Friday 20 March 2015

How to Prepare Your Property for a Sales Transaction

Another “How to sell your Property” –You don’t want to miss this one!

The property / real estate market is a fascinating place and there is no limit to the variations of how people can get it wrong. In my professional career I have come across unbelievable attempts to sell a property profitably. There are numerous publications about the performance of a due diligence process for buying residential or commercial property / real estate. When it comes to selling most of it is aimed at selling a private home and gives the advice to make fresh coffee before the viewing because it gives a homely feeling. When you are selling an apartment block or a commercial property it would be a tough co-ordination job to get your tenants to do this in time for the viewing and would most likely not make a big difference because whoever is viewing will not move in.
However I would like to use another analogy going forward where most would know what to do: Selling a used car. When people are selling a used car they know to wash it, empty the ash tray (assuming it was used) and get the papers including proof of inspections etc. in order. You just don’t say: “It’s a nice car and when you wash it is actually red”. You make sure it looks red.
Now why don’t people do this when they want to sell their apartment block? Here are some of the answers I’ve heard:
  • I don’t want to spend the money; I just want to sell for top dollar!
    Really? But you want the best possible price, right? This attitude will cost you because the buyer’s estimate is going to be very cautious and then double to make sure.
  • The new owner should do it as he thinks it is best.
    So you owned the property for how long and still don’t know what is right for it? Must be a difficult property – why should I buy it then?
  • The list is endless – believe me!
Asset Life Cycle Management
These are just some examples and I don’t want to bore you with more because you already understand where this is going.
No matter at what scale a sale is negotiated; the game plan is always the same: A potential buyer likes a property but not its price tag. So he employs an army of technical, legal and commercial consultants to find “risks” or arguments to reduce the price. The name of the game is “Due Diligence” and believe me, there is a fortune to be made or lost in this game if played right. I am not talking about the consultants who are happy when a deal falls through because there is no risk for them if they missed something. They get paid anyway.
Keeping this in mind, what should you do when you want to sell you property?
Well, many things; first of all, have a close look at the property yourself! Don’t let your property manager tell you that ‘it is just fine’ because he/she is blind after managing the property for some time and might be in trouble if it was not. It is like that letter on your desk that becomes invisible after two or three days, it just becomes part of the landscape. Pretend you are looking at your property for the first time and you are considering buying it (again), or let someone professional do it for you. I am sure you are not surprised, but I am actually offering this service. [link to website]
What in the world is the purpose of due diligence?
Well, to me it’s one of those “Games People Play”. It is all about negotiating the price.

The traditional division of the skills is “legal” (most expensive), “commercial” and “technical”. This is justified when you are buying a shopping centre or a portfolio of 100 apartments or more, but what do you do when you want to buy an apartment block of say 10 apartments?
Here are some of the punches just above the belt I like to place, when I am managing a due diligence on behalf of the potential buyer:
  • What are the tenants’ complaints over the last twelve months?
  • Which repairs are outstanding?
  • Show me your planned maintenance plans.
  • Show me your rent-review plan.
  • What does the vacancy look like, any contract notices?
These are just a very few examples. When you are selling, you need sound and quick answers to all of these questions or your asking price is crumbling before your very eyes. Does your property manager know them and is he going to provide the right answers? Is he professional enough not to sabotage your sale because he does not want to lose the contract? You have to answer these questions for yourself I’m afraid, but I think I would know the answer in most cases.


If you or your property are not well prepared for the sale you will suffer totally unnecessary price reductions or even loss of promising sales.
During the next few weeks I would like to take you through the process necessary to achieve the best possible price for your property – not just in Germany. For any questions or suggestions please contact me through the contact facility of our website, it goes directly to my iPhone and computer.


Tuesday 17 March 2015

Increase of residential building permits by 5.4% in 2014

As reported by the Federal Statistical Office (Destatis), the construction of a total of 284,900 dwellings was permitted in Germany in 2014. Compared with the corresponding period of 2013, this is an increase of 5.4% or 14,500.
Link to the Destatis Website

The positive trend since 2010 was sustained but much weaker than 2013 with an increase of 12.9%. For multi-tenanted buildings the increase of 8.8% was the lowest since 2010.

These numbers are still not keeping up with growing demand and  dropping out of "not fit" housing accomodations. The pressure on rent increases will remain despite the measures take by the government to cap further rent increases in metropolitan areas.

Germany will remain an attractive destination for international Residential Property Investment.


Tuesday 10 March 2015

The New Lifestyle Center of Berlin-Mitte

Chausseestrasse at the north end of Friedrichstrasse in Berlin-Mitte is the new Lifestyle Center of the city.

The immediate environment is developing fast. Every visit brings new discoveries, a new espresso bar, a new restaurant, a hidden away well-established restaurant or the new bio-supermarket. There are attractions like the climbing garden “Mountmitte", the Natural History Museum and others at nearby Invalidenstrasse. For art lovers, the contemporary arts gallery at the “Hamburger Bahnhof” – is within a few minutes walking distance.
Looking at an aerial view, the amount of interspersed green areas become apparent. Bigger parks like Humboldhain or Tiergarten are within comfortable jogging distance. Pankepark and the Park am Hauptbahnhof (currently under development) surround the vicinity of  Chaussestrasse.

The company offices, some of them Germany headquarters, and federal ministries in the area are numerous. A few examples: Deutsche Bahn AG (3,000 office jobs), Vattenfall, Total, Bayer-Schering Pharma, Charité (University Hospital w. 3,800 doctors and scientists).  Federal Ministry (FM) of Transport, Building and Urban Development, FM of Economics and Technology, FM of Education

Currently there are several interesting property developments in construction or planned. There is "The Mile", "The Garden Living" and of course Daniel Liebeskind’s prestigious "Sapphire" project, with still more opportunities to come. For an interested buyer, especially living far away, it is a tedious task to follow all the developments, get brochures from all kind of agents and developers and at the same time know what is real and what is "pie in the sky" and might never be built. To help in those situations, there is a service available which provides an independent one-stop-shop for Luxury Condos in Berlin, especially in the central areas.

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Monday 2 March 2015

Purchase cost for German Real Estate 2015

One of the most asked questions by investors new to Germany is regarding the typical cost involved in making a real estate investment.
The cost depends on the price of the property the cost tables for the notary public and the land register relate to is as value of the transaction. They are degressive, in other words, the higher the price, the lower the percentage of the cost.
Another cost factor is the property sales tax (stamp duty) which varies in the German states (see table below).

Last but certainly not least there is the commission for the property agent. These also vary in different areas of Germany and are easily obtained from the offer you are looking at.

Depending on your financing there will also be a cost for entering securities into the register, relating to the amount to be secured. Because the financing varies individually, this is not included in the examples.

For the purpose of the examples it is assumed that the property is bought in Berlin
Real Estate Purchase Cost in Germany 2015

Click on the table for a bigger pdf-version.

Property sales tax (stamp duty) in the German states 2015

Further cost will be incurred in the context if financing which may include due diligence and cost for notary and register for the entry of securities into the land register.