Buying real estate in Berlin (question for German ERE enthusiasts)

How to avoid signing your life over to a mortgage
Post Reply
NPV
Posts: 87
Joined: Fri Dec 06, 2013 9:41 am

Buying real estate in Berlin (question for German ERE enthusiasts)

Post by NPV » Sat Jan 07, 2017 7:02 am

I have been looking into buying residential real estate (an apartment, a house or even land where a private house can be built) in Berlin. I do not live in Berlin (or in Germany, for that matter) currently, but it is a place I consider as a long term destination for personal reasons. Ideally I would want to buy something that would give me a net yield above inflation and something where I would be happy to move into myself (probably a 2 bedroom + 2 bathroom + living room apartment in Steglitz).

I roughly understand the fundamentals of the market.
On plus side:
- still cheaper than other European capitals, although less so relative to incomes
- positive trajectory on population and economic growth, better than most of Germany although starting from a lower base than Munich or Frankfurt
- sentiment factor - young people from all over the world tend to love Berlin + it is a growing startup hub. As more of these young people embark on careers and make investments and the startup ecosystem grows, real estate can further appreciate
On minus side:
- low yield as prices of RE have grown ~50% in the last couple years while rents are heavily controlled and have not advanced much
- price risk as interest rates might rise from historical lows
- (for Germany overall) all the regulatory baggage as laws favor renters heavily (e.g., you cannot break a standard contract or raise price without a compelling reason)
- (for Germany overall) idiosyncratic technical risks due to weird German laws where you own a piece of the overall house rather than just your apartment and hence liable for capital maintenance of the apartment complex, breaks in central plumbing and heating etc. - hence need to pay for independent technical audit when buying

My question though is less about investment fundamentals and more about how to find great deals. So far I have looked at websites like immobilienscout24.de which reflect the market but do not necessarily offer great deals. From having been to Berlin and doing my research online I gathered two things:
1. Banks often sell RE from foreclosures with some discount relative to normal market price
2. Apartments which are rented are valued lower than equivalent unoccupied apartments (I am totally fine with that as I would not be moving into the apartment immediately and likely not in the next few years, and I understand even draconian German rental laws let the owner break the lease for the purpose of moving into the apartment themselves with a few months notice)
Hence it sounds like I should be targeting apartments which are sold by banks and are currently rented out for best value.
My main questions are:
a. How should I go about finding such deals (I am not on the ground in Berlin but have people there who could potentially help me out with a few hours (although not days) of their time? Is contacting the banks the best bet?
b. What other discount drivers like #1 and #2 exist?

maxysu
Posts: 31
Joined: Mon Dec 01, 2014 8:39 am

Re: Buying real estate in Berlin (question for German ERE enthusiasts)

Post by maxysu » Sun Jan 08, 2017 5:27 am

I also looked at Berlin as it is a startup hub and a magnet for young people. However, I am a bit scared what will happen in the EU due to the migrant crisis and other factors, so that makes me hesitant to decide to invest.

Post Reply