Buying a Tenanted Apartment in Berlin: Part 1

→ Tenant Fact Sheet
This blog is the first in a series of blogs focusing on the purchase of tenanted Apartments.

Berlin is a rental city. With relatively cheap rents (albeit rising) the city has maintained a heavy rental culture, and even throughout Germany, homeownership numbers are extremely low compared to other countries, and nearly last in Europe. Tenancy is a hot topic in Berlin at the moment, and purchasing of tenanted apartments is on the rise due to its lucrative possibilities. The main issue at the moment is how to do it right.

There are pros and cons to buying tenanted apartments, and it’s important to have a solid understanding of the details before jumping into purchasing a property. Above all, integrity and honesty with tenants is still a primary element. Purchasing tenanted apartments is more often done in the case of interest in investment rather than personal residence, and rental yield can range heavily from area to area, and while rents are rising there are still certain rules to be abided. At the moment rent is only allowed to be raised by 15% over three years. If a property owner is eager to raise the rent it is possible to buy a tenant out of the apartment, but that can be costly as well.

The issue of rental prices in Berlin and laws surrounding owner and tenant rights is a constant discussion in the city right now due to the growth of popularity and burgeoning residency. Some owners try to use tricks or play on fears to push tenants out, and some simply raise the rent (within their right) with little regard for the existing tenants. This has caused much discontent among the many renters in the city. Property owners need to know their rights as well as the rights of their tenants. When purchasing a tenanted apartment, it’s best to know the details of the contract and consider whether those are suitable to one’s needs and desires. Is the contract short-term or long-term? What are the possibilities in both cases? For those looking to buy a tenanted apartment for self-usage the desire to get a bargain and move in quickly might seem appealing, but the issue of common decency should not be overlooked. Again, understanding the current contract and current tenants and finding diplomatic ways to achieve goals is the best policy and will keep the market and general property atmosphere positive and healthy.

While buying a tenanted apartment may seem slightly complicated, it has its perks. Tenanted apartments come at bargain prices compared to vacant apartments. If a buyer is looking to rent, then it’s a pleasantly economical starting point that will pay itself back in time with rental yields at an average of 2.5%. The best case for a buyer looking into an investment purchase is to understand that current tenant and work within their abilities. Is the current rent adequate? Can the tenant afford a higher rent? It is better to work with current tenants than to force people out. The heavy-handed approach is both more difficult as well as builds resentment against property owners within the city. Berlin has great opportunity for property owners, but the atmosphere needs to be one of trust and respect in order to keep the market in its upwards swing as it is.

With the influx of young professionals with disposable income, Berlin is a great place to invest in property. The tenant pool is strong and the rent possibilities are appealing as well. There’s no shortage of renters, so purchasing tenanted apartments is generally a safe endeavor for an investor. Rents always go up in time, and people are generally understanding. Slow and steady wins the race, though.

For more information on buying tenanted apartments download our fact sheet found at the beginning of the article.