Investing in Germany: Advantages & Risks

With Achim Amann, CEO of Black Label Properties

Set Up Your Investment Structure in Germany with Black Label Properties

In Germany we are operating in four different federal states, namely Berlin, Brandenburg, Saxony and Saxony-Anhalt. Why? Because we have local offices and partners on the ground who can manage the assets. We also expanding into the other German states, especially if we find good local opportunities and partners.

With our company BLP Investments we invest via tailor made companies directly into apartment buildings. If you are an international investor who wants to benefit from low interest rates and have a local partner to support you, we set up SPVs to invest in multifamily homes.

We will find a suitable property, a mortgage, and we will manage the property, including finding tenants, etc. We set up the company with the help of lawyers and structural surveyors and we discuss potential exit scenarios. If you're interested in co-investing with us, please feel free to contact us - we're happy to help and will inform you about various opportunities and options in Berlin and other federal states, where you can expect a significant return on your investment.

The 6 advantages to invest into the German real estate market are:

1. Stable political environment and clear investment structures
2. Solid household income and strong economy in the middle of Europe
3. Low purchase prices compared to other European countries
4. Very segmented investment market, different major cities rather than one capital that dominates the market
5. Very strong rental market, very low risk of not receiving rent
6. Long term investment structures with fixed interest rates and tax advantages realistic

What Are the 6 Risks You Should Be Aware of Before Investing in Property?

Are there risks for people who are not based in Germany and who are not used to investing here? There are six different risks:

1. The interest risk
   The interest risk is considerably low. We can help you, because we usually have a fixed mortgage rate here in Germany for a minimum of 5 years. Most of our clients are going for a 10, 15 or even 20 years mortgage, especially when the goal is to hold the property for a long period of time. A fixed interest rate means that you don't have to pay back the mortgage with varying interest rates over that fixed period of time.
2. The price risk
   A lot of people are asking us if there currently is the danger of a real estate price bubble. We usually have three different criteria’s on price risk and especially on bubbles
   1. The first criteria is supply exceeding demand in a market, which is not the case in any major city in Germany. One of the main reasons is the construction industry that is not able to produce enough apartments in a timely fashion. We don't expect to have an oversupply in the major cities in Germany.
   2. The second one are heavily rising interest rates causing prices to fall. This is very unlikely, even now with inflation, war in Europe, pandemic, supply chain disruptions and rising building costs we can see: prices are staying stable.
   3. The tenancy risk means that people prefer to rent apartments rather than buying them. Especially in Berlin the rental market is highly regulated, hence no one is letting their apartment out if they don’t have to under the regulated price. There are many people who cannot rent, because there are simply no apartments available at a low rent anymore.
3. Also to be considered is the migration factor, especially with the COVID 19 pandemic and with the Ukrainian war. You might have seen slightly less people migrating to Germany, which is a similar situation to other European countries. Germany, however, has remained quite stable overall, especially with regards to the number of people migrating to Germany, with numbers expected to increase again in the future.
4. The inflation risk
   If inflation goes up investing in property is a wise decision because usually property is better covered against inflation.
5. The regulation risk
   The regulation risk is a big one. You may have read about the rent ceiling and about the rent cover. There might be more regulations coming our way. The last regulation order that was implemented in order to protect the tenants is that property owners are now banned from cutting large units or blocks of apartments into smaller units and selling them separately.
6. The product risk
   The product risk is related to the kind of property you are buying. In Germany we have a very high quality standard of construction, so even when you buy an existing apartment we usually send a structured survey and adhere to strong legal processes. So this risk can be considered to be relatively minor.