With the rental of real estate, a monthly cash flow can be generated, but the step to the owner needs to be well-planned. In this article, you will read practical tips for newcomers to the real estate business who want to buy their first property.
Whether house or apartment: In 7 steps to the owner
Although a property offers many advantages, the purchase of the rental properties needs to be well considered. After all, it is always about a decision with great financial significance – the right preparation is crucial for newcomers. However, if you consider the following seven steps, nothing stands in the way of your first property.
Step 1: Save equity
The more equity you can raise, the more pleasant the later financing of the property will be. Therefore, you should start saving as early as possible and improve your creditworthiness.
In the further guide, you can read a selection of suitable investment options if you ever wanted to know how to grow a real estate business?
Step 2: Plan financing
Even before the actual property search, you must be aware of the size to or can you invest: Do you start rather small with a one- to two-room apartment or start directly with an apartment building?
In conversation with a bank advisor or financing intermediary, you can clarify the amount of a loan granted to you. Taken together with the saved equity, this results in the upper limit for your investment, which allows you to make the following property search much more precise.
In your calculation, you must not forget the additional costs incurred: real estate transfer tax, notary and brokerage fee cost you an additional 10 to 15 percent of the actual purchase price and the important maintenance reserve also needs additional capital reserves. Further helpful tips on the bank loan can also be found in our guide to real estate financing.
Step 3: Object selection
When searching for lucrative objects, you will come across a wide variety of properties. Our checklist for buying real estate as well as our further guides on the following topics offers you orientation:
- Solid house or prefabricated house
- Monument properties
- Nursing homes
- Holiday properties
- Real estate investment guide
- Locations for buying real estate
As an investor, you should still not lose the landlord’s perspective: Would you potentially want to live in the property later? Even if the property on paper offers you the best return, this does not attract permanent tenants.
Step 4: Agree on the purchase price
Once you have found a suitable property, it is now becoming concrete: You must secure the real estate financing of your bank and negotiate the final purchase price. Once this is done, it is next the turn of the notary appointment.
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Step 5: Notary appointment & handover
After the notarial purchase contract and registration in the land register, you are officially a property owner. In addition to the purchase price, the notary contract also sets out the payment deadline. As an owner, you can already start finding tenants.
At the end of the change of ownership, the property is handed over. You should make sure that you receive the property properly in the agreed condition: If the rooms were vacated, was the possible agreed rectification of defects adhered to?
Residents who refuse payment and leave the apartment in chaos after its devastation are the nightmare of landlords. Here you can read action steps with which you can recognize rental nomads in advance and, in the worst case, get rid of them.
Step 6: Optional upgrades
Additional renovation or renovation measures may be worthwhile before renting. Often, even minor changes lead to an apartment being far more appealing to the new tenants: If the walls are neatly painted or the bathroom is newly tiled, a higher rental price can often also be enforced.
Step 7: Take advantage of the benefits
Done! You now own your first property – but that’s not all the work. You may want to commission a property management company to manage your property and you should also think about selling the property now.
After ten years, you can sell your rented property tax-free, in the period before a speculation tax applies.
