Single flats or apartments / condominiums
They have been a market since five decades and will remain a market in the next seven decades to come! Frankfurt and Munich are leading cities in that aspect. Don't buy anywhere secondclass; the risk of losing is too high. They can be bought as a one room studio or as one to three bedroom flats. They can be rented furnished or unfurnished. The return on investment can be expected to be somewhere between 2 and 4%. As the rental law regulates rents in Germany pretty strongly, one should not play with the idea of putting higher and higher rents upon the tenant every year. To let such an apartment unfurnished most of the time would mean to give the tenant an unlimited lease contract. That does not need to be renewed from year to year, it automatically runs until notice is given by either party. The legal and regular notice period for the tenant is three months, for the landlord the period is longer if the tenancy is continued over five years. If one wants to use the apartment or flat sometime in the future for oneself this should be exactly written down in the rental contract when signed; the specific legal aspects to the wordings an conditions of such contract should be left up to an experienced agent. Furnished rentals can be short term and thus incur less risk of a never ending problem with a tenant; however the yields depend also very much on the economy and on the caretaking for your apartment by the tenant and by your apartment manager or agency.
So called "Zinshaeuser" (Rental homes with 3-20 Apartments or flats) are most attractive as investments in Germany. In Frankfurt they are very hard to get at all; in several other cities it seems currently not such a big problem. Most sought after are what we call „Altbau“; buildings that were constructed at the beginning of last century or even earlier and so are between 80-120 years old. If these houses are modernized, they are unique with their high rooms, ceiling level at about 3.00 to 4.00 meters (buildings after 1950 have ca. 2.50 - 2.60 meters room height unless they are very new - now again higher ceilings are often preferred).
A modernized Altbau is also a very good rental property. These types of apartments are selected by us for sale because they are totally newly refurbished with everything renewed, and yet have their old style character of the early 1900s preserved. Such houses are the most sought-after ones on the market here in Frankfurt and their value increase is normally higher than that of newer or totally new buildings, just because they are not multipliable.
Buying prices in these have gone up enormously between 2011 and 2017. Whereas you could buy in 2007 for 2.000-3.000 EUR per sqm these prices now range from 3.500 upwards, often more than 4.000 Eur per sqm - unrefurbished or last modernizations perhaps in the 70ies or 80ies.
On such houses as rental houses the investment return rate ranges between 2.5 and 4% p.yr. right now. The reason they are sought-after nevertheless is that there is still a high expectation for prices to increase even further (Brexit and other reasons).
Supermarkets and Malls
In general this is a very difficult market. Well-known supermarket chains have been going very well in one area and bad in another. Having rented out a supermarket to such a chain says not very much as of today. The situation might change very fast. Supermarkets that have been going well for many years if they are situated very centrally are a good investment, though. But those opportunities are rare to get ahold of. The capital investment return can be expected to be somewhere between 6 and 8% per yr. One needs to research very well where to buy and be careful when buying in no matter which chain the market is rented out to. Especially the contracts have to be examined as to the remaining duration. If one happens to find a renewed 10 or 15 years contract with a well known discounter, that will be a good deal most likely.
Houses that have a mix between shops and apartments are most recommendable when located very centrally. They still are of the best investments possible. The value increase can be expected to be very good. Investment return is somewhere around 4 and 6% p. yr depending on their location.
New apartment house building
Difficult proposition, only recommendable to experienced building companies which ally with a German house building company with some experience on the German City bureaucracies and who know the sales possibilities very well. Otherwise might wind up as a big flop.
Single family homes
Very much asked for. Is of much interest for those families who buy to live in the house.
Can be bought in several categories, single-standing, semidetached, terraced houses etc.
Prices around Frankfurt range between 350.000 and 800.000 Euro, within Frankfurt 850.000 to 3 Million Euro for a single-standing house or bungalow or villa.
In high-end areas luxury homes can go in the 2.5 - 5 Million range easily.
Newly built apartments (condominiums)
There are lots of new developments on the market. Quality is an issue. As land prices are very high for developers, they sometimes try to save on building material and workers. Preferably buy from good house builders which are since a long time on the market.
This is a special market segment; in Frankfurt very much sought-after, and lots of Hotels have been made out of old and run-down buildings around the Central Train Station and the Frankfurt Messe area. (Not our line of business in general.)
Can be an attractive buy, but need extensive Know-how in dealing with them. Renovation costs can go very high as the monuments office is giving directions on material and paint to be used and restrictions on changing anything. On the other side has high depreciation with it thus can be attractive in combination with tax returns. Nevertheless, take an expert on this subject on your side before buying such.
How to buy Real Estate in Germany Part 1: The current property market situation
How to buy Real Estate in Germany Part 2: Market view by Real Estate category (this page)
How to buy Real Estate in Germany Part 3: Steps to take when buying
How to buy Real Estate in Germany Part 4: Financing Real Estate in Germany
How to buy Real Estate in Germany Part 5: Frequently asked Questions