real estate market over the last 50 years, this is the main question! Why is the German real estate market so resilient? Compared to the stock market, or real estate markets in other countries, it’s insane how stable and profitable the returns have been. The German Economic Institute gives three reasons:

1. Conservative financing

First and foremost, the conservative way mortgages are handled here in Germany. While other countries fix their mortgage rates only for a short term or have variable mortgage rates like in the UK or Spain, German banks usually fix interest rates on mortgages for 10 years or more. So the recent interest rate hikes are only relevant for people that want to get a mortgage right now, or people that have financed more than 10 years ago. For the past 10 years or more, we’ve had an interest rate of 3% to 4%. We know everybody’s making a huge deal out of rising interest rates, but the German real estate market doesn’t care.

2. Long-Term Investor Mindset

The second reason goes hand in hand with the first. German real estate investors generally have a long-term mindset. This mindset also comes from the relatively high real estate transaction costs in Germany. These can easily be 10% of the purchase price and need to be recouped to just be at 0% again. Another consideration in Germany is the tax-free speculation period of 10 years. When you hold a property for more than 10 years, you can sell it completely tax-free even if you made millions.

3. Diverse Real Estate Market

Last but certainly not least, is the argument that we bring up over and over again – the German real estate market is extremely diverse. There is not one German real estate market, there are many. The UK and France are very focused on their capital cities, London and Paris. If something would happen to these two cities, both countries would have a huge problem.

Germany is different. In our capital Berlin, you have the start-up culture. In Frankfurt, you have our finance city, maybe even the financial center of Europe. Hamburg is logistics. Cologne and Düsseldorf, where we launched our first two Real Estate Security Tokens, are more manufacturing, while Stuttgart is all about cars. Every single one of our top seven “A” locations has its unique benefits and is competing with the other six cities. If something would happen to one of the top 7 cities, of course, it wouldn’t be great. However, the overall German real estate market would probably be fine as investors would move to a different “A” location.

And that is why the German Economic Institute believes German real estate can be a great investment if done right. And that is what GermanReal.Estate believes as well! So why not learn more about it on our website and start investing in real estate in Germany right now!

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Multiple

The “multiple” is the most prominent way to calculate the return on your investment property. How do you calculate the multiple and what multiple should you be looking for when buying a property?

Key Takeaways

  • The multiple is the easiest way to calculate the profitability of your real estate investment with just 2 numbers
  • After calculating the multiple, you will know the investment return of your property when calculating “1/multiple”
  • In 2023, the multiples in Germany ranged from around 20 up to 80 in the regions with high demand
  • Historically speaking, the multiple has been rising continuously for property prices in Germany
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What Is The Real Estate "Multiple"?

A great way to calculate the return on your investment property is by using the multiple, called “Vervielfältiger” in German. In this article of the GermanReal.Estate Wiki, we will look at what the multiple is, how you calculate it, and the best multiple you should look at before buying an investment property in Germany.

The multiple (Vervielfältiger) is an extremely popular number to easily calculate the return of your rental property the fastest way possible. All you need is two numbers of your property you probably know already:

  1. The purchasing price of your investment property
  2. The net rental income per year

Attention: NET rental income, not GROSS rental income. Figuring out the net rental income generated by your rental property per year can be a little tricky. You need to subtract all the costs of owning a property from the rental income your tenant pays each month, including:

  • Reserves for any renovations and repairs
  • Property management costs
  • A reserve for covering expenses during any vacancies
  • All other costs of the property (“Betriebskosten”)

You can also calculate the multiple using the GROSS rental income instead of the NET rental income, but then you are just making the investment property seem more profitable than it actually is. Calculating back and forth until the numbers look nice enough is a sure way to failure when investing in real estate. As a real estate investor, you will get the NET rental income only, not the GROSS rental income paid by the tenant.

How To Calculate Your Real Estate Return With The Multiple

Now that we have the two numbers we need to calculate the multiple, we just divide the property price by the annual net rent to get the multiple of your investment property. But what does the multiple help us to know? 🤔

The multiple might make more sense when you divide 1 by the multiple to give you the percentage return of your rental property:

  • A property worth 100.000€ that returns 10.000€ in net rental income per year would have a multiple of 10. When dividing 1 by your multiple of 10, you will get your net return of 10% per year.
  • A 100.000€ property returning only 5.000€ in net rental income per year would have a higher multiple of 20, and therefore only a net return of only 5% per year.

The higher the multiple of your property, the lower your return, and vice versa. If you find a property with a multiple of 1, it would cost 100.000€ and return 100.000€ in net rental income. In other words, the rental property will pay completely for itself in the first year.

That would be absolutely incredible, and that’s also why properties like this do not exist (at least here in Germany). Properties with single-digit multiples, or higher than 10% return, don’t really exist in Germany anymore. Only perhaps crappy shacks in the back end of nowhere that need extensive renovation.

Invest in properties in Germany with LOW multiples (and therefore a HIGH return on investment) here:

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Multiples Of German Real Estate In 2023

What is a realistic multiple for German investment properties in 2023? Let’s see the Postbank Wohnatlas from 2022 that shows exactly that. Here you can see the multiple in 400 different German districts. Not surprisingly there is no district with single-digit multiples.

The dark green areas have the smallest multiple with less than 22.5. A multiple of 22.5 is a return of about 4%. That is why it is currently quite tough to make passive income when investing in real estate in Germany.

In the top German locations, mostly the “A” locations and really good “B” locations, the multiple is at least 30. That’s the red areas on the map.

In the dark red areas, the multiple goes above 32.5. Based on our formula, the return on investment of a rental property with a multiple of 32.5 would be roughly 3%.

The highest multiple on this map is in an area you would probably never expect – in North Friesland. The multiple here is 82.3 which is a return on net rent of 1.2%. Extremely low!

It’s probably on the Island of the Rich and Famous in Germany: Sylt.

The question when seeing this map is: What type of real estate investor are you? What are you looking for as a real estate investor? 🤔

Is it all right to invest a large amount of money and get a small return on rent in exchange for a relatively safe investment? Then invest in the red and dark red areas with high multiples. Or do you want a cheap property with a relatively high return on your investment IF you find a tenant (= significantly higher risk)? Then invest in Sachsen-Anhalt which is almost completely green.

Historic Multiples Of Real Estate In Germany

One thing is sure, over the long term the Germany map above will get darker and darker in the red if Postbank doesn’t adjust the multiple numbers in the future. We compared the 2021 map with the 2022 map, and rent increased by about 5% year-over-year while property prices increased by more than 17% over the same period.

  • Average multiple in Germany 2022: 28,5
  • Average multiple in Germany 2021: 25,8
  • Average multiple in Germany 2020: 24,1

With the rising property prices in Germany over the last decades and the high demand for living space, it seems likely that this trend will continue over the long term. So if you are interested to invest in real estate in Germany then you might want to go ahead now before properties become less and less affordable in front of your eyes.

The first 2 investment properties we tokenized are in the areas surrounding Düsseldorf (Mönchengladbach & Willich). Düsseldorf is one of the top 7 cities in Germany (A-locations) and properties are still affordable there. If you find the right property, of course. If you don’t want to go property hunting yourself, but want an easier way to invest in German real estate, check out our real estate security tokens on our marketplace.

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Real Estate With No Money: Is That Possible?

Many people on the internet suggest that can invest in real estate in Germany without any money. In this GermanReal.Estate FAQ we check if that is possible and how you can do it (incl. 4 alternatives).

Key Takeaways

  • Realistically speaking, it is very tough or even next to impossible to invest in German real estate with no money
  • Investing in real estate with very little money makes it a lot easier than trying to invest in real estate with no money
  • The example of a real property in Germany shows how much money you need to buy a property worth 100.000€
  • For multiple reasons, it helps to start your real estate investing career if you have little savings when buying a property
  • While saving for your (first) real estate purchase, you can invest in these 4 alternatives to profit from rising property prices
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Is It Possible To Invest In Real Estate With No Money?

There are a lot of articles on the internet and videos on YouTube telling you how to invest in real estate with no money. Is that even possible (in Germany)? Or are these articles and videos just clickbait? 🤔

You want to get rich quickly, we get it! You read Rich Dad, Poor Dad and want to use other people’s money. We get that too. But there’s something called reality that might limit your real estate investing dreams if you have absolutely no money. Let’s see if it’s possible to invest in real estate with no money, and how you can do it in this article on the GermanReal.Estate FAQ.

How To Invest In Real Estate With Very Little Money

Before we talk about investing in real estate with absolutely no money at all, let’s first see if you can start investing in real estate with very little money. Even having a little money to start with makes it a lot easier to kick-start your real estate investing career here in Germany. You will be surprised at how little money we are talking about because the best thing about investing in real estate is that you can use other people’s money.

If you bring at least a small down payment to the table, you can get a large mortgage from the bank to buy a property. Even if you could afford to buy the property outright without a mortgage, it wouldn’t be a good idea to do it. Debt is great, even with the current interest rate of 3% to 4%. Good debt of course – don’t get into a consumer loan.

Why is a mortgage the best thing in the world? The video below explains it in detail, but to summarize, the impact of inflation over time on the mortgage you get today means you will end up paying the bank less than what you got from them (adjusted by inflation). Also, your tenant will pay the majority of your mortgage together with the German government. When you invest in real estate in Germany you get pretty significant tax benefits.

Calculating Your Cash Flow – An Example

Let’s look at a recent example and see just how little money you need to start your real estate investing career. PerFinEx, our sister company, had an investment property in a large city in Saxony with more than 200 flats. As the investment property as in a C-location, it was very affordable compared to other (better) locations.

Example flat:

  • 2-room flat with 40 sqm for 97.600€
  • Return on rent of 4,7% per year (±5% including the garage)
  • 3,5% real estate transfer tax in Saxony (increased to 5,5% in 2023)
  • 2% for notary and land registry

As a side note, PerFinEx sold this property in December 2022 because in 2023 the real estate transfer tax rate in Saxony was raised to 5,5%!  The buyer saved money by not paying a commission to a real estate agent as well since PerFinEx is not operating as a real estate agent (PerFinEx is a financial advisor).

In total, the amount required to purchase this property was 103.000€. The incredible thing about this deal was that all the money could come from the bank and the buyer was not required to put in a single cent of their own money. That is because the banks liked that property so much that they were willing to finance even +100% of the property value. What a great deal! Or was it? 🤔

Are you interested to invest in real estate in Germany with a positive cash flow? Our real estate security tokens pay a regular passive income to investors.

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2 Reasons You Need Some Money To Start Investing In Real Estate

Reason 1: If you want 105,5% financing from the bank, you need an incredibly good financial situation. If you have absolutely no savings, or maybe even a consumer loan, low income, or a bad credit score (called a Schufa Score in Germany), there is no way you can get 105,5% financing from a bank.

It is extremely tough to start investing in real estate with no money at all. You need at least a little bit of money and a decent financial situation. Nobody says you need to put your own money into the property, but you still need some money to secure a mortgage in the first place.

Reason 2: Let’s say you get 105,5% financing. Let’s look at your monthly cash flow using the 5% return on rent from the property above. A 5% return is great (well above the German average in 2023), but you don’t get to keep your 5% return on rent. You have to pay your mortgage as well as many other expenses.

If you have financed more than 100% of the property, it’s likely you didn’t get the lowest interest rate on your mortgage. At current rates, you’ll probably get a mortgage for closer to 4%. Factor in paying another 2% in principal repayment (as part of your mortgage). Doing some quick math, you’re earning a 5% return from rent while paying 6% to the bank (4% interest + 2% principal), leaving you with a deficit in your cash flow of about 1%. 

This means, that in addition to paying all your rental returns to the bank, you will need to pay money out of your pocket. To keep the example simple, we can calculate with a rule of thumb: 100€/month will cover a 100.000€ mortgage. For the 103.000€ property, you would need around 100€/month to cover the additional mortgage payment, any taxes, property management costs, and the costs of any vacancies. 

To summarize: It’s unlikely you’ll get 105,5% financing from the bank if you have absolutely no money at all, and even then, you will need to put in your own money after purchasing the property because you won’t have a positive cash flow. You’ll have no passive income! At least not in the beginning.

4 Ways To Invest In Real Estate With Less Than 1.000€

So what’s the good news? Even if you do need a least some money to get started, you don’t need a lot to invest in real estate (in Germany). As long as you have a solid base income where you earn a little more than you spend each month, you can start saving money. It won’t be long until you have 5.000€ or 10.000€ set aside to start looking at small properties to invest in.

You don’t need large sums like 25.000€, 50.000€, or even 100.000€ to get started. If you don’t have it yet, look at building that solid base by increasing your income or reducing your expenses, and you will be on your way to becoming a successful real estate investor.

In the meantime, you can start investing in real estate in other ways than purchasing rental properties. Consider these 4 ways to invest in real estate with less than 1.000€:

REITs, or Real Estate Investment Trusts. Investing in REITs can get you started with earning good passive income – By law, REITs must distribute 90% of their rental earnings to investors.

Because REITs in Germany are highly regulated, it is very tough for them to make a positive return for investors. You can read more here.

Real Estate Crowdfunding or Real Estate P2P investing. In Germany, real estate crowdfunding or P2P (peer-to-peer) investing platforms have become quite popular in the last few years.

But there is risk involved, and not all platforms are transparent. With the recent downturn in the real estate market, more and more platforms and real estate crowdfunding projects are defaulting.

Real Estate ETFs. ETFs, or Exchange Traded Funds, with a focus on underlying real estate investments, are another great option.

There are about 100 real estate ETFs available to choose from. So choose carefully which real estate is suitable for your personal financial situation.

Real Estate Security Tokens. To find out more about this type of real estate investment, visit our GermanReal.Estate marketplace to find out about available properties to invest in with security tokens.

You can invest in property developments as well as property portfolios (like our community portfolio: new constructions) that we launched in February 2023.

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Best Real Estate Locations In Germany Until 2030

German Property prices surged in the 2010s and early 2020s to unprecedented highs. Which locations will be the best until 2030 and what growth rates can investors realistically expect? 🤔

Key Takeaways

  • After the tremendous property prices increases of the past, Postbank released new projections for 2030
  • The 2010s were the golden ages for the German real estate market. Will that trend continue until 2030 and beyond?
  • The start to the 2020s was difficult, but still real estate prices increased faster than ever before
  • Until the year 2030, Postbank projects very low property price growth projections of not even 2% per year
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Best Cities to Buy Investment Properties in Germany

After the insane property price increases of the last years (+7,2% in 2018 up to +14,2% in 2021 as seen below), Postbank recently released a new map with the best real estate locations in Germany until 2030. Will property prices almost double in value by 2030, if the 2020 trend of +9,6% per year continues, or even rise by +142% if the 2021 trend of +14,2% continues (all percentages adjusted for inflation)?

Before we get to the map of the best real estate locations in this GermanReal.Estate blog article, let’s give some context to Postbank’s numbers. Spoiler alert… Postbank barely projects a 2% increase in property value until 2030 for the best locations in Germany! 😱

How is that possible? Well, we also think the Postbank projections are low, but to understand their numbers, let’s recap how real estate was in the 2010s, how the German real estate market started in the 2020s, and what that might mean for 2030 and beyond. This context can help us to understand Postbank projections, and also to help you determine in which location you might want to invest right now.

+7,2% Property Prices in 2018
+9,3% Property Prices in 2019
+9,6% Property Prices in 2020
+14,2% Property Prices in 2021

German Real Estate In The 2010s: The Golden Ages

The 2010s started right after the Global Financial Crisis. The economy was booming, which means that people’s incomes rose as well. Earning more money was great as people also had more money to invest. The big question at the time was what to invest in when interest rates around the world were close to 0%. In the end, the stock market, the crypto market, and the real estate market all saw significant growth and increased investment.

To be more specific, the stock market experienced an unprecedented boom, with stock prices rising rapidly and making many investors wealthy. The crypto market also experienced rapid growth, with blockchain-based cryptocurrencies such as Bitcoin reaching new heights and becoming more widely accepted than before.

The real estate market also experienced a surge in prices, with the German house price index serving as a prime example. On the right, you can see the official graph of the German House Price Index to prove the point.

Property prices have almost doubled since the Global Financial Crisis and continued to increase faster than before in 2021 (same result as Postbank above).

Of course, there are also other reasons why property prices increased so much in the 2010s. Nevertheless, economics has a very strong part in it, as people thus have more money to invest in real estate.

To summarize the 2010s: When the economy is doing great, real estate generally also does great.

Our real estate security tokens allow you to invest in German real estate as easily as possible. Investing on our GermanReal.Estate marketplace starts at usually just 100€:

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German Real Estate In The 2020s: Difficult Start

So, what about the 2020s? Well, it didn’t start that well with the COVID-19 pandemic. However, if you look at the Postbank maps at the beginning of this article, the pandemic didn’t do any harm to the German real estate market. Even during the biggest economic downturn since the Global Financial Crisis, the German property market remained pretty stable.

The stock market did drop significantly because stock markets react quickly to news events. However, the real estate market tends to be much slower to react to short-term events that last only a couple of years. In 2021, as the pandemic dragged on, even the resilient real estate market started to show some effects. 

Subsequently, inflation started to rise from 0% to the 2% inflation target of the European Central Bank, to 5%, and then to more than 10% in October 2022. Rising inflation caused leading central banks around the world to increase interest rates in 2022 and 2023 as a response. Over the last two years, interest rates for real estate financing increased from about 0,5% to 4%. Insane!

Of course, Russia’s invasion of Ukraine in February 2022 is also pushing inflation even higher and is causing economies around the world to go down.

The 2020s didn’t have the greatest start for rising real estate prices, and it seems that the party of the 2010s is over for now.

This doesn’t mean that the real estate bubble is going to burst or that the real estate market is going to crash, but you can hear our take on that in this video. 

German Real Estate in 2030: Low Growth Rates?

Now that we have some perspective on the real estate market over the last 10 years and the present, let’s look at Postbank’s projections for the best real estate locations until 2030 and beyond. Here is why we cannot completely agree with Postbank’s projections:

The map looks pretty red, and yes that’s bad. All red and orange areas are projected to have falling real estate values until 2030, after inflation that is. So, they could rise in nominal value, but realistically property prices are falling in the red and orange areas.

In the green areas, property prices are rising by the amount of up to 1% per year – and in the dark green areas by +1% per year. Extremely low compared to the property growth rates of the 2010s or early 2020s! 

Four of the top five locations from the Postbank map are in or around Munich, with close to 2% growth per year. What do you think about these growth rates that you’re seeing here? 🤔

Let’s take the example of our capital city, Berlin. Berlin is a prime A-Location that has become more and more expensive over the years. It has become so expensive in fact that people have started buying properties in the surrounding areas of Berlin.

On the Postbank map, Berlin is dark green, and the areas around it are also green. We can agree with the map here. Same for Munich, Stuttgart, Frankfurt, and Hamburg.

But what about Düsseldorf which is currently the most affordable A-location in Germany? Is it really realistic that property prices around Düsseldorf are falling?

Best Real Estate Locations In Germany Until 2030

We certainly don’t think so and that’s why we issued our first real estate security token (Mönchengladbach: Welcome Home) as well as the first property of our second real estate security token (Community Portfolio: New Constructions) in the suburbs of Düsseldorf.

The most extreme example, and where we simply cannot agree with the Postbank map showing the supposedly best real estate locations in Germany until 2030, is the triangle of Leipzig, Dresden, and Chemnitz. This region experienced incredible growth over the last few years, and there’s no indication that this will stop anytime soon.

Our Predictions For German Real Estate until 2030

How realistic are the low property prices growth projections for the German real estate market of Postbank? Nobody knows the future! We’ll certainly be keeping an eye on developments in the German real estate market, and will post a video in 2030 looking at how the market developed!

What is our prediction? We think that real estate in Germany will experience at least double the growth rates that Postbank is projecting on its map! Come back to our website in 8 years to see who was right!

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Real Estate Crowdfunding

Many people want to invest in real estate (in Germany) without spending large amounts of money. Real estate crowdfunding might be the perfect solution. Find out in our GermanReal.Estate Wiki.

Key Takeaways

  • Real estate crowdfunding can be a great alternative to investing in (German) properties aside from buying a property yourself
  • Different types of real estate crowdfunding will reward the crowd in different ways (e.g. fixed interest rate)
  • Real estate crowdfunding offers many benefits (e.g. it’s affordable) but also some downsides (e.g. transparency)
  • Is real estate crowdfunding a good investment for your personal financial situation? Find it out in this article!
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What Is Real Estate Crowdfunding?

First let us understand that real estate crowdfunding, crowdlending, crowdfinaning, crowdinvesting, and real estate peer-2-peer (P2P) are all the same. There are slight variations based on the different types of crowdfunding, but generally speaking, all the terms above mean the same thing. So what is real estate crowdfunding? How does it work and should you invest in it? 🤔

Let’s imagine you find a property that you would like to invest in for 100.000€ (or any other amount of money). Traditionally, you would go to a German bank and apply for a mortgage. That is unfortunately not as easy as it sounds because banks demand a lot of documents, a solid financial situation, and maybe even a property valuation from a professional real estate appraiser.

With the rising property prices in Germany over the last few years, we see more and more banks declining mortgage applications. It does not necessarily mean there is something wrong with your financial situation, the bank might not like the property you want to invest in or your mortgage is not suiting the bank’s mortgage strategy. What do you do now? 🤔

If you find the property is an interesting investment, other people might share your opinion. Instead of raising money from a single source (e.g. bank), you can also raise money from many different other investors that would like to invest in the same property. As you get money from the crowd, hence the name for this type of real estate investing is called crowdfunding. Depending on the type of real estate crowdfunding you would reward the crowd with an interest rate of a share of the property.

Different Types Of Real Estate Crowdfunding

When many investors join forces in order to fund a property purchase by crowdfunding, they want to be compensated for their investment. The exact compensation for the crowd will vary based on the type of real estate crowdfunding. Generally speaking, there are 3 pure types of crowdfunding as well as one mixed type:

    1. Primary-rank loan crowdfunding: When financing with the crowd only, you are basically replacing the mortgage from a bank with investment from the crowd. That is why the crowd would most likely receive a fixed interest rate as compensation for participating in this type of real estate crowdfunding (variable interest rate also possible). If something would go wrong with the property investment, the crowd would receive money first as they have a loan with primary rank. 
    2. Secondary-rank loan crowdfunding: When a bank is involved in the property purchase (e.g. the property is being funded with a mixture of crowdfunding and mortgage), the bank will always require the primary rank. In that case, the crowd will receive the secondary rank only. As the risk is higher than with a loan with a primary rank, the crowd probably wants a higher interest rate with a secondary rank than with a primary rank.
    3. Equity crowdfunding: It is important to understand that the crowd does not own the property in the prior 2 types of real estate crowdfunding (the crowd acts as a bank giving a loan). If the crowd wants to own a piece of the property, it is equity crowdfunding. In this type, investors will receive a share of the (net) rental income as well as a share of the resale value of the property (based on how much they invested as a total share of the crowd). 
    4. Mezzanine crowdfunding: All 3 types of real estate crowdfunding mentioned so far have their unique advantage (primary-rank crowdfunding: security, secondary-rank crowdfunding: higher return, equity crowdfunding: participation in the increase of the property value). Mezzanine crowdfunding can combine the advantages of the prior real estate crowdfunding types as it is a mixture of 2 types or even 3 types.

As our real estate security tokens are real financial securities based on the blockchain technology, they are not real estate crowdfunding. If anyone would want to force a comparison between security tokens and crowdfunding, then our first investment in Mönchengladbach: Welcome Home and our Community Portfolio: New Consctructions would be mezzanine crowdfunding. The real estate security token offers investors a fixed interest rate as well as a share of the resale value of the property.

Real estate security tokens bring real estate crowdfunding to the next level. Investors can not just profit from passive income but also from rising security token values. And investors can vote on the security token strategy!

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Benefits & Downsides Of Real Estate Crowdfunding

After learning about the different types of real estate crowdfunding, it becomes apparent that there must be different advantages and disadvantages for real estate crowdfunding (compared to other forms of investing in real estate like REITs or real estate ETFs). Read more about the benefits and downsides of real estate crowdfunding below:

Benefits Of Real Estate Crowdfunding

  • Real estate crowdfunding starts at a lot lower minimum investment than buying a property yourself in the traditional way (some platforms start at 500€).
  • The lower minimum investment amount in real estate crowdfunding makes it easy to diversify your portfolio than if you would have to invest thousands of Euros.
  • Registering for a real estate crowdfunding platform is much easier than going through the traditional property purchase process with mortgage, notary, etc.

When done right, real estate crowdfunding is a very easy way to invest in real estate (in Germany). You can just invest and chill without having to deal with tenants, banks, or anyone else.

Downsides Of Real Estate Crowdfunding

  • Most real estate crowdfunding platforms severely lack transparency. You don’t get to know a lot about the property or the experience of the people behind it.
  • Real estate crowdfunding platforms are quite new and came up with the latest improvement in technology. So far they have hardly any successful track record.
  • With the World Bank expecting a recession & UBS calculating higher real estate bubble risks, we don’t know the impact of crashing property prices on crowdfunding.

To ensure as much transparency as possible with our investors, we publish regular videos on our YouTube channel or articles on our blog, our FAQ, or our real estate Wiki.

Should You Invest In Real Estate Crowdfunding?

Now that you know all about the different types of real estate crowdfunding as well as their advantages & disadvantages there is only one question left to answer: Should you invest in real estate crowdfunding? 🤔

The idea to divide exciting investment properties into multiple parts in order to lower the investment barriers for investors is great and offers a lot of benefits. That is why we at GermanReal.Estate are doing that as well with properties on our marketplace you can invest in with real estate security tokens.

Before investing in real estate crowdfunding with any platform, we recommend doing a lot of due diligence about the properties you want to invest in as well as the real estate crowdfunding platform itself (especially when they are outside of Germany with different tax rules). Who are the people behind the platform what is their prior experience in the (German) real estate industry? Do they have a successful real estate investing track record?

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Why Rents Have Been Exploding In Germany

Key Takeaways

  • Rents in Germany rose a lot over the last few years and some people feel rents are “too expensive.”
  • Salaries in Germany increased faster than rents in Germany, therefore making renting more affordable
  • While rents in Germany increased only by +17% since 2010, property prices increased by 93% over the same time
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Did Rents In Germany Really Explode?

Many people think that rents in Germany and the cost of living are “too high.” Especially people living and renting in large German cities like Berlin, Frankfurt, or Munich (where our business is). The idea that rents in Germany are “too high” is most of the time just a feeling or a personal impression and not backed up by any facts or data. Because the real question is: What does “too high” even mean? “Too high” compared to what? 🤔

Rents in Germany increased on a nominal level over the years and decades, and so did prices for food, cinema tickets, and everything else (at least with inflation). Rent prices are no isolated factor like some imagine them to be. Rents are just one single factor in the entire real estate universe. So in order to determine if rents in Germany are (too) expensive or not, we need to compare rent prices with other economic factors:

  • How did incomes in Germany develop compared to rent prices?
  • How did property prices in Germany develop compared to rent prices?

Only when putting other economic factors tied to real estate in perspective with rent prices in Germany, we will get the complete picture that will help us answer the question of this GermanReal.Estate blog post: Did rents in Germany explode? And if so, WHY did rents in Germany increase so much?

How Much Income Germans Spend On Rent

As income is the net salary for most people, let us compare how rents in Germany developed over the years in relation to net salaries. The German Economic Insitute in Cologne published in September 2022 how affordable rents are in the top 7 German cities (Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich, and Stuttgart). The graph can be seen below.

The fundamental question of the graph is: How many sqm can the median earner afford to rent if he spends 25% of his net salary?

We can see clearly that Munich is the most expensive city to rent in Germany as all 4 bars are lower than in the other cities (=Munich has the lowest affordability).

The yellow/gold bars show how many sqm the median earner could afford in the year 2018, and the dark green bars show how many sqm the median earner could afford in the year 2021.

Interestingly, in 5 out of the top 7 cities in Germany, the median earner could afford more sqm in 2021 than in 2018. Only Stuttgart become more expensive by 1% and Cologne by 2% over the 3-year period.

Even though rent prices probably increased on a nominal value in all 7 top German cities, they still became more affordable for the median earner. How is that even possible? 🤔

It might sound counter-intuitive, but as local salaries in Germany increased as well, renting in the 7 A-locations became more affordable. But renting did not automatically become more affordable in all German cities. As Germany has a very diverse real estate market that can be split into many different regional markets, we have to take a deeper look when comparing salaries with rents.

Rent Increase Vs. Salary Increase In Germany

It puts the statement “Rents in Germany are too expensive” into perspective when comparing rents with German salaries, doesn’t it? The charts below compare rent prices vs. salary increases (gross salary this time, not net salary as above in the affordability graph) from 2009 to 2019.

Where Rents Rise Faster Than Salaries

Explanation: In Berlin, rents increased by 104% while salaries increased only by 35% from 2009 to 2019.

Where Salaries Rise Faster Than Rents

Explanation: In Rostock, rents fell by 5% while salaries increased by 35% from 2009 to 2019.

Pro tip: You might want to avoid investing in real estate in Rostock (3rd largest German city on the Baltic Sea). If rents are falling even though the employer market seems to be in the German average with ±35% growth from 2009 to 2019, property prices will have to follow eventually and go down as well. Rather invest in growing regions than in regions with falling property prices.

Profit from rising rents in Germany by investing in our real estate security tokens. You don’t even have to search for the right property or deal with tenants. Security tokens are as easy as it gets!

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Rent Prices Vs. Property Prices In Germany

Rents in Germany did increase quite a bit, but property prices increased a lot more as seen in the chart on the right that compares rents vs. house prices in the European Union.

Houses in Germany almost doubled in value (+93%) from 2010 to the end of 2021. Rents on the other hand increased by +17% only in the same time period.

This is one reason why people keep talking about a real estate bubble in Germany. As property prices outgrew rent prices, the profitability for real estate investors goes down, leaving people to believe the German real estate market is going to crash.

The real question that is left aside in charts like the one on the right is: WHY did property prices increase so much? It is because Germany is not providing enough living for its population.

The goal of our German government is to build 400.000 new flats every year. Since the year 2000, Germany managed to build just 300.000 once (all other years just 200.000 – 250.000 flats).

That is why are sure that German real estate will continue to be an exciting investment over the term as rising rent prices increase passive income for real estate investors. 

How You Can Profit From High Rents In Germany

In Germany, salaries rose continuously over the last few years, not just on a nominal basis but also on a real basis (adjusted for inflation). The good news for renters is that renting in Germany has become more affordable even though rents increased and some people think they have become increasingly “expensive.” The reality is, that salaries rose higher than rents in Germany making renting more affordable.

The good news for real estate investors (or people that want to become real estate investors in the future) is that property prices will continue to rise over the long term as Germany is not creating enough living space. Regional markets will play a huge role in the future increase of property prices. Real estate in cities like Rostock might fall in value while other cities like Düsseldorf (and suburbs like Mönchengladbach) might continue to rise in value.

If you are looking to invest in German real estate in the easiest way possible, then check out our marketplace. Thanks to the power of tokenization, we can offer blockchain-based real estate security tokens to our investors for just 1€ (minimum investment usually 100€).

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Are There REITs in Germany?

Key Takeaways

  • REITs (Real Estate Investment Trusts) are very common in the US, but they also exist in Germany
  • REITs are real estate companies that pool funds from investors in order to create real estate portfolios
  • Because German REIT law severely limits REITs, they have many benefits & downsides for investors
  • Should you invest in German REITs? It depends on your personal financial strategy and your investment goals
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What Is A REIT (Real Estate Investment Trust)?

Would you like to invest in real estate (in Germany) without spending tens of thousands of Euros on a downpayment, taxes, and fees (e.g. notary or real estate agent)? Then real estate ETFs, open or closed real estate mutual funds, or REITs (short for Real Estate Investment Trust) might be a good option for you to become a real estate investor far easier and more affordable than buying a property yourself.

As REITs seem to interest many people from our community the most, let us take a closer look at German REITs in this GermanReal.Estate FAQ. On the most fundamental level, REITs are real estate companies that pool money from investors (like real estate crowdfunding) in order to invest in a portfolio of different properties. So if you do not have enough money to buy your own shopping mall or multi-family home (yet 😉), REITs can be a great alternative to invest in properties you otherwise wouldn’t have the money for.

REITs are a lot more common in the United States than they are here in Germany or Europe, but they do exist. As of writing this article, there are 5 different German REITs available to invest in. Germany doesn’t have a lot of REITs because they are as regulated by financial laws as anything can be. That sparks the question if you should invest in German REITs or not.

Rules For REITs In Germany

In order for a real estate company to be considered a REIT, it needs to apply all rules listed below. Some rules might be more important for the REIT company than for you as a potential investor, you just need to know that a REIT can also lose its REIT status if it does not comply with all the rules of the German REIT law (“Gesetz über deutsche Immobilien-Aktiengesellschaften mit börsennotierten Anteilen“):

REITs in Germany are limited in the types of properties they can invest in. While REITs can invest in commercial properties, infrastructure, plots, etc depending on their strategy, they cannot invest in residential properties built after 2007. The German REIT law prevents REITs to invest in newer residential properties because rents would rise even higher than today (apparently).

A minimum of 75% of the earnings & of the assets of a German REIT must come/be from real estate and real estate only. Real estate-related activities (e.g. doing construction) are not allowed for REITs in Germany. The only real estate-related activity allowed is for Mortgage REITs to earn interest from giving out mortgages.

German REITs are not allowed to trade properties. The German REIT law demands that REITs focus on passive real estate management only. Only small changes to the property portfolio are allowed: REITs can shift 50% of their portfolio every 5 years or 100% of their property portfolio every 10 years. If REITs want to buy and sell more often (because the real estate market is currently rising or falling) or buy properties in growing regions (e.g. B locations), the REIT would lose its REIT status.

All REITs in Germany must be publicly traded companies. Other countries might allow public REITs and private REITs, the German REIT law recognizes only publicly traded companies to apply for REIT status.

Any special purpose vehicle (SPV) set up in order to hold a real estate portfolio would need to transfer to a publicly traded company (AG or SE) first which is a tremendously long and cost-intensive process.

Real estate is great because it is the only investment that allows you to boost your investment return by leveraging with a mortgage. Many real estate investors would like to leverage as much as they can with a 100% mortgage (especially in times of high inflation). German REITs are allowed to leverage 45% only as they have to bring 55% as equity (= investors’ money) which is severely limiting their performance.

The outstanding REIT shares must have a minimum distribution among investors. No single investor is allowed to have 10% of the outstanding REIT shares. Also, at least 15% of the outstanding REIT shares must be distributed to a large number of investors of which no single investor holds more than 3% of the REIT shares.

While REITs are a great concept that allows many people to invest in real estate, the German REIT law destroyed all flexibility & chance to make profits for German REITs.

Benefits & Downsides Of Investing In REITs

Given all the rules that apply to German REITs mentioned above, REITs in Germany come with many different benefits and downsides when investing in them. Reading through the benefits and downsides below will help you to make up your mind if you want to invest in German REITs or not.

Benefits Of Investing In REITs

  • REITs are paying a lot of passive income in the form of dividends. In order to keep their REIT status, 90% of taxable profits have to be paid out to shareholders.
  • When paying out 90% of taxable profits, REITs are for the “public good” and therefore enjoy a 0% corporate tax rate (vs. ±30% for regular companies or ±15% for SPVs).
  • As all REITs in Germany are publicly traded, they are also as liquid as stocks or ETFs. You can sell your REIT shares a lot faster than if you would try to sell a real property of yours.

Downsides Of Investing In REITs

  • The high dividend payout ratio of 90% means there is only a little money to grow the real estate portfolio. This can be seen perfectly in the performance of the German REIT index.
  • REITs might enjoy a 0% corporate tax rate, but investors still need to pay the German 25% capital gains tax on all profits they make when investing in REITs.
  • The liquidity from the stock market comes with the volatility of the stock market as well. REITs are generally speaking more volatile as they are basically real estate sector ETFs.

Blockchain-based real estate security tokens offer real estate companies & investors far more flexibility than REITs. See what investments are currently available for you to invest in here:

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Should You Invest In German REITs?

Due to the many rules that apply to real estate companies in order to keep their REIT status, the German REIT index is showing an incredibly bad performance of -17,2% since its inception in 2007 (see chart below). Given that German real estate prices are at an all-time high and

the World Bank and UBS are expecting a real estate crash in 2023, it seems almost unbelievable that the German REIT index can be negative over the last +15 years.

Because REITs in Germany pay 90% of their taxable profits as dividends to investors, the capital appreciation is very small as only 10% of profits are left to further grow the property portfolio the REIT is investing in (Why security tokens are better than REITs).

Despite reinvesting 10% of their after-tax earnings in properties, German REITs did not manage to grow their share price. This leaves only 2 conclusions: Either REITs in Germany have pretty bad real estate investing strategies or the REIT management is doing bad business.

Tackling this and giving investors great ways to invest in German real estate was the major point of improvement we wanted to make with our real estate security tokens. Security tokens allow investors to decide which real estate strategy is right or when it is the right time to buy or sell a property (e.g. with the Mönchengladbach: Welcome Home security token or our community portfolio token that is expected to be released in early 2023).

With real estate security tokens, investors have a great alternative to buying properties themselves. Investors can diversify their portfolio with very little money (investing on our marketplace usually starts at 100€) and very little work (e.g. no dealing with tenants). Learn more about real estate security tokens in the video below and register as an investor to start profiting from the German real estate market.

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How Inflation Impacts Real Estate Investors

Key Takeaways

  • Inflation in the Euro area is at an all-time high. Investing in real estate might be the perfect solution to fight inflation.
  • When saving UP (with e.g. ETFs), you are slowly growing your investments and inflation is working against you.
  • When saving DOWN (with real estate), you take a mortgage from a bank so inflation works in your favor.
  • Everyone with debt is profiting from high inflationary times while everyone with assets is losing money.
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Inflation In The Euro Area

Our European Central Bank is targeting an inflation rate of 2% in the Euro area. We started 2022 with a 5% inflation and climbed to more than 10% inflation in October and November of 2022 (see graph below). All while interest rates from banks are still near 0% (for savings accounts, not for mortgages). If your money loses basically 10% in value year over year, what can you do in order to fight inflation? 🤔

Before we come to possible solutions, it is important to understand that there is absolutely nothing anyone can do against inflation itself. The inflation rate in the Euro area will rise or fall without any single person having a significant influence on that. The only thing you can do to fight inflation is to protect your hard-earned money by investing it in real assets:

  • Equities like stocks or ETFs
  • Commodities like Gold or Silver
  • Blockchain-based investments like cryptocurrencies or security tokens
  • Real estate (investment properties or homes for self-use, not REITs)

All possible investments above work the same way with the exception of real estate. Real estate is the only investment that allows you to take a loan from a bank. Good luck trying to convince a (German) bank to give you a loan in order to invest that money into cryptocurrencies or stocks. And this difference makes real estate such a perfect hedge against inflation because it allows you to save DOWN instead of saving UP.

Saving Up: Inflation Is Your Enemy

When investing in any type of savings plan (e.g. stocks, ETFs, cryptocurrency, real estate crowdfunding, etc) you are starting from 0€ and invest gradually more money over time. When you invest 100€/month, you have 1.200€ in your account after 1 year or 12.000€ after 10 years. If you don’t let your money sleep in a bank account but invest it with a meaningful return, you will profit from exponential growth (“compounding interest“) as seen in the graph below.

While there is generally speaking nothing wrong with saving UP, we have to understand that inflation is fighting against us here. While your goal is to save more and more, inflation is bringing the value of your money down (currently by ±10%/year). The example below shows that you need a rate of return far above the inflation rate in order to have a real positive investment return.

Example of saving UP:

  • You are investing money (saving up) with a 4% rate of return (from portfolio growth or passive income from rents)
  • The inflation rate is at the same time at 4%, leaving you with a 0% realistic rate of return
  • Your 4% rate of return is taxed with at least 25% capital gains tax, leaving you with a -1% investment return

Saving up and investing your money is far better than leaving all your money in a bank account with 0% interest, but the example above shows that you are just fighting windmills when saving up. If your (net!) investment return is smaller than the inflation rate, you are actually losing money while you think that you are getting richer. If saving UP is not the solution, maybe saving DOWN with real estate might be better.

Saving Down: Inflation Is Your Friend

How about instead of fighting inflation by saving UP (which you cannot win anyway), you make inflation your friend by saving DOWN? All you need to do is to work in the same direction as inflation, trying to devalue your money as fast as possible. And how do you do that? By taking a mortgage from a bank and getting into debt to buy a German property.

With a mortgage, you don’t start saving at 0€ as you do with a savings plan that is saving up, you start at 100.000€, 200.000€, or whatever your property value is. While you get a tiny profit with a savings plan that returns 4% in the first year, you get an enormous profit by investing in a property that returns 4% in the first year (4.000€ for every 100.000€ in property value). And you are not even taxed on your profit with real estate if you are holding your property for +10 years (tax-free speculation period in Germany).

Real estate investors are not just profiting from rising property prices, they are also earning more money the higher the inflation rate is (even if the real estate “bubble” is bursting). The nominal value of your mortgage will stay the same (100.000€ mortgage will stay 100.000€ mortgage), but the more you fast forward in time the more you will pay off your mortgage with devalued Euros (adjusted by inflation). In times of 10% inflation, your mortgage is basically getting 10% “cheaper.”

Real estate investors are profiting the most from high inflationary times. Join the winning side of inflation by investing in tokenized properties with our real estate security tokens here:

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Is Real Estate The Perfect Solution Against Inflation?

If you want to profit from inflation while everyone else is losing, you can do it! You just have to go into debt, it’s “just” that easy. 🫠

Jokes aside. In order to profit from inflation, you need to get out of cash that is losing value fast and start investing in real assets like stocks, ETFs, or real estate. The major advantage of real estate is that you can go into debt when making that investment which will boost your return even further the higher the inflation rate is. But please don’t go into bad debt (e.g. consumer loan), only go into good debt (e.g. mortgage).

We realize it is not so easy to just go out and find a good investment property and that is why we created GermanReal.Estate to make your real estate investor life as easy as possible. With our real estate security tokens you don’t need to find the right property in the right location for the right price. You can just register as an investor and see what investments are currently available on our marketplace.

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eWpG (German Electronic Securities Act)

The eWpG (Electronic Securities Act) has ushered in a new era of digital transformation in the German financial markets. This revolutionary law enables purely electronic securities, eliminating the need for physical certificates of ownership.

Key Takeaways

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Introduction

In the rapidly evolving world of finance, digitalization has become a dominant force, reshaping the way people invest and manage their assets. Germany was not far behind in embracing digital advancements in investing. The eWpG (German Electronic Securities Act), introduced a little over a year ago, has set the stage for a groundbreaking transformation in the German financial markets.

The eWpG (Electronic Securities Transactions Act) introduced on 10 June 2021 by the Federal Ministry of Justice and Consumer Protection in cooperation with the Federal Ministry of Finance has set the course for a groundbreaking change in the German financial markets.

In this GermanReal.Estate Wiki, we explore the impact of the eWpG, examine how it is revolutionizing the investment landscape, and discuss the remarkable potential it offers investors through Real Estate Security Tokens. Indeed, these are officially authorized as a result.

The Power of eWpG: Transforming Ownership with Purely Electronic Securities

Traditionally, financial instruments like stocks and bonds required physical certificates of ownership to facilitate transfers and transactions. However, the eWpG eliminates the need for cumbersome paperwork by allowing purely electronic securities.

This groundbreaking feature of the eWpG marks a fundamental shift from the reliance on physical certificates to a seamless, digital ownership experience. This shift not only streamlines processes but also offers enhanced security and accessibility to investors.

Central Securities Register vs. Decentralized Securities Register

The eWpG introduces two distinct electronic security registers: the central securities register and the decentralized securities register. While the central securities register maintains entries in a centralized database, the true innovation lies in the decentralized securities register, operating on the foundation of distributed ledger technology – the blockchain. Embracing this technology ensures transparency, immutability, and tamper-proof record-keeping, revolutionizing the traditional methods of financial record management.

A decentralized securities register harnesses the power of blockchain technology, a decentralized and secure record-keeping system. By adopting blockchain, the eWpG ensures that ownership records remain transparent, trustworthy, and efficiently managed, reducing the dependence on intermediaries. Forward-thinking companies like Cash Link Technologies are already capitalizing on this innovative approach to issue crypto securities, making the most of blockchain’s inherent advantages.

Real Estate Security Tokens: A Gateway to Investment Opportunities

The eWpG’s monumental impact is reflected in the emergence of Real Estate Security tokens on platforms like GermanReal.Estate. These tokens represent fractional ownership of real estate assets and provide a gateway to previously inaccessible investment opportunities. By leveraging the transparency and security of blockchain, Real Estate Security tokens enable investors to participate in the lucrative world of real estate with enhanced liquidity and ease.

Investing in Real Estate Security tokens presents several compelling advantages for investors. Firstly, fractional ownership allows investors to diversify their portfolios effectively, even with relatively small amounts of capital. Additionally, the digital nature of these tokens facilitates instant and secure transactions, eliminating the delays and complexities often associated with traditional real estate transactions. Moreover, the transparency afforded by blockchain technology ensures that investors have access to accurate and up-to-date information about their investments.

Conclusion

As the eWpG paves the way for a digital revolution in the German financial landscape, the possibilities for investors are limitless. By embracing this transformative legislation, Germany is setting the stage for a future where blockchain and digital assets will play a pivotal role in the financial ecosystem. As the advantages of Real Estate Security tokens become more evident, more companies are likely to embrace the potential of eWpG and offer innovative investment opportunities to investors.

Furthermore, the eWpG not only empowers domestic investors but also opens doors to international investors looking to diversify their portfolios in the German real estate market. With the ease of digital transactions and the elimination of geographical barriers, investors from around the world can now access GermanReal.Estate’s marketplace and partake in the country’s thriving real estate sector.

In conclusion, the eWpG (German Electronic Securities Act) marks a historic turning point in Germany’s financial landscape, ushering in an era of digitalization and blockchain-based investments. With its introduction, Germany has set a precedent for other countries looking to embrace digital transformation in their financial markets. Real Estate Security tokens represent an exciting opportunity for investors, offering fractional ownership of real estate assets with enhanced liquidity and transparency. As the German real estate market evolves with the eWpG’s implementation, investors can look forward to a dynamic and innovative investment landscape, powered by blockchain technology and Real Estate Security tokens.

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Real Estate Bubble Index

Key Takeaways

  • The Swiss investment bank UBS published its annual global real estate bubble index report in October 2022
  • UBS evaluates the risk for a real estate bubble higher than ever before because of the high price-to-rent ratio
  • Higher mortgage rates bring down profitability for real estate investors leading them to sell properties, UBS argues
  • 2 out of the top 4 cities with the highest real estate bubble risk worldwide are Frankfurt and Munich
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UBS Global Real Estate Bubble Index Explained

In October 2022, the Swiss investment bank UBS published their yearly Global Real Estate Bubble Index again, comparing property prices all over the world to show the cities with the highest bubble risk.

2 out of the top 4 cities with the highest real estate bubble risk worldwide are German cities: The A-locations Frankfurt and Munich (as seen in the graph on the right).

This post of the GermanReal.Estate blog will examine in detail why UBS ranks the 2 German cities Frankfurt and Munich so high on their global real estate bubble risk list.

Because if you live in Frankfurt or in Munich and experience rent prices and property purchase prices firsthand, you might have a different than UBS (our business is in Munich too).

UBS opens its global real estate bubble index with the very important sentence “In many cities, there is not enough housing supply” which is especially true for many cities in Germany.

This is also one major argument against the real estate bubble. In order to have any bubble, you would need a supply that is far above the demand so prices fall.

UBS acknowledges there that is no excess supply in many cities around the world. They build their real estate bubble on two arguments: Development of rents & mortgage interest rates.

Real Estate Bubble Reason 1: Price-To-Rent Ratio

The first argument for UBS supporting the rising real estate bubble risk is the development of rent prices compared to the development of property prices. In all major cities around the world, property prices went up and up over the last years or decades, in some cities even by double-digit growth rates (+10% per year).

While property prices increased a lot all over the world, rents increased as well but only with local salaries. Resulting in property prices that have outgrown rent prices.

The real estate bubble argument is, that the higher the difference between property prices vs. rent prices, the lower the profitability for real estate investors. And the lower the profitability for real estate investors, the harder it is to justify high property prices.

The prominent “price-to-rent ratio” calculates the discrepancy between property prices vs. rent prices. The graph on the right shows how many years a property needs to be rented out in order to pay for itself.

The no. 1 cities with the highest price-to-rent ratio are the cities with the lowest profitable real estate: Munich, Hong Kong, and Tel Aviv. In all these 3 cities, investment properties must be rented out for 44 years until they have paid for themselves. Frankfurt is #4 on the price-to-rent ratio list with 42 years until your property would have paid for itself with passive income from renting it out.

All price-to-rent ratios from the current global real estate bubble index 2022 are vastly higher than those from 2012 (except Singapore, Madrid, and Dubai) giving an argument supporting a higher real estate bubble risk than 10 years ago. What are high price-to-rent ratios telling us? That investors are willing to sacrifice passive rental income in the hopes of further increasing property prices (driven by historically low mortgage rates).

Cities With The Highest Real Estate Bubble Risk Worldwide

Real Estate Bubble Reason 2: Mortgage Interest Rates

Continuously increasing price-to-rent ratios can only be justified by historically low mortgage interest rates (according to UBS). Over the last +10 years, central banks around the world have been lowering interest rates to 0% in order to boost the economy.

During the time of 0% interest, investors were looking for profitable investments as savings accounts and fixed-term savings accounts returned almost no profit. Therefore driving up prices of stocks (e.g. REITs), ETFs, and real estate (crowdfunding).

In early 2022, central banks started to raise their interest rates again (and mortgage rates with it). The current realistic mortgage rate in Germany can be seen in the table below:

Rising interest rates are not beneficial for real estate investors, UBS is certainly right here. But mortgage rates are no isolated factor that is detached from other factors that influence real estate prices:

  • What are alternative investments?
  • How are (real) incomes developing?
  • How high is the inflation rate?

When adjusting for inflation, property prices developed as seen in the chart on the right. Even though real estate valuations increased in Frankfurt and Munich on a nominal basis, real property prices fell in both cities when adjusted for inflation.

Real estate prices have become increasingly unaffordable but you would like to benefit from higher interest rates? Check out our real estate security tokens that our investors can trade on the blockchain.

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Frankfurt Real Estate Bubble Index

One of the 7 A-class cities in Germany even got its own page in the UBS global real estate bubble risk index: Frankfurt. UBS is seeing a high risk of a bursting bubble here and titles the page “Slowdown in the making.”

The annual growth chart of property prices in the middle of the page shows clearly that Frankfurt was the big winner of Brexit, as a lot of high-paying jobs in the finance sector moved from London to Frankfurt.

The growth chart that showed an almost 15% increase in property valuations in 2017, 2018, and 2019 slowed down significantly and is expected to be below the 20-year average growth rate of +5% in 2022.

UBS argues that the increase in property prices has to slow down at some point as rents did not keep up with property prices (as seen in the price-to-rent ratio above).

You can download the full global real estate bubble index report of 2022 on the website of UBS here in case you would like to dig deeper into the real estate bubble discussion yourself.

At the same time, UBS argues that property prices could rise even higher as vacancies are at an extremely low level in Frankfurt. The Swiss investment bank expects the housing shortage will resolve itself in the next years, which we are highly doubting given the low amount of living space Germany is actually creating (and has been creating over the last years).

That is why we are still confident that real estate will continue to be an exciting and profitable investment over the long term. If you share our opinion and want to invest in German real estate in the easiest way possible, then see what kind of real estate security tokens are currently available on our marketplace.

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Passive Income & Real Estate: Is That Possible?

Key Takeaways

  • Passive income (from return on rent) is important for many investors when investing in real estate in Germany
  • The sad reality is, that is very tough to find properties returning a positive cash flow in this current real estate environment
  • If you know how to manage your risk, investing in real estate in Germany with negative cash flow is fine
  • Tokenized real estate like our Blockchain-based real estate security tokens offer immediate passive income to investors
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Why Passive Income Is Important When Investing In Real Estate

A viewer of the YouTube channel of PerFinEx (the #1 English-speaking & independent financial advisor in Germany) commented that any investor knows, that investing in real estate without passive income would be a sure way to failure. Is that so? Should you invest in German properties ONLY if you receive an immediate positive cash flow from rent – or is that not realistic at all given the current state of the German real estate market? 🤔

Investing in real estate in Germany costs a lot of money, to begin with (real properties not REITs or real estate ETFs):

  • 2% notary & land registry fees
  • 3,5% – 6,5% ground purchasing taxes
  • +3,57% real estate agent (optional)

Let us take 10% as a rule of thumb in closing costs that you have to pay on top of the property value. Any downpayment a bank might require would mean you have to invest additional money. That is a lot of savings that you need before you can even start thinking about buying a property. And if your property is returning no passive income but a negative cash flow, it means you have to invest additional money into your real estate investment every single month.

Buying a property with negative cash flow is bad for multiple reasons:

  1. If a property is costing you e.g. 250€ negative cash flow per month, 2 properties will cost you 500€/month, and so on. So with every property, your free liquidity and creditworthiness are going down which is the exact opposite of what real estate investors want. They want a higher creditworthiness to leverage their investments by taking more credit from a bank.
  2. A real estate investing strategy with negative cash flow is depending entirely on your income. What if your income goes away for some reason? You might lose your job, you might get sick, or your company might go bankrupt. As soon as your income is gone (for just a while), investment properties with negative cash flow will eat your savings. And as soon as they are gone too, you might be forced to sell your property (maybe at a bad time when the market is going down).

We can probably all agree on this: The absolute best-case scenario would be to buy a property that returns immediate passive income with a 110% mortgage that covers not just the property, but also the additional closing costs (especially in times of high inflation). Meaning you don’t have to invest a single Euro from your own money because the property pays completely for itself. Is it realistic to find a property like this? 🤔

The Real Estate Cash Flow Reality In Germany

Buying a property in Germany that is returning passive income is what a lot of real estate investors desire and it sounds easy as well, but it is actually not. In order to generate passive income for yourself, a property needs to produce more rental income than expenses. As (net) rental income is summed up easily, let us take a closer look at the expenses you might have when investing in real estate in Germany:

  • Principal: Generally speaking, a bank requires to pay 2% principal per year as part of the mortgage
  • Interest: The current realistic mortgage interest rate as of writing this article is around 4% p.y. (subject to change)
  • Renovations: In order to have a great rental property in the future as well, you need to maintain it and invest additional money
  • Management: A property manager that is taking care of your investment property will decrease your cash flow further
  • Vacancy: No matter what your return on rent is, if your rental property is empty, it doesn’t return any passive income at all

All the costs above are potentially decreasing your passive income from investing in real estate. Let us make the extremely unrealistic example that renovations, management, and vacancies do not exist at all and you only need to pay principal and interest to the bank where you got your mortgage. In that case, you would need to find a property returning 6% passive income from return on rent (2% principal + 4% interest).

Where can you find properties with a +6% return on rent?

The Postbank Wohnatlas of 2022 is showing the “multiple” that is dividing property value by net rent in order to find regions in which properties are returning a positive cash flow and passive income.

  • A property worth 100.000€ returning 10.000€/year in rent has a return on rent of 10% and a multiple of 10.
  • A property worth 100.000€ returning 5.000€/year in rent has a return on rent of 5% and a multiple of 20.

In order to find a property with a 6% return on rent (which is our absolute minimum to receive passive income) would need to return 6.000€/year in return with a multiple of 16,67.

A multiple of 16,67 leaves us with only the dark green areas that have a multiple smaller than 22,5. And most A- & B locations have a multiple of +32, meaning a return on rent of a maximum of 3%, not a minimum of 6%.

Property prices in Germany have far outpaced the growth of rent prices over the last +10 years making it very difficult to find properties returning passive income from the very start (“price-to-rent ratio“).

Real estate security tokens pay interest to investors instead of paying interest to a bank. Receive 4% p.y. interest by investing in our first security token in Mönchengladbach here:

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Why Real Estate With Negative Cash Flow Is Fine

The reality is, that it has become almost impossible to find investment properties in Germany that return passive income right after buying them. The only affordable properties are in regions you probably don’t want to invest in because vacancies will eat you alive. A high return on rent will be a 0% return on rent if you cannot find a tenant in the backend of nowhere.

If we were in your shoes, we wouldn’t focus too much on passive income when investing in real estate. Other factors are much more important when it comes to making a great real estate investment. Here is why: Imagine you find the 1 in a million property that returns 7% passive income in terms of return on rent. Would you buy it? 🤔

Of course, you would buy the property because it returns an immediate positive cash flow. But if you increase your principal you pay the bank from 2% p.y. to 4% p.y. now, suddenly the property you thought was a great investment returns a negative cash flow (7% return on rent vs. 8% mortgage). Even though nothing changed with the property fundamentally, you don’t receive passive income anymore.

The example above shows you the pitfall of real estate and passive income, especially for many new real estate investors. You need to look at why there is no passive income. Maybe you are buying in the city center of an A-location hoping for a big increase in property valuation. Foregoing small positive cash flow while betting on. a big increase in property value is a fine trade-off, isn’t it?

To us at GermanReal.Estate it is fine to buy properties with negative cash flow if you know how to manage the risk. Especially given the after-tax cash flow will be positive much sooner than the pre-tax cash flow as a real estate investor. If you would like to invest in properties in Germany while receiving immediate passive income, check out what kind of real estate security tokens are currently available on our marketplace.

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Location Ranking (A, B, C & D)

Key Takeaways

  • The German real estate market is so diverse that it helps to rank cities among their attractiveness as a location
  • While A locations are the top 7 German cities, locations have a potential higher return on rent from B to C to D
  • The location ranking can help you to find the best location(s) in Germany to buy properties in
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Introduction: A B C D Location Ranking Explained

If you would like to invest in real estate in Germany, one of the very first questions you are asking yourself is: In which location should I buy a property? The location ranking of German cities (A, B, C, or D) will help you to find an answer:

  • A locations are the top 7 cities that are the most popular and the most expensive to buy real estate in
  • B locations are major cities with at least 250.000 inhabitants and many attractive features (e.g. national significance)
  • C locations have at least 100.000 inhabitants and important relevance to their surrounding region 
  • D locations are small cities with a central function for their immediate surroundings (e.g. large employer)

As seen in the 2 examples from a popular German real estate website, it makes a tremendous difference if you are buying in an A (in Munich) or in a D location (Chemnitz). While you can buy a 36 sqm flat for 729.000€ (=20.000€/sqm) in Munich, you can buy for almost the same price an entire house with residential and commercial space in Chemnitz for less than 500€/sqm.

A Locations In Germany

The top 7 German cities are undeniably considered A locations as they are the most stable locations even if the overall German real estate market is going down.

The German capital Berlin with 3,7 million inhabitants, Hamburg with 1,8 million, Munich with 1,5 million, and Cologne with 1,1 million inhabitants are simply for their size an A location.

Frankfurt is the financial center of Europe after London lost that status due to Brexit. Stuttgart is the 6th largest city in Germany and home to many internationally known companies like Mercedes Benz and Porsche.

And last but certainly not least: Düsseldorf. Home of the “high society” in Germany with close proximity to A location Cologne. Together they are in the Ruhrgebiet, the economic powerhouse of Germany.

As of writing this article, Düsseldorf is currently the most affordable A location in Germany. That is why we decided to launch our first real estate security token in close proximity to Düsseldorf.

Examples of A locations in Germany:

  • Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart

B Locations In Germany

While the arguments for A locations are pretty obvious, it gets interesting with the B locations in Germany. B cities are second-tier locations that have a lot to offer in terms of attractiveness for real estate:

A large university with tens of thousands of students like Ruhr-Universität in Bochum, Universität Duisburg-Essen, or the Technical University in Dresden.

Dresden is also home to the tech industry association “Silicon Saxony“ with more than 400 (international) companies and more than 40.000 employees.

A city that experienced incredible growth over the last decades and is now one of the fastest-growing cities in Europe is Leipzig. Therefore, Leipzig has been growing from a C location into a B location.

Proximity to an A location can also be an argument for a B location. Mönchengladbach alone might be considered more like a C location but becomes more like a B location with its close proximity to A location Düsseldorf. That is why we issued our very first real estate security token in Mönchengladbach.

Examples of B locations in Germany:

  • Augsburg, Bochum, Bremen, Dresden, Essen, Hannover, Leipzig, Mannheim, Mönchengladbach, Nuremberg, etc

Do you want to invest in real estate in B cities in Germany? Then check out our first real estate security token in Mönchengladbach by FiveRocks Development SE here:

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C Locations In Germany

The further we go down the location ranking, the longer the list of German cities. There are a lot more C and D locations than A locations (just the top 7 German cities).

While B locations have a population of at least 250.000 people, C locations should have at least 100.000 inhabitants. This size makes C locations important to their region, even though they might not be that important to Germany as a whole anymore.

Aachen has almost a population of 250.000 and a large university and is therefore considered a very good C location. If the city continues to grow, it might become a B location eventually (like Augsburg was a C location back in the day).

Halle has almost 250.000 inhabitants as well and is in close proximity to B location Leipzig (like Potsdam is close to A location Berlin). That feature makes these cities very good C locations.

While a B location needs to be important in and of itself (e.g. population, university, companies, economic power, etc), a C location is more dependent on the surrounding area to be important.

Examples of C locations in Germany:

  • Aachen, Erfurt, Erlangen, Halle, Heidelberg, Kiel, Mainz, Potsdam, Saarbrücken, Ulm, Wiesbaden, etc

D Locations In Germany

The list of German cities is the longest when it comes to D locations. These D locations offer potentially the highest investment return while proposing the highest risk at the same time.

Small and medium-sized German cities that mainly depend on one large employer (SAP for Walldorf, Adidas for Herzogenaurach, Audi for Ingolstadt, etc) are D locations as they don’t offer much more than this one company.

The almost 1.500 sqm house on the +2.000 sqm plot for less than 500€/sqm mentioned in the introduction is also in a D location (Chemnitz). That explains why this property is so “cheap.” If the same house would be in an A or B location, it would be a lot more expensive.

Examples of D locations in Germany:

  • Bielefeld, Chemnitz, Herzogenaurach, Koblenz, Regensburg, Trier, Tübingen, Schwerin, Walldorf, Wolfsburg, etc

Are you interested to own real estate in many different A, B, C, and maybe even D locations without spending an enormous amount of money? Investing on our marketplace starts usually at just 100€ minimum investment.

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Should You Invest In An A, B, C, or D Location?

After learning all the details of the German location ranking that ranks cities in Germany according to their attractiveness for real estate investments, there is just one more question left to answer: Which location or locations should you buy real estate in? 🤔

The answer depends on a couple of different factors:

  • Your budget: Not surprisingly, properties in A locations are much more expensive than similar properties in C or D locations. Ask yourself how much you would like to invest in a property or how much you can afford to invest.
  • Your strategy: As properties in A and B locations are more secure, their return is potentially lower than properties in C and D locations. But be careful: A high return on rent on a D location can become a 0% return on rent if you don’t find a tenant in the middle of nowhere.
  • External factors: You might not be able to control (e.g. inflation or mortgage rates).

As ever so often in the world of investing and personal finance, diversifying is key to true investment success. Strive to build a real estate portfolio of many different property types in many different A, B, C, and maybe even D locations. Our blockchain-based real estate security tokens help you do exactly that. Register as an investor on GermanReal.Estate and experience the easiest way to invest in real estate in Germany.

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What is a Wallet

Blockchain wallets, a vital component of the cryptocurrency ecosystem, provide users with a secure gateway to interact with digital assets and cryptocurrencies.

Key Takeaways

  • A blockchain wallet is a software application or device that contains keys, not coins, and enables secure interaction with digital assets.
  • You need a public key to obtain Real Estate Security Tokens on GermanReal.Estate’s user-friendly wallet.
  • The private key is a secret key that grants you access to your digital asset. Protect it for exclusive control and security of digital assets.
  • We put great emphasis on your satisfaction. Therefore, we will work to ensure that you can use a 3rd party wallet in the future.
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Introduction

In the ever-evolving world of blockchain technology, terms like Bitcoin, Ledger, crypto, Ethereum, tokens, and wallets come to the surface. But what exactly is a wallet in the context of blockchain, and why is it crucial for managing your digital assets?

In this comprehensive guide, we will explore the fundamental concepts of blockchain wallets, focusing on the GermanReal.Estate wallet as an example. By the end of this article, you’ll have a clear understanding of public and private keys and how they play a vital role in securing your digital assets. Join us in this episode of the GermanReal.Estate Wiki as we unravel the mysteries of this essential tool.

What Is A (Blockchain) Wallet?

At its core, a blockchain wallet is a software application or device that allows users to securely store, send and receive cryptocurrencies and other digital assets.

Unlike physical wallets, blockchain wallets do not contain coins or tokens. A blockchain wallet acts as a software application or hardware device designed to interact with blockchain networks and instead stores private keys used to access and manage assets on the blockchain.

Public Key Of Your Wallet

The public key is a fundamental component of your blockchain wallet. It acts as your digital address, much like your email address or bank account number. When you want to receive cryptocurrencies or tokens, you provide your public key to the sender. Think of it as giving someone your email address for them to send you a message. This unique address ensures that the funds are directed to the right wallet on the blockchain.

In the case of GermanReal.Estate, the blockchain wallet allows users to store and manage real estate security tokens securely. The public key associated with the GermanReal.Estate wallet serves as the destination for receiving these tokens. If you plan to invest in real estate assets through GermanReal.Estate, you’ll need to share your public key with the relevant parties, ensuring a seamless transfer of tokens.

Private Key Of Your Wallet

Equally important is the private key, which is the secret key that grants you access to your digital assets. Your private key is like a password to your wallet; it should be kept confidential and never shared with anyone. Possession of the private key provides complete control over the assets associated with the public key.

For users of GermanReal.Estate, protecting your private key is of utmost importance. Nobody from GermanReal.Estate will ever ask you for your private key, and it should be treated with the same level of confidentiality as your online banking credentials. Keeping your private key secure ensures that your digital assets remain under your control and are protected from unauthorized access.

Is GermanReal.Estate Allowing 3rd Party Wallets?

A question that often arises is whether the GermanReal.Estate platform allows the use of third-party wallets. Currently, GermanReal.Estate prefers to use its own wallet to ensure a seamless user experience and to ensure regulatory compliance. By using their own wallet, users can be assured that their real estate security Tokens are securely stored and can be easily managed within the platform.

The idea of integrating popular third-party wallets such as MetaMask has been considered, but regulatory requirements and the need for the KYC (Know Your Customer) process present challenges. The current whitelisting process helps GermanReal.Estate complies with German regulatory standards and provides an additional layer of security for users’ digital assets.

Conclusion

Blockchain wallets are indispensable tools that enable users to interact securely with the world of cryptocurrencies and digital assets. The GermanReal.Estate wallet illustrates how public and private keys work in harmony to enable the secure storage and management of real estate security tokens. Understanding these core concepts will allow you to confidently participate in blockchain-based investments while protecting your assets from potential threats. Remember to keep your private key confidential and take advantage of the GermanReal.Estate Wallet to store, send and receive real estate security tokens securely.

In summary, blockchain wallets are the cornerstone of the cryptocurrency and digital asset landscape. They provide users with a secure and efficient means to manage their holdings on the blockchain. The GermanReal.Estate wallet in particular is a shining example of how public and private keys work seamlessly together to provide investors with security in the world of real estate investing.

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Global Real Estate Crash In 2023?

Key Takeaways

  • The German newspaper Handelsblatt and the American bank Goldman Sachs are predicting falling real estate prices in 2023
  • Rising mortgage interest rates will increase the costs of real estate investing and bring down profitability
  • Other important factors that influence (German) real estate prices are left aside by Goldman Sachs and Handelsblatt
  • Will global real estate crash in 2023? We certainly have a mixed opinion on the real estate bubble discussion!
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Introduction: Analysts Predict A Global Real Estate Market Crash

One of the largest German business newspapers Handelsblatt just recently published an article on their website that “Analysts expect global real estate prices to fall from 2023 onwards.“ The article itself does not reveal who these “analysts” are supposed to be, but it is likely that Handelsblatt is referring to this article from Goldman Sachs published also in October of 2022 “Why Home Prices are Poised to Fall.”

Are real estate prices all over the world going to crash in 2023? And if so, what would that mean for the German real estate market (properties directly as well as indirect real estate investments like REITs, real estate ETFs, or crowdfunding)? That is what we will answer in this GermanReal.Estate blog post. According to our understanding of the property market in Germany, Goldman Sachs might have a valid point, but real estate has a lot more influencing factors than just rising mortgage interest rates.

Will Rising Mortgage Rates Cause A Real Estate Crash?

The one (and almost only) argument from Goldman Sachs supporting the real estate crash prediction is that interest rates are rising all over the world since the start of 2022. As of writing this article, the Federal Reserve in the US increased their Federal Funds Rate to 3,25% and our European Central Bank increased their key interest rate from 0% to 1,25%.

Consequently, when central banks around the world increase interest rates, banks are raising their mortgage interest rates as well. While German mortgage rates were between 0,5% to 1% at the beginning of 2022, they spiked up quickly to 4% with rising inflation and the war in Ukraine. The current mortgage interest rate when you are reading this article can be found in the interactive table below:

Examples of different mortgage interest rates:

  • A 100.000€ mortgage with an interest rate of 0,5% is costing 208€ monthly or 11.595€ in total interest until the loan is paid back
  • A 100.000€ mortgage with an interest rate of 4% is costing 500€ monthly or 65.066€ in total interest until the loan is paid back

As seen in the example above, the higher the mortgage rates, the higher the costs to buy properties and own properties. Consequently, investors can afford to buy less property or will shy away completely from investing in real estate. Meaning a low-interest rate environment will make real estate prices go up, and a high-interest rate environment will make real estate prices go down.

In this regard, we can agree with Goldman Sachs that real estate prices might fall in 2023. But there is one important question that is left aside here: Who is affected by the change in mortgage interest rates? While 40% of Brits need to refinance their mortgage in 2023 according to the Bank of England, standard German mortgages fix interest rates for at least 10 or 15 years. And 10 or 15 years ago we also had around 3% mortgage rates in Germany.

Rising mortgage rates will also raise the interest rates property developers pay to our investors. See how much interest rates you can get by investing in our real estate security tokens here:

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Which Factors Influence (German) Real Estate Prices?

Aside from mortgage interest rates, there are a lot more economic factors that have an influence on real estate prices. When looking at just one factor alone, you will get a pretty incomplete picture and might come therefore to wrong conclusions when trying to predict the future of the German real estate market.

Factors supporting that real estate prices will fall in 2023:

  • Mortgage rates: Rising mortgage interest rates increase the costs for real estate investors and therefore decrease their returns when investing in properties (in Germany).
  • Income: If the income of the population is rising faster than mortgage rates, the costs to buy and own properties become more affordable for the population even though mortgage rates are rising.

Factors supporting that real estate prices will rise in 2023:

  • Demographics: If the population of a country is growing (like the German population which is currently at an all-time high), the demand for living space will keep on increasing accordingly.
  • Supply of living space: Germany is creating around 200.000 to 300.000 new flats every year while the demand for flats is 400.000 flats. If the demand outgrows the supply of living space, how are property prices or rent prices supposed to fall?

As ever so often, a coin has multiple sides, and the question if real estate prices will fall in 2023 has multiple sides as well. In case you would like to take a deeper look into the real estate bubble discussion to make up your own mind, the 2 videos from our YouTube channel below will give you more insides:

Conclusion: Will The Global Real Estate Market Crash In 2023?

Nobody has a glass ball and can predict exactly what will happen in the future. The only thing we can do is to take statistics and data of the present to project what might happen in the future. Goldman Sachs is taking the rising mortgage interest rates to project that global real estate prices will fall in 2023 (as seen in the chart below).

This blog post showed that there are a lot more influencing factors on the (German) real estate market than just interest rates. Buying a great property in a great location will always lead to great investment success over the long term. And that is what we are trying to help you do: Approaching real estate investing with an investor mindset (real return of the German real estate market).

So if you would like to invest in real estate in Germany in the easiest way possible, then check out our real estate security tokens that are currently available on our marketplace. By investing in our real estate security tokens you do not have to find your own property, secure a mortgage, or deal with tenants. And that is why GermanReal.Estate is the true future of investing in real estate.

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How Are Returns On GermanReal.Estate Taxed?

Key Takeaways

  • Taxation of blockchain-based investments can be confusing and is changing every so often with different regulations
  • Taxation of “security” tokens is easy: A flat 25% tax rate for all capital gains the investor makes on a personal level
  • Starting in 2023, investors can secure up to 1.000€/year in tax benefits when investing in real estate security tokens
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Taxation Of Blockchain Investments In General

When making any investment decision, the taxation of potential profits should never ever be the major deciding factor to or against any investment. Taxation is definitely one factor of many to consider, but it should not be the one and only factor. Find out in this FAQ article how real estate security tokens are taxed and how they are treated differently than cryptocurrencies or NFTs.

The financial regulators at the Federal Financial Supervisory Authority (BaFin) and the tax regulators at Finanzamt have been trying to figure out blockchain-based investments and their taxation rules for many years now. The result is that tokens are taxed differently than any other blockchain-based investment. (Real estate) security tokens are even taxed differently than currency tokens or utility tokens, which is highly beneficial for investors.

Different profits of blockchain-based investments:

  • Capital gains: When buying any blockchain-based investment (other than security tokens) at 100€ and selling it at 200€, the 100€ capital gains are generally speaking subject to personal income tax of up to 45% (as well as solidarity tax & church tax). When holding a blockchain-based investment over the long term (+1 year), your tax rate might be 0% under certain conditions (if profit is below 600€/year).
  • Passive income: Depending on the type of passive income from cryptocurrency or NFT (e.g. liquidity mining, rewards, etc), the taxation can be different. Most earnings from decentralized finance (DeFi) will be taxed with the investors’ personal income tax rate of up to 45% in Germany.

As cryptocurrencies and NFTs are considered “other assets” and not financial products or financial securities (like security tokens), selling them is considered a “private sale” by Finanzamt. When making too many of these private sale transactions (Finanzamt has no specific number here), any private person can be considered as a business engaging in a commercial activity. As a business, all your earnings from the first cent onwards will be taxed with a roughly 30% tax rate (not 15% like for SPVs).

Taxation Of "Security" Tokens

While the taxation of blockchain-based investments can get confusing very quickly (depending on the type of profit), taxation of security tokens is as easy as possible. Profits above the tax-free threshold are taxed with the flat 25% capital gains tax rate (just like with REITs or ETFs). No matter if these profits come from the difference of buying vs. selling price (from rising real estate value), passive rental income, profit share, or interest rate.

Security tokens are taxed differently because they are the only blockchain-based investment that is considered a financial security by BaFin and Finanzamt. Financial securities are transferable to other investors (like on our secondary market that is expected to go online in 2024) and give investors certain rights that are similar to other securities. Details can be found in §2 of the German Electronic Securities Act (eWpG).

Thanks to that classification as financial security, profits from (real estate) security tokens are taxed at 25% only. That makes taxation of rental income also more attractive than rental income that would be taxed with up to 45% on a personal income level. Rental income is taxed like regular income from work in Germany. Rental income from security tokens is taxed at 25% only (That’s why security tokens are better than REITs).

Secure completely tax-free investment returns of up to 1.000€/year by investing in our real estate security tokens. Yes, tax-free income in Germany does exist!

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Tax Benefits Of Investing In Real Estate Security Tokens

As real estate security tokens are considered financial securities (unlike real estate crowdfunding), they come with another inherent benefit for investors: The 25% capital gains tax rate applies for profits above 801€/year only (starting in 2023 this threshold will be increased to 1.000€/year). Profits below 801€ (1.000€) are completely free of any tax thanks to the “Sparer-Pauschbetrag”.

When investing in our real estate security tokens, the first 801€/year (1.000€/year) in profits will not be subject to any kind of tax for everyone with a German tax ID. For married couples that file a joint German tax declaration, the amount is doubled to 1.602€/year (2.000€/year starting in 2023).

Utilize this rare opportunity to make tax-free profits in Germany by registering as an investor here.

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Where Are Properties In Germany Still Affordable?

Key Takeaways

  • German mass media is suggesting for many years that properties in Germany are not affordable anymore
  • The real estate association of Germany (IVD) is creating a German real estate affordability index every quarter
  • IVD is looking at different locations: Average German locations vs. the top 7 German cities (A locations)
  • As well as different property types in order to get the most objective view possible of the affordability of German real estate
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The German Real Estate Affordability Index

When reading about German real estate in the German media, you get the impression that property prices are not affordable anymore (especially in times of high inflation) and that the real estate market in Germany is about to crash. Headlines like the ones below make you wonder: Is real estate in Germany still affordable? And if so, where are properties still affordable?

The “Immobilienverband Deutschland (IVD)” is answering the question of how affordable properties in Germany are every quarter with their affordability index coming to different conclusions than the headlines above. In order to get the most objective view of German property prices possible, IVD is having a scientific approach when compiling its German real estate affordability index:

  • Location: Germany is split into average locations & the top 7 cities (also called A locations)
  • Property types: “Real estate” is divided into 4 different types: Existing flats, new flats, townhouses, and single-family houses
  • Mortgage rate: Current realistic interest rate for a mortgage that is paid back fully in 30 years
  • Closing costs: Mandatory notary fees & ground purchasing taxes for transferring a property (not for tokenized real estate)
  • Income: Net household income consisting of 1,75 full-time workers with the average German salary

The IVD is doing an incredible job in compiling their Geman real estate affordability index every quarter since the year 2010. They compile different property types in up to 285 different German locations to come up with property prices and affordability percentages (below 25% is considered affordable for IVD). See the 8 different results for yourself here:

  1. Existing flats in the average German location vs. the top 7 cities
  2. New flats in the average German location vs. the top 7 cities
  3. Townhouses in the average German location vs. the top 7 cities
  4. Single-family houses in the average German location vs. the top 7 cities

Affordability Of Existing Flats In Average Germany

Prices of average existing flats:

Property prices in the average German location went straight up since IVD started to publish its affordability index in 2010. Existing flats that cost around 90.000€ back in 2010, are costing 230.588€ today (= increase of 156%).

Affordability of average existing flats:

While 230.588€ is a lot of money for an existing flat, the question is how much money that really is compared to people’s income. Despite the increase in property prices, the IVD affordability index is still 13,3% (= people spend 13,3% of their net income on the mortgage).

Affordability Of Existing Flats In The Top 7 Cities

Prices of top 7 existing flats:

Property prices in the top 7 cities are much higher than in the average German location and increased much more as well over the years. Existing flats range from 275.616€ in Berlin up to 583.025€ in Munich. That is why the top 7 cities are considered A locations.

Affordability of top 7 existing flats:

Even though real estate in the top 7 cities is much more expensive than in the average German location, the IVD affordability index is still below 25% for all cities except Munich with 31,2%. Düsseldorf is the most affordable with 19,1% among the top 7 German cities.

The affordability of real estate in Düsseldorf is why FiveRocks started to develop Welcome Home as well as our Community Portfolio close to Düsseldorf that you can invest in.

Do you want to invest in real estate in Germany with passive income but without spending hundreds of thousands of Euros? Try our real estate security tokens:

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Affordability Of New Flats In Average Germany

Prices of average new flats:

Property prices for new flats are significantly higher than prices for existing flats. The difference in the average German location is 230.588€ (existing) vs 335.156€ (new). Consequently, the question “Should I buy a new flat or an existing flat?” is probably a personal budget question when talking about a 105.000€ difference.

Affordability of average new flats:

New flats in the average German location are still quite affordable with an index of 19,9%. At the end of 2015, the affordability index was around 16% (= increase of 24,4% over just 6 years). If the trend continues, new flats in the average German location might soon reach the 25% limit of the IVD.

Affordability Of New Flats In The Top 7 Cities

Prices of top 7 new flats:

Property prices in the top 7 German cities are mostly far away from the average location (except Düsseldorf with 361.506€). The most expensive cities for new flats are Stuttgart with 517.190€ and Munich with 721.008€ (where flats in the city center cost sometimes up to 20.000€/sqm).

Affordability of top 7 new flats:

Newly built flats in 6 out of the top 7 German cities break the 25% barrier of the IVD. Only Düsseldorf, which has the strongest upwards trend, is below the threshold with 22,8%. Munich is again the most expensive German city with an affordability index of 38,6%.

“No matter which type of property you are looking at, Munich is by far the most expensive city to buy and rent real estate in Germany.”

Affordability Of Townhouses In Average Germany

Prices of average townhouses:

Property prices for townhouses in the average German location are surprisingly cheap compared to newly built flats (only 67.000€ more for a house than a flat). The prices for townhouses more than doubled from around 200.000€ to 401.955€ (a little over half the price of a new flat in Munich 🫠).

Affordability of average townhouses:

Because of the incredible return of townhouses in the average German location, their affordability index is very close to the IVD threshold at 23,8%. If the price increase continues for just another year or two, townhouses will be not affordable anymore (according to the IVD).

Affordability Of Townhouses In The Top 7 Cities

Prices of top 7 townhouses:

While townhouses in the average German location cost 401.955€ only, townhouses in Munich cost almost 1 million €. The majority of the top 7 cities are about 50% more expensive than the average location with around 600.000€ (Cologne, Düsseldorf, Frankfurt).

Affordability of top 7 townhouses:

For the first time on this list, all 7 top cities break the 25% affordability barrier of the IVD (all above 30%). Cologne & Frankfurt are around 40% affordability and Munich is the most expensive with 52,7%, meaning the average earning household spends 52,7% of the net income just on the mortgage.

How can you invest in real estate in Germany without spending +50% of your net income? With our blockchain-based real estate security tokens that start usually at 100€ minimum investment!

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Affordability Of Single-Family Houses In Average Germany

Prices of average single-family houses:

Property prices for single-family houses are by far the most expensive type of property in Germany. In the average German location, a single-family house costs 514.905€, almost 115.000€ more than a townhouse in the average location.

Affordability of average single-family houses:

For the first and only time on this list, the affordability of the average German location breaks through the 25% barrier of the IVD. Single-family houses cost the average earning household exactly 30% of their net income (just for the mortgage).

Affordability Of Single-Family Houses In The Top 7 Cities

Prices of top 7 single-family houses:

While single-family houses are the most expensive property type in Germany, Berlin is the exception of the top 7 cities. Single-family houses in Berlin at 469.710€ are cheaper than single-family houses in the average German location (at 514.905€).

Given this statistic, we might publish single-family houses on our marketplace for you guys to invest in. 🤔

Affordability of top 7 single-family houses:

Like townhouses, single-family houses in the top 7 cities are not affordable anymore for the average earning household. Berlin is the “cheapest” with 37,4% (+12,4% above the IVD barrier), and Munich is again the most expensive with an affordability index of 73,6%.

Including other housing costs (electricity, water, GEZ, insurance, etc) the average household would spend way over 80% for their home in Munich.

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Special Purpose Vehicle (SPV)

Key Takeaways

  • A Special Purpose Vehicle (or Special Purpose Entity) is a regular German capital company (e.g. GmbH)
  • The SPV is created by its parent company for a very specific purpose (and time) only
  • SPVs offer different benefits for investors and the parent company (e.g. issuing security tokens)
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What Is A Special Purpose Vehicle (SPV) & Why Do We Need It?

German financial regulation (especially the German Electronic Securities Act eWpG) is not allowing the tokenization of physical assets like real estate directly. That is why properties you can find on the GermanReal.Estate marketplace are held by special purpose vehicles (SPVs) or special purpose entities. These SPVs offer certain benefits not just for the issuer of the real estate security token, but also for investors in our blockchain-based securities.

A special purpose vehicle or special purpose entity sounds complicated and special, but it is actually just a regular German capital company. Generally speaking, SPVs are created as GmbH (short for “Gesellschaft mit beschränkter Haftung”) which would translate to LLC (short for Limited Liability Company) or AG (short for “Aktiengesellschaft”) which would translate to a stock corporation.

While there are no differences between a regular company and an SPV from a legal perspective, there are various differences from a business perspective. SPVs are usually created by another company (parent company) for a very limited and particular task only. Let’s make the example that a German property developer wants to create a new SPV for a new property they want to build:

  • Parent company (e.g. FiveRocks Development SE): German property developer that is developing multiple different projects at the same time or one after the other. As the parent company exists over the long term, its business purpose might be “Developing buildings in B locations all over Germany.”
  • Special purpose vehicle (e.g. Welcome Home MG GmbH): Created by the parent company for one specific project development only. The SPV, therefore, exists only for the time until the project development is complete. Its business purpose might be “Developing and holding a building in Munich.”

Thanks to the separation of the parent company (comp. holding company) and its SPV, the financials and the risk of doing business are completely separated. That makes it also very clear to everyone looking from the outside who is doing what and who owns the property exactly. The separation offers also other benefits for the parent company and for investors.

Do you want to invest in real estate in Germany in the easiest way possible? See on our GermanReal.Estate marketplace what kind of real estate security tokens are currently available:

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Benefits Of A Special Purpose Vehicle (SPV)

Creating an SPV offers various benefits for the parent company as well as other business partners of the SPV (e.g. investors). That is also why we created our SPV “German Real Estate Token 1 GmbH” for our first community token which is separated from the parent company behind GermanReal.Estate (“German Real Estate GmbH”). The benefits include the following:

Taxation: Generally speaking, the earnings of a company in Germany are taxed with 15% corporate tax + 15% trade tax (slight variations in trade tax, as well as solidarity tax, ignored here). If a company is not doing any commercial activity, it can be freed from paying trade tax. Therefore, an SPV that is just holding a property and issuing a financial security might enjoy a tax rate of 15% only (compared to rental income that is taxed on a personal income tax level with up to 45%).

Share deal: In a regular transaction (from person to person), a property is transferred from seller to buyer. This transaction involves notary fees and taxes based on the property value. Instead of transferring the property itself, the seller could also transfer the SPV holding the property (share deal). A share deal will produce the same result (the desired property is transferred from seller to buyer), while significantly reducing the fees and the taxes involved in the transaction (like on our blockchain).

Private: SPVs are not forced by German financial regulation to be publicly traded companies (unlike REITs or real estate ETFs). SPVs just have to be separate legal entities (e.g. GmbH) but can be held in private ownership. Therefore, the costs of an SPV are significantly lower than the costs of a publicly traded company (e.g. no investor relations department) which increases returns and passive income for investors.

The benefits of SPVs (e.g. the decreased tax rate on a company level) allow us to increase returns for our investors that invest in real estate security tokens on our GermanReal.Estate marketplace (Security tokens are better than REITs).

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Why Are We Using The Blockchain Technology?

Key Takeaways

  • The blockchain technology allows everyone in the world to invest in German real estate security tokens (theoretically)
  • Transaction data from trading security tokens can be recorded very securely and fast on the blockchain
  • The increased efficiency of the blockchain technology allows us to reduce costs & increase returns for investors
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Introduction: The Blockchain Offers Unique Advantages

In a previous article in the GermanReal.Estate Wiki, we discussed what a blockchain is already. Some investors have been asking why we are using the blockchain technology to trade our real estate security tokens (currently Polygon). Running our smart contracts on a blockchain offers different benefits that cannot be found in traditional financial services (e.g. real estate crowdfunding).

Read the full article to learn more about the unique benefits of the blockchain and why we are using this technology:

Blockchain Advantage #1: Global Technology

Real estate (in Germany) is an exciting asset class to have in any portfolio. Unfortunately, many people are facing different problems when trying to buy a physical property:

  • Not having the right financial situation: When applying for a mortgage, banks want to see low or no debt, a good Schufa score, etc
  • Not having the right job situation: To get a mortgage, an unlimited job contract and a completed probation period are required
  • Not having the money: Buying real estate involves high start-up costs in Germany (e.g. notary, taxes, real estate agent)
  • Not having the right visa: Securing a mortgage without a permanent residency or German citizenship is difficult

When investing in real estate security tokens on the blockchain, none of the requirements of traditional real estate investing matter. The blockchain technology allows (almost) everyone to invest in real estate security tokens through the internet. As investors can buy our security tokens directly with their wallets, there is no need to physically be in Germany.

Attention: While the blockchain technology allows global trading over the internet, German money laundering laws restrict some transactions. The internet doesn’t know any physical borders of countries, German law does. That is why there might be some issues when investing in our real estate security tokens with a non-Euro bank account.

Blockchain Advantage #2: Digital Processes

Buying a German property the traditional way will take weeks and months with all parties and steps involved (finding the right property for the right price in the right location, securing the mortgage, notary meeting, and changing the German land registry). And most of this traditional German bureaucracy still involves pen & paper processes.

Our smart contracts that run on the blockchain allow us to streamline the traditional pen & paper processes to an absolute minimum. GermanReal.Estate allows you to invest in properties in Germany in minutes, and not in weeks or months (indirectly with security tokens). All our investors need is a device that is connected to the internet in order to invest (and e.g. receive passive income).

GermanReal.Estate is the easiest way to invest in properties in Germany!

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Blockchain Advantage #3: Secure Record-Keeping

Aside from being slow and bureaucratic, the traditional pen & paper processes of the German real estate industry are an invitation for human error as well. As the blockchain technology is digital, it is by far the most secure record-keeping system existing.

With every transaction of a real estate security token, a record is written below the latest transaction. After accumulating enough transactions, they are sealed in a block. Thanks to the unique hash (fingerprint), this block is linked to the previous block. Therefore creating a chain of blocks that cannot be changed anymore, as the faulty hash would cause the blockchain to break.

The transparency of the decentralized blockchain network makes transactions visible to everyone. If somebody would try to manipulate our transactions, hack GermanReal.Estate, or steal real estate security tokens from an investor’s wallet, we could just destroy the stolen security tokens and mint new ones according to the record we have before the hack happened.

Blockchain Advantage #4: High Efficiency

Thanks to the decentralized blockchain network, there is no need for middlemen when investors want to trade our real estate security tokens. While traditional financial services require an exchange (e.g. stock exchange) or a bank, the blockchain technology runs smart contracts automatically.

The increased efficiency will show its full potential with our secondary market (expected to go online in 2024). The GermanReal.Estate secondary market will allow investors to trade their real estate security tokens like stocks are traded on a traditional stock exchange.

While it is currently difficult for investors to cash out before the maturity date of the security token, the secondary market will give investors another option to make a profit. Depending on your future outlook of the German real estate market (if property prices will go up or crash), you will be able to buy more security tokens or sell your amount of security tokens completely.

Blockchain Advantage #5: Reduced Costs

The increased efficiency of the blockchain technology is benefitting us in two different ways: Allowing us to reduce costs and therefore increasing potential returns for investors. Real Estate security tokens have allowed us to eliminate all sales commissions for investors. GermanReal.Estate makes money by charging property developers that want to finance their projects, not by charging high sales commissions from investors.

While traditional real estate investments (like REITs, short for Real Estate Investment Trusts) require a minimum of 5.000€ or even 10.000€ investment, tokenizing real estate with the blockchain can be economical at much lower investment minimums. That is why the minimum investment on the GermanReal.Estate marketplace starts at usually 100€.

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2 Reasons For Rising German Property Prices

Key Takeaways

  • In early 2022, the 10+ year rally of real estate prices in Germany started to slow down significantly
  • Out of the 4 major economic factors that determine property prices, 2 indicate falling prices or even a market crash
  • With the German population being at an all-time high, the demand for living space keeps growing and growing
  • Germany is losing +100.000 flats every single year because we are not building or renovating enough
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Introduction: The German Real Estate Market Changed

We introduced the 4 major economic factors that influence (German) real estate prices in the last GermanReal.Estate blog post. The first 2 factors (mortgage interest rates & incomes) indicate that real estate prices in Germany will fall, maybe even that the entire German real estate market will crash. The other 2 factors that will be discussed in this blog post, speak for rising german property prices.

Will the German real estate rally continue or is the party over and properties are not affordable for the German population anymore? In 2020, property prices in the average German location rose by +9,6% after inflation. In 20201, property prices rose by another 14,2% after inflation. Growth rates like these have many people worried that the market will turn eventually and the “bubble” will burst.

With the World Bank expecting a global recession in 2023, rising mortgage interest rates, the war in Ukraine, rising inflation in the Euro area, etc it is not looking positive for the German real estate market (at first sight). That is why this article will take a deeper look to find economic factors that will stand against the negative news. The real question is: Will these factors be enough to support the German real estate market? You will be able to form your own opinion after reading through the article.

Reason 1 For Rising German Property Prices: Demographics

The German population has been rising consistently since World War 2. Especially in the 1960s, the 1990s after the German reunion, and in the 2010s after the global financial crisis, a lot of babies have been born. That is why today, the German population is at an all-time high with about 83,2 million people (at the end of 2021). For real estate investors, it is more important what will happen to the population in the future, than what happened in the past.

Nobody can know exactly how the German population will develop in the future, but there are certain projections from the German Demographics Portal. Variant 1 in the graphic below shows the future development of the German population with absolutely no migration to Germany. As more people are dying than babies are being born, the German population would be shrinking fast without any migration.

With a little migration to Germany, the population would develop like in Variant 2. As there was always migration to Germany since the 1950s (up to 1 million people per year (net) as shown in this chart), it is extremely unlikely that the German population would shrink as fast as in variant 1. With little migration to Germany, the population would still shrink slowly over the next years and decades.

Migration will have a tremendous influence on the development of the German demographics. With a lot of migration (like in the year 2015 with +2 million), the German population would be growing for the next 10 and 20 years until the year 2040. Everything after that is highly speculative anyway. Trying to predict demographic changes over 10 or 20 years might lead to valid results. Trying to predict population changes over 40 years seems highly speculative given the fact that many variables are involved.

No matter which population variant you guess is the correct one, there will always be demographic trends driving up the real estate prices of certain properties. Always remember: Population growth is only one aspect of demographic change. There are a lot more variables involved in order to determine the development of real estate prices:

  • The amount of people living in cities will grow continuously. The graphic shows that the German population went from 68,1% in cities in the 1950s to 78,6% living in cities in the 2030s. So even if the overall German population could be shrinking (like in variant 1), the percentage of people in cities will grow and therefore make properties in the top German locations more valuable.
  • While the German population ranked in age groups looked more like a pyramid in the 1950s (as seen here), the pyramid shape slowly shifted as fewer babies were being born over the decades. This shift makes real estate catered to senior living (seniority homes, retirement homes, nursing homes, etc) more valuable.

There is no “one” German real estate that will be a good or bad investment going forward. The goal of investors has to be to diversify with different investment properties. That was our goal when creating GermanReal.Estate, to give investors the chance to invest in many different rental properties with the blockchain.

What is difficult to do when buying real physical properties yourself (because of high prices), is easy to do when investing in real estate security tokens on our GermanReal.Estate marketplace. Alternative ways to invest in real estate in Germany aside from real estate security tokens are REITs, real estate ETFs, or real estate crowdfunding.

Invest in many different (German) real estate trends here:

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Reason 2 For Rising German Property Prices: Supply

The last major economic factor that influences (German) real estate prices is at the same time the most important one to everyone believing in the market economy. The law of supply & demand has been proven right and right again over hundreds of years. When trying to predict future property prices, you just need to compare how much living space is created compared to how much living space is needed.

If a country has a supply surplus of living space (more supply than demand), sooner or later property prices and rents have to go down as tenants and potential buyers have many options to choose from. There is no reason to pay high property prices or high rents. If a country is not creating enough living space, property prices and rents have to go higher and higher the more the demand outgrows the supply (excess demand).

In order to keep the supply of living space leveled, the German government plans to create 400.000 flats every year. Given the average lifespan of a property (±100 years), Germany needs to build, modernize, or renovate 400.000 flats every year just to keep the supply of living space at 0. Factoring in that the German population is at an all-time high right now, Germany would need a lot more than 400.000 flats each year in order to satisfy the demand.

To see how close Germany came to building 400.000 new flats every year, let us take a look at the graphic above that shows how many flats Germany has really been building over the last 20 years. In 2021, Germany didn’t even manage to create 300.000 flats. To make things worse: In the first half of 2022, even -2,1% fewer building permits were granted in Germany, making it extremely unlikely that Germany will reach its goal to build 400.000 flats in 2022.

Realistically speaking, Germany is losing at the very least 100.000 flats each year for the last 20 years. 300.000 flats were built just once (2020). It seems more realistic that Germany creates 250.000 each year when looking at the graphic above. Resulting in -150.000 flats each year, -1,5 million flats in 10 years, or -3 million flats over the last 20 years. Germany is missing at least 3 million flats.

Are you still wondering why property prices or rents in Germany have been exploding? The German population has been growing consistently over the last 20 years, meaning the demand for living space has been growing accordingly. At the same time, Germany has been losing on a realistic basis about 150.000 flats each year, lowering the demand. How are property prices supposed to go down or “crash” with these numbers?

Conclusion: What Will Happen To German Property Prices?

German property prices are determined mainly by 4 major economic factors. Before 2022, all 4 of these economic factors indicated the German real estate market will continue to grow. At the beginning of 2022, the 2 factors mortgage interest rates and incomes started to turn, meaning that the years of growth might be over.

The other 2 economic indicators (demographics & supply of living space) lead to the conclusion that property prices in Germany will continue to rise. If you believe in the market economy value the law of supply and demand (like us), it seems impossible that real estate prices in Germany will go down significantly over the long term. Some properties in some regions might lose value (become affordable again and therefore generate higher passive income), but the overall German real estate market will stay strong.

In order to help the German real estate market out of this misery, there is only one thing we can do so that rents and property prices will normalize going forward. Companies in the real estate industry (especially property developers) need money so they can build more living space. If you want to support the cause while earning a nice return for yourself by investing in tokenized real estate, check out how you can help property developers on our marketplace.

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Security Token

Key Takeaways

  • (Security) tokens get often confused with coins (like Bitcoin or Ethereum) or NFTs (non-fungible tokens)
  • While there are some similarities between tokens, coins & NFTs, there are major differences as well
  • Only GermanReal.Estate security tokens are considered financial securities (like traditional securities, just digital)
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Difference Between A Coin Vs A Token

Some investors seem to mix our real estate security tokens with cryptocurrencies like Bitcoin or Ethereum every once in a while. Even though tokens & cryptos are blockchain-based, there are major differences between the two. Because of the word “token”, security tokens are also confused sometimes with NFTs (non-fungible tokens). What are the differences exactly? 🤔

A cryptocurrency or coin like Bitcoin or Ethereum use their one blockchain technology in order to store data (e.g. transaction data), validate transactions, or run smart contracts. Therefore, the bitcoin blockchain is completely separated from any other coin or blockchain out there. Tokens do not have their own blockchain and use an already existing blockchain as their infrastructure.

As of writing this Wiki article, we run our real estate security tokens on the Polygon blockchain. Therefore, we do not have to develop our own blockchain from the ground up, worry about the validation process, or run a virtual machine that is capable of processing our smart contracts. The Polygon blockchain that is existing already is giving us the entire infrastructure.

Thanks to the Polygon blockchain, we can focus on providing a great product for our investors by tokenizing German properties into real estate security tokens that you can trade on our marketplace (as well as producing content on YouTube, our blog & FAQ). Are we stuck with using the Polygon blockchain forever? Once the interest in our real estate security tokens from investors picks up, we could branch off from Polygon at any time (maybe even develop our own blockchain).

What Is A "Security Token"?

Now that we know what the difference between a coin vs a token is, what is a “security” token? As there are different types of tokens (utility tokens, commodity tokens, currency tokens, etc), it is even harder to understand exactly what security tokens are. According to §2 eWpG security tokens are financial securities as they are tradable between investors and have rights that are similar to traditional securities.

Security tokens are minted by us to represent ownership of the properties that can be found on our GermanReal.Estate marketplace. Historically speaking, ownership of any asset (e.g. real estate, gold, a company) was represented by a physical piece of paper. Security tokens function the same, they are a digital symbol of ownership (and therefore more secure than real estate crowdfunding).

Imagine that you would like to invest in real estate as it is a really good asset class to have in your portfolio. Unfortunately for you, investing in real estate is not as easy as it seems with the search for the right property for the right price, handling your tenant(s), filing extended tax declarations, taking care of renovations, etc. To make your life easier, you can invest in real estate security tokens that are issued by the SPV holding the property you would like to invest in (and receive e.g. passive income).

If you would buy 100% of all security tokens of any given property (e.g. Mönchengladbach: Welcome Home), you would be entitled to 100% of the net rental income as well as 100% of the resale value of the property (generally speaking). When buying 50% of all outstanding real estate security tokens, you would profit from 50% of the net rental income and resale value. And with any other percentage accordingly.

The example above also separates our real estate security tokens from NFTs (non-fungible tokens). NFTs are non-fungible, meaning they are unique identifiers that prove ownership (usually used in digital photos or videos). Security tokens are just like REIT shares or ETFs fungible, as no security token differs from another security token of the same product line (e.g. security token #69 from GRE2 can be replaced with security token #420 from GRE2).

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How Can I Earn Money On GermanReal.Estate?

Key Takeaways

  • With traditional real estate investing, you have only 2 ways to make an investment return (rising property value & passive income)
  • When investing on GermanReal.Estate, you have up to 3 ways to make an investment return (incl. our investor referral program)
  • When participating in our investor referral program, both you and your friend will earn a reward based on his investment
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Option 1 To Earn On GermanReal.Estate: Rising Security Token Value

The investment returns you can achieve with traditional real estate investing are quite obvious: The difference between the buying price of your property vs. the selling price, as well as passive rental income. Investors that invest in real estate security tokens on our GermanReal.Estate marketplace have been asking if the types of return are the same, or if they have also other ways to make a return.

Generally speaking, investors can benefit from 3 different types of return when investing on GermanReal.Estate. The first and most obvious way is to invest in real estate security tokens that are most of the time valued at 1€ on our marketplace. Over time and with increasing demand from investors these security tokens might rise from 1,00€ to 1,10€ in value, maybe even 2,00€, or whichever value is possible (not possible with real estate crowdfunding).

Why would anyone pay more than 1€ for a real estate security token with a nominal value of only 1€? Because of increased property value (if the property is in the right location) and increased demand from investors means increased value for any investment. As of writing this article, the Deutsche Post stock price is at 36€ of market value while the nominal value is still at 1€. Due to demand from investors, the Deutsche Post share price outgrew the nominal value (unlike German REITs).

The same logic can be applied to our real estate security tokens once our secondary market is going online (expected in 2024). As soon as investors can trade our security tokens on our secondary market, it is their job to determine the fair market value of any given real estate security token (like on any regular stock exchange). Even though the nominal value of this specific security token will still be at 1€, despite the market value (Why real estate security tokens are better than REITs).

Option 2 To Earn On GermanReal.Estate: Passive Income

The second option to make an investment return when investing in our real estate security tokens is the internet’s favorite way to make a return: Passive income. As security tokens are one of the most flexible financial products existing, there can also be a wide range of different types of passive income.

Rental income: With existing buildings, investors might receive a share of the net rental income. Depending on the number of security tokens, investors will receive a percentage. If an investor has 1% of any given real estate security token, he would be entitled to 1% of the net rental income from the underlying property. Taxed a lot better at just 25% with security tokens rather than 45% (including tax-free earnings of 1.000€ in 2023).

Fixed interest rate: As there are no tenants with newly built property developments, no rental income can be shared with investors. That is why property developments pay mostly a fixed interest (e.g. Mönchengladbach: Welcome Home). Issuers of the security token can decide on the amount of interest paid as well as how often the interest is paid to investors (monthly, quarterly, twice a year, or annually).

Profit share from property sale: If the underlying property of the real estate security token is being sold, investors can benefit from the resale value. When the issuer (e.g. FiveRocks Development SE) bought a property or constructed a property for 100.000€ and sells it for 200.000€, investors can participate from the 100.000€ profit from selling the property. Attention: Property values can also go down. A rising property value is not guaranteed.

Profit share from SPV: Properties listed on the GermanReal.Estate marketplace are mostly held by special purpose vehicles (SPV) or special purpose entities that also issue the real estate security token. When that SPV makes a profit, a certain percentage of that profit can be paid out to investors. The community portfolio token we are working on will reward investors with a profit share.

Please be aware that not all real estate security tokens that are listed on the GermanReal.Estate marketplace will pay all 4 different types of passive income mentioned above. As each and every security token is different, the passive income opportunities of every security token will also be different (e.g. different amount of fixed interest paid to investors).

Option 3 To Earn On GermanReal.Estate: Investor Referral Program

The third and last option to make an investment return on GermanReal.Estate is an option that does not exist in traditional real estate investing. We work very hard in order to provide the best possible investing product for our investors. If you enjoy investing in our blockchain-based security tokens, you can tell your friends about us by sharing your investor referral link.

If one of your friends registers as an investor on GermanReal.Estate, he will be rewarded with a bonus that is based on his initial investment amount (currently valid percentage can be found here). You as the person who referred a new investor to us will also be rewarded with the same bonus as your friend. As of writing this article there is no limit to the amount of friends you can refer or the amount of bonus that can be paid out to you and your friend.

In this FAQ post, you learned about the 3 ways of making a return when investing in real estate security tokens from GermanReal.Estate. We wish every one of our investors happy investing and fun when utilizing the different ways to improve their very own financial future with security tokens.

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Will The German Housing Market Crash?

Key Takeaways

  • Real estate prices (in Germany) are mostly determined by 4 economic factors
  • 2 of these factors (mortgage interest rates & incomes) suggest that property prices in Germany will fall or crash
  • The other 2 factors (population development & supply of living space) indicate that the German real estate market will keep rising
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Introduction: 4 Factors That Influence Real Estate Prices

Crash prophets always find a reason to predict falling prices in any financial market. Especially recently, more and more “news” got published that the German housing market will crash in the near future. Depending on the news website, headlines in the German media report very contrary price predictions for the German real estate market:

After reading these headlines, which were published in a very short timeframe within each other, one might wonder what will really happen to property prices in Germany. That is why this GermanReal.Estate blog post will check the facts to find out what is really happening in the German real estate market.

According to (real!) experts, property prices are determined by 4 economic factors: Mortgage interest rate, income, population development, and supply of living space. One could probably find hundreds of influencing factors that have somewhat of an influence on the German housing market, this article will examine these 4 major factors only in order to predict what will happen to property prices in Germany.

As 2 out of these 4 factors changed in the first half of 2022, this might also be the reason that leaves many people scared the German real estate bubble will finally popp (and properties become affordable again).

Reason 1 For A Real Estate Crash: Mortgage Interest Rates

Mortgage interest rates have been falling with interest rates around the world since the global financial crisis in 2007/2008. While German mortgage rates were at almost 9% in the mid 1990s, one could finance his property for around 0,5% interest in 2019 and 2020 (10-year fixed rate). After an almost constant decline in mortgage rates for 25 years (as seen in the chart below), interest started rising again in 2021.

Especially in mid 2021, mortgage interest rates started skyrocketing to about 4% in just a couple of weeks with increased inflation concerns, the war in Ukraine, and rising the rising key interest rate from the European Central Bank. The comparison below is showing how severe the increased mortgage rates are that 8x.

Comparison of a 100.000€ mortgage with different interest rates:
  • 0,5% interest: 208€ monthly payment, totaling 11.595€ in interest until the mortgage is paid off
  • 4% interest: 500€ monthly payment, totaling 65.066€ in interest until the mortgage is paid off

Aside from a monthly mortgage payment that more than doubled, an 8x mortgage rate results in +53.000€ more in interest payments during the duration of the mortgage. The increased mortgage rate drives up living costs for homeowners and brings down returns for real estate investors.

Additionally, it has gotten increasingly difficult to secure a mortgage in the first place, as German banks started increasing their equity requirements. Also, with inflation in the Euro area to be expected 10% in October 2022, the ECB is expected to increase its key interest rate again in the near future.

While the increased lending rates hurt property buyers applying for a mortgage, other investments (i.e. bonds) are getting more attractive as interest rates around the world keep rising. Property developers financing through our platform pay interest to our investors, instead of paying interest to a bank. That is one of the many benefits of tokenized real estate that investors can earn more money when interest rates are rising (like with real estate crowdfunding).

Invest blockchain-based in real estate security tokens with passive income from rents here:

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Reason 2 For A Real Estate Crash: Income

As (disposable) income determines how much property people can afford, the second economic factor is the real income of the population. While the average German net income was 2.439€ in the year 1960, the average German will earn 25.583€ net salary in 2022 (see statistic here). When inflation rises by 10% but average incomes only by 3%, the real income is going down.

When the real income of the average German population goes down, real estate prices have to follow eventually as fewer and fewer people can afford to buy a property. That is why we decided to have investing minimums in our real estate security tokens as low as economically possible with 100€ to allow everyone to invest in real estate in Germany.

The world bank stated in a press release in September 2022 that the risk of a global recession in 2023 keeps rising. If the recession is happening, it is expected that some incomes will at least stagnate and some people might even lose their job. Bringing another strong argument that real estate prices will fall accordingly.

Especially the number of homebuyers is expected to decrease significantly during a recession, as people do not want the pressure to pay off a mortgage for decades if they are not sure how secure their income really is. Ask yourself: Would you like to get a mortgage if you are not sure how secure your job really is? 🤔

2 Reasons For Rising Real Estate Prices

The 2 arguments above leave many people worried and scared that property prices in Germany will fall in the near future (especially German people). Should you be scared as well that the German real estate “bubble” will finally burst?

Panicking is a highly emotional reaction that is never good when trying to make rational investment decisions. We recommend looking at facts rather than clickbait from German news websites that are just trying to get you scared. There will always be a reason for crash prophets to predict falling prices. Be it because of the pandemic, inflation concerns, the war in Ukraine, rising interest rates, etc.

Nobody has a glass ball and knows exactly what will happen to real estate prices in the future. The remaining 2 factors on the list of 4 major factors that influence (the German) real estate market give strong arguments for why property prices in Germany will continue to be strong. Regionally, some real estate prices might decrease a little over the short term, but over the long term, the overall German real estate market is going to be fine.

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What Is A Blockchain?

Key Takeaways

  • A blockchain is a technology based on a chain of sequential blocks that contain unique information (hash).
  • The information of a blockchain is distributed across many different computers (distributed ledger).
  • If the hash (comp. fingerprint of humans) of a blockchain is manipulated, the connection to this block is broken.
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How a blockchain works

A blockchain is a chain of blocks that contain information (mostly transaction data). For this, you can imagine a real chain with links, like the one you might have hanging around your neck. The premise in the case of the blockchain is that each link is an independent block of information. In the last link, you will find the data for today. In the second to last link the data from yesterday and so on, until the first link, where you have the very first piece of information recorded in the history of that specific blockchain.

The difference between the blockchain and the chain around your neck is that each block on the blockchain is unique. Each block has its own kind of fingerprint. This is called “hash” in technical jargon. It also makes sense that each blog is unique because the information within each block is also unique. What exactly is mostly the information of a block? (Mostly) transaction data.

Since each block knows the unique hash or fingerprint of the previous block, past transactions cannot be changed because that would also require a change in the hash of the previous block. This is how the chain is created, and it is also exactly what makes the blockchain so secure. In fact, the blockchain is one of the most secure record-keeping systems ever invented in human history (more secure than investing in REITs or real estate ETFs on the stock market, especially more secure than real estate crowdfunding).

The Bitcoin blockchain

Blockchain technology became really popular when Satoshi Nakamoto used it to invent the cryptocurrency Bitcoin. For Bitcoin, the blockchain is basically a list of transactions that everyone can see on the internet. Every time, an investor makes a Bitcoin transaction, i.e. sends or receives Bitcoin in his wallet, a record is written in the Bitcoin blockchain.

This record is open and transparent to the public. So if someone would try to manipulate a Bitcoin transaction, the entire world could see it, and in addition, the change in the unique hash or fingerprint would cause the link to that faulty block in the blockchain to break. This technique makes sure that returns for investors are safer than with other record-keeping systems.

Who is in control of the blockchain?

There is no direct single entity that has control over any particular blockchain. This is what we call distributed ledger. The information on the blockchain is spread across many computers, countries, and institutions around the world. Whoever wants to participate in this decentralized network can do so, and since the entire network can see all transactions, they must first agree that each new block is correct before it is added to the blockchain (comp. proof of work). Hence, everyone controls everyone else.

This is exactly what makes a blockchain so great. It gives the power back to the people, and that is also what we do with GermanReal.Estate. We are giving people the opportunity to invest in landmark buildings in Germany with security tokens worth 1€ (minimum investment starting at usually 100€).

Therefore, we are using a new development on the blockchain called “smart contracts”. A program stored on the blockchain that is used to automatically exchange our real estate security tokens based on certain conditions. More information is in our FAQ post on the benefits of tokenized real estate.

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How To Register As Investor

Key Takeaways

  • In order to invest in our real estate security tokens, investors need to verify their identity and create their wallet once.
  • Our managing director Axel recorded himself during the registration process so you can follow along.
  • This article will help you to go through the 7 registration steps as smoothly as possible.
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GermanReal.Estate Investor Registration Process

Before investing in real estate security tokens on the GermanReal.Estate marketplace, investors need to create their account (only one time before the very first investment). This registration process involves the verification of the investor’s identity as well as the setup of the wallet. Investors can follow these 7 steps to register as easily as possible and start investing in tokenized real estate:

In order to start the registration process, investors can click on any of the “Invest Now” buttons on the GermanReal.Estate website. Before investing, we strongly advise reading our general risk disclosure as well as the specific risks of the respective investment that are mentioned on the specific real estate security token website. After reading about the risks of the investment, investors may continue with their registration.

1. Investment Data:

To start the investor registration process, we need some personal information about the investor (e.g. name, address, birthday, email address, etc). This step also involves agreeing to our terms & conditions if you would like to invest in our real estate security tokens. After finishing the first step, the investor will receive an email from us to confirm his email address and determine his investment amount (starting usually at 100€).

2. Knowledge & Experience:

To make sure our investor registration process is aligned with German financial regulations, the second step is to ask investors about their qualifications, occupation, and investing experience. The questionnaire is voluntary, investors can also click on “I do not want to give any information.” if they choose to do so. We strongly advise to take just a minute and fill out the questionnaire about the investor’s experience.

3. Confirm Investment:

After completing the questionnaire, it is time to read and accept the legal documents of the respective real estate security token (e.g. consumer information, basic information sheet, security conditions, etc). We strongly recommend reading the investment documents before accepting them. However, there is no need to download the legal documents as they will be sent to the investor’s email address.

4. Verification Of Identity:

To be compliant with German money laundering laws, investors need to identify themselves. That is why the next step is to verify your identity. As of writing this article, we are working together with IDnow as our identification service provider. If you face problems with your identification process, please send us a message with your ident ID (format: ABC-DEFGH) and we will clarify the issue for you.

5. Payment Of Investment Amount:

After the identity of the investor has been verified, we will send out an email with the payment details to transfer the investment amount for the real estate security token. By clicking on the “View Payment Data” button in the email, investors will be redirected to their GermanReal.Estate investor dashboard. Important: Make sure to use the correct “reference” (Verwendungszweck in German) when making your transfer. This account will also be used to pay profits (e.g. from rising security token value). You can change your reference bank account later on in your GermanReal.Estate dashboard when you change your bank account.

6. Saving The Wallet Account Connection:

Once the issuer received the investment, investors will get another email confirming their investment in the respective real estate security token. In order to finish the registration process, investors can now choose their custody option with the instructions that are sent by email. Our GermanReal.Estate app can be downloaded on the Apple App Store and the Google Play Store. By scanning the QR code, the app will connect automatically with the GermanReal.Estate investor dashboard and create the 12-word recovery phrase that investors should write down and store safely.

7. Saving Taxes When Investing:

As real estate security tokens are considered financial securities, everyone with a German tax ID (11 digit number) can secure an annual bonus of 801€ (1.602€ for married couples) in capital gains taxes (also from passive income) when investing on GermanReal.Estate. As of writing this article, the German government is likely to increase that 801€ tax-free threshold to 1.000€ (2.000€ for married couples) starting in 2023.

After completing the 7 steps, investors can see their portfolio in their GermanReal.Estate dashboard, earn rewards, make changes to their account, or new investments in other real estate security tokens. Hopefully, our video tutorial and blog article was helpful for every (potential) investor that wants to register on GermanReal.Estate in order to start investing in real estate security tokens.

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Mönchengladbach: Welcome Home Security Token

Key Takeaways

  • FiveRocks is constructing a new building with its development company (SPV) Welcome Home MG GmbH
  • The building with 8 residential units & 4 commercial units will be in Mönchengladbach, North Rhine-Westphalia, Germany
  • Investors will receive a fixed interest rate of 4% p.y. + 20% profit share if the property gets sold during the duration
  • The real estate security token will mature on 31.07.2023 (with the option to extend for 6 months until 31.12.2023)
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Why Did FiveRocks Choose Mönchengladbach As Location for the real estate security token?

Tobias Hänschke and Michael Schröder are the managing directors of FiveRocks Development SE (holding company of Welcome Home MG GmbH). They will explain here why exactly they chose Mönchengladbach as the location.

TOBIAS: The Rhine-Ruhr metropolitan region is the largest in Germany (by population & GDP) and the fourth largest in Europe. That is why Mönchengladbach is a very interesting location for us with its proximity to the most affordable A-city in Germany (Düsseldorf). In particular, the industrial and business demand there is enormous. Also, the connections between all the cities in the Rhein-Ruhr metropolitan region give us more flexibility to address potential tenants from both the commercial and residential side. This was basically one of the main points for us to decide to develop this property in Mönchengladbach.

MICHAEL: There is also an initiative from Mönchengladbach to create more green and sustainable areas in the city center, including green living and commercial space. In terms of the micro-location, “Welcome Home” is a very exciting plot because we are right next to the newly built city hall. So we are very close to the heart of Mönchengladbach and still a little bit away from the traffic. That is an important reason why we chose to build this property.

Why Did FiveRocks Choose A Mixture Of Residential & Commercial Usage for the real estate security token?

This property is in a very good B-location right next to many A-locations (Düsseldorf & Cologne) which is why the return can be very good. Especially with a mix of commercial and residential use. What is the advantage for investors exactly?

TOBIAS: First of all, we have to develop according to the plan of the city of Mönchengladbach. The zoning plan says that we need commercial and residential space in this area. So we want to optimize that mix of commercial and residential usage. Also, commercial buildings yield a higher return than residential real estate. Yet, there is a lot of demand for residential space in the heart of Mönchengladbach. We think the mix is perfect and the potential returns are attractive for investors (especially in times of high inflation). 

MICHAEL: There are many retail stores very close to our property already (including the large shopping center Minto). That is why this property is ideal because we already have all the stores of daily life and the very quiet location is ideal for living. What is missing in the city center of Mönchengladbach so far is high-quality office space, which we are targeting with “Welcome Home.” That is the reason why we decided on this particular split between high-quality office space and high-quality residential space. Commercial space offers a higher return, that is why “Welcome Home” is very attractive for investors.

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What Is The Current Status Of "Welcome Home" in Mönchengladbach?

Being a real estate investor, especially developing real estate yourself, is a lot of work. What is the current status of the property development?

MICHAEL: We acquired the plot about a year ago and have been in discussions with the city since then. We have received the first positive feedback from the city for our development plans, the design of the property, etc. We have now submitted our building permit application with the goal of receiving it by the end of 2022 or early 2023. Until then we are willing to negotiate possible changes or improvements together with the city council of Mönchengladbach.

TOBIAS: Planning and developing the perfect property with the perfect mix of commercial and residential space takes time. Once we have the building permit, we will start developing the property and find the right tenants after that. After finishing the construction in 2024 we could sell the property (with a 20% profit share for security token investors). Preferably, we would like to keep the property together with investors for passive rental income (tax-efficiently with security tokens). The flexibility we have here is the major advantage of tokenizing a property development like “Welcome Home” with the blockchain technology.

What Are The Next Steps For The Property?

As of writing this article, FiveRocks is far from done with the work. When is the planned completion date for the construction and what is your plan with "Welcome Home" afterwards? Usually, property developers sell the properties after they are completed, but you have something very special in mind.

MICHAEL: We plan to finish the project in the first half of 2024. I think we are well on the way to accomplishing this. But if necessary, we always have a plan B if things get delayed.

TOBIAS: This project is absolutely awesome! It would be great to find as many real estate security token investors as possible to keep “Welcome Home” as an asset and get cash flow from passive rental income in the future. That would be the best scenario! FiveRocks would manage the property and everyone would benefit from a modern & sustainable building in a very attractive area in Germany.

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Investment Details Of the real estate security token "Welcome Home" - Mönchengladbach

AXEL: FiveRocks is offering investors 450.000€ divided into 1€ security tokens to participate in this project development. Therefore creating together with us an exciting investment opportunity that didn’t exist before. In order to reach the goal and hold the property after construction, the funding goal of 1 million € is required. If that goal cannot be met, FiveRocks will sell “Welcome Home” after completion.

Investors will receive in both scenarios a fixed interest rate of 4% until the duration of this blockchain-based Welcome Home security token on 31.07.2023 (with the option for the issuer to extend for another 6 months until 31.12.2023). If FiveRocks has to sell the property, investors will receive an additional 20% profit share of the sale value (an additional 8,8% return equaling a 12,8% return for one year according to FiveRocks calculations). 

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What Are the Benefits of Tokenized Real Estate?

Key Takeaways

  • The traditional process of buying real estate in Germany is very lengthy and costly (up to 15,64% in transaction fees).
  • Tokenization of properties streamlines the process tremendously & cuts out most, if not all middlemen.
  • Real estate security tokens allow investors to invest in properties in minutes (and not in weeks or months as previously).
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Tokenized Real Estate Will Cut Out Most Middlemen

Investors have many different options when looking to invest in real estate in Germany. Tokenization of properties offers investors a couple of unique benefits that are none of the existing options to invest in real estate offer yet. To understand the revolutionary impact of real estate security tokens, let us remind ourselves of the traditional process of buying a property in Germany.
 
  1. Finding the right property in the right location for the right price (that fits the investors’ personal financial strategy)
  2. Securing the right mortgage with a bank that will result in a financing contract
  3. Negotiating the purchase price with the owner that will result in a (preliminary) purchase contract
  4. Notary meeting to sign the purchase contract & change the German land registry
  5. Buyer pays all bills for the notary (2%), purchase taxes to Finanzamt (3,5% – 6,5%), and real estate agent (3,57% – 7,14%)

The entire traditional property purchase process as shown above is taking weeks or months of work and costs anything from 5,5% – 15,64% in closing costs on top of the property value. That is anything from 5.500€ up to 15.640€ for every 100.000€ of property value that is being transferred from the seller to the buyer (not for REITs or real estate ETFs).

The fundamental idea of Bitcoin was to transfer money (across international borders) without a bank in the middle. Tokenizing real estate with security tokens is bringing the Bitcoin idea to a whole new level as it allows people to transfer ownership of properties without middlemen, therefore saving a lot of time and money while increasing returns for investors.

Investors can register on GermanReal.Estate and after the one-time identification process and setting up the wallet, they are immediately the “owner” of properties in Germany (indirectly through security tokens). The real-world owner of every property listed on the GermanReal.Estate marketplace is a special purpose vehicle – short SPV in English (GmbH in German).

Tokenized real estate securities will revolutionize the traditional German real estate market. Be part of this revolution and profit from the upcoming change!

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How Real Estate Security Tokens Improve Investor Experience

Instead of transferring the ownership of a German property in the real world (which would involve the process and the fees mentioned above), real estate security tokens allow the transfer of the digital ownership of a property much faster & more cost-efficient. Thanks to the blockchain technology, real estate security tokens can be transferred fully automatically by smart contracts.

Example: A property worth 100.000€ (either a project development or an existing building) can be tokenized into 100.000€ real estate security tokens (like real estate crowdfunding but as real financial security). However many security tokens the investor wants to buy will be minted for him. Investing on the GermanReal.Estate marketplace starts usually at just 100€.

The key point that separates real estate security tokens from all other available forms to invest in real estate is the digital ownership thanks to the blockchain technology. No matter which investor owns how many security tokens, the real world owner of every property is a special purpose vehicle. Therefore, investors are saving the 5,5% – 15,64% transaction costs when real estate security tokens get transferred from one investor’s wallet to another investor’s wallet.

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Der Erwerb der Wertpapiere auf dieser Webseite ist mit erheblichen Risiken verbunden, die zum vollständigen Verlust des eingesetzten Vermögens führen können. Weitere Risikohinweise lesen Sie bitte bevor Sie investieren hier. Die hier dargestellten Informationen haben ausschließlich werbenden Charakter und stellen weder ein Angebot zum Kauf, eine Aufforderung zur Abgabe eines Angebots, noch zur Zeichnung des Wertpapiers dar. Insbesondere stellen die Informationen keine Finanz- oder Anlageberatung dar. Wir weisen darauf hin, dass sich unsere Wertpapiere ausschließlich an Personen mit gewöhnlichem Aufenthalt in der Bundesrepublik Deutschland richten. Das hier angebotenen Wertpapiere unterliegen dem deutschen Recht und werden ausschließlich in der Bundesrepublik Deutschland angeboten. Nur die deutsche Fassung der Vertragsunterlagen ist verbindlich. Die englische Übersetzung dient lediglich zu Informationszwecken. Die nachfolgenden Informationen richten sich insbesondere nicht an US-Personen im Sinne der Regulation S des US Securities Act 1933 sowie Internet-Nutzer mit Wohnsitz in Großbritannien und Nordirland, Kanada und Japan. Die Wertpapiere auf die sich nachfolgende Informationen beziehen sind nicht und sollen nicht nach den Bestimmungen des US Securities Act 1933 in den USA registriert werden und dürfen in den USA ohne eine solche Registrierung bzw. nur auf Grundlage einer etwaigen Ausnahmeregelung an vorgenannte US-Personen angeboten und verkauft werden.
The purchase of securities on this website involves substantial risks that may result in the complete loss of the invested funds. Please read further risk information before investing here. The information presented here is for advertising purposes only and does not constitute an offer to buy, a solicitation of an offer to buy, or an offer to subscribe to the security. In particular, the information does not constitute financial or investment advice. We would like to point out that our securities are directed exclusively at persons with their habitual residence in the Federal Republic of Germany. The securities offered here are subject to German law and are offered exclusively in the Federal Republic of Germany. Only the German version of the contractual documents is binding. The English translation is for information purposes only. In particular, the following information is not directed at U.S. persons within the meaning of Regulation S under the U.S. Securities Act 1933 or Internet users residing in the United Kingdom and Northern Ireland, Canada and Japan. The securities to which the following information relates have not been and are not intended to be registered under the provisions of the US Securities Act 1933 in the USA and may be offered and sold in the USA without such registration or only on the basis of a possible exemption to the aforementioned US persons.

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