Buying In Berlin

[mart123]

Hi,

I've been offered 3 flats to buy in Prenzlauer Berg, Price is good. One flat has an extremely low rent of €2 per Sqm. What are your experiences increasing rents? House was built pre World War 1 and was revenovated in the 90's. My experience (Munich only) are that it's not that easy.

Two of the flats are quite small about 30sqm and I guess there will be a fairly high Tenant turnover. In Munich I plan to miss one months rent every year, although that has not happened in 3 years, what should one plan for in Berlin. Is there a risk the flats will lie empty for a period of time?

Many thanks,
Martin

 

[neustria]

Look at your projected income yields rather than rental price per square meter to get a better idea of how good a bargain you are getting.

Somebody will certainly want to correct me on this - for I know nothing specific about the Berlin market - but I imagine that above a 5% yearly return on investment, your deal could be satisfactory.

The current crisis might allow you to do better than this, because Berlin, like everywhere, must be a buyer's market now.

 

[mart123]

Berlin

Hi,
The return at the moment is about 5% but can be pushed up to about 8% if I manage to drive the rent up. One apartment is rented out for €2 per sqm, market is about €6. I am not sure why the current owner didn't try to increase rents. Well in fact I am sure he tried but it didn't work. So I am really keen to know how easy or difficult it is to increase rents.

I tried in Munich and had very little success.

regards,
Martin

 

[Jörg]

Berlin

In Germany you can only rise the rent of a tenant apartment by 20% during 3 years. If the tenant leave the flat you could rent it even higher. In general the net yield of tenant flats in berlin is between 4-5% anual. You could also find some apartment with 6 or nearly 7% but these are most located in the non-city districts.
The big advantage of apartments in Berlin is the low starting price a really good chance that the price go up in the next 10 years (for apartments near the city-centre).
If you want take a look at your website www(dot)berlinpiso(dot)com . It is only in spanish, but with an online translator you can inform yourself about apartments in Berlin.
Best regards
Jörg

 

[georgesmith80]

I agree look at your projected income yields instead of the per qm price

 

[expo09]

In Germany you can only rise the rent of a tenant apartment by 20% during 3 years.

ONLY 20% over 3 years? That amount over 3 years is a HUGE increase. For a property that is 1,000 euros a month now it would be an extra 2,400 euros a year in just 3 years with that rise. I'm assuming rents rarely actually increase by that amount.

 

[kap-C]

Yes, expo09, if your rent is 1000 Euro/month and if this rent is below the typical rents for the area, you can increase the rent by a maximum of 20% over 3 years to eventually 1200 Euro/month.

mart123 is talking about a rent of 2 Euro per square metre, which appears indeed quite low. At this rent you will be able to increase the rent to 2.40 Euro over the next three years. In case of a 45 square metre apartment (mart123 mentions two apartments with 30 sqm each),this means that you can increase the rent from currently 90 Euros/month to 108 Euro/month, which is still quite significantly below the rent of 270 Euros/month that mart123 mentions as the average price for the area (6 Euro/sqm).

The SPIEGEL reports here that rents in Prenzlauer Berg have on average increased by 12.9% since May 2009 and that the average rent of new rental agreements in the district is now at 7.90 Euro/Square Metre.

The only way you will have a chance to achieve this rent is if the current tenant leaves and you can get a new tenant in. However, if you are not looking for an immediate high return and have the required patience, your yield may 'explode' once you can re-let the apartment. Properties that do achieve these rents at the moment are, at the same time, significantly more expensive than those that are currently let at the very low prices.

BUT

Do you know what condition the apartments are in? Did you see them or at least the building? You write that the property was renovated in the 1990s - but to what standard? And - the 1990s are now almost 20 years ago, so properties may be up for the next renovation ...

I don't know anything about the properties that were offered to you, but the rent of 2 Euro/Square Metre would imply to me that this apartment has probably been let for quite a long time now (prior to reunification?),which may mean that it has not been modernized ... Obviously you will not be able to achieve the above mentioned average rent if your property is sub-standard. You may want to check this out!