One of the most asked questions by investors new to Berlin is regarding the typical cost involved in making a real estate investment. Since we last published this overview in December 2007 the property sales tax has gone up to 4.5% and since April 1st of this year is at 5% where about half of the German states are.
The cost depends on the price of the property and the cost tables for the notary public and the land register. They are digressive, in other words, the higher the price, the lower the percentage of the cost.
For a property with a purchase price of
€ 1 million the cost would be roughly:
Notary
Public
|
for the
contract
|
6,965 €
|
|
For an
escrow account if required (based on $ 500k) 3,020 €
|
|
|
Land
Register
|
|
4,280 €
|
|
Property
Sales Tax
|
5% in
Berlin
|
50,000 €
|
|
(4.5 – 5%
rest of Germany
except Hesse, Bavaria and Saxony 3.5%)
|
|
|
Agent
Commission
|
Between 5
and 6 % plus VAT 19%,
|
|
|
(assume 5%)
|
59,500 €
|
|
Total
|
120,745 €
|
For a property with a purchase price of € 2 million the cost would be roughly:
|
Notary
Public
|
for the
contract
|
13,660 €
|
|
For an
escrow account if required (based on € 1 mill.) 5,995 €
|
|
|
Land
Register
|
|
8,410 €
|
|
Property
Sales Tax
|
5% in
Berlin
|
100,000 €
|
|
(4.5 – 5%
rest of Germany
except Hesse, Bavaria and Saxony 3.5%))
|
|
|
Agent
Commission
|
Between 5
and 6 % plus VAT,
|
|
|
(assume 5%)
|
119,000 €
|
|
Total
|
241,070 €
|
For the quoted size of investment as a rule of thumb it is safe to use
12 % purchase cost for an initial calculation, with higher values reducing the percentage slightly.
These figures also identify the items where savings can be achieved:
If it is a straight forward purchase an escrow account should be avoided as the saving can be quite substantial.
Traditionally in Berlin the commission for the property agent is paid by the buyer. For a long time 6% plus VAT was custom and practise. With the recent influx of international investors these margins have come under pressure, especially with the agents not assuming any responsibility for the information provided by them. On the other hand there are 5 or more interested buyers for any property coming to the market which is a difficult negotiating position. Please also read our post about the
Double Commission Trap.
The cost of financing will depend on many factors like the amount of equity used etc.. There will be cost for Technical
Due Diligence and valuation, "handling fee" between 0.25 and 1 % of the loan charged by the bank and entry of the loan into the deeds register. With the right approach and experience there is also a money saving way of doing this.
Naturally there are many more aspects to be considered before making a purchase: Review of the rental contracts, maintenance, ancillary cost to mention only a few of them. Language can be quite an obstacle because an investor cannot expect every property manager or care taker to speak English.
Businesses like
Falkenberg Solutions – Real Estate Consultants. and their network of Real Estate Professionals from Notaries to Tax Consultants and Finance Brokers are specialised in assisting international investors in their investment decisions, providing a "home base" for their activities in Berlin -- before and after the purchase.
Purchase Cost for a Property in Berlin 2012
