Thursday 30 January 2020

The Berlin Rent Cap - "Mietendeckel" is here. What Do You Have To Do?

Immediately after the law is published, probably in mid-February, a rent freeze applies as the first stage. The key date for this was June 18, 2019. Landlords are then no longer allowed to charge a rent that is above the value at that time. This rent freeze applies at least until January 2022.

Then, nine months later stage two, the most controversial section of the law follows with a rule that has never existed before: The Senate has established a rent table with prices that are based on the age group and fit out standard.

There are also surcharges: one euro for "modern equipment", for example with a fitted kitchen and high-quality flooring, and "location surcharges", a maximum of 0.74 euros per square meter in good locations. Including these surcharges, the absolute maximum price of a net rent in Berlin for a period of five years will be 11.54 euros - in this case for houses built between 2003 and 2013.

When the rent is 20% or more above the applicable table value the landlord has to take the initiative to reduce it.

What to do next?

If your property was completed 2014 or later - have a cup of tea and watch.

If your property is older, there are several things you have to comply with and they all require the landlord to become active or risk fines.

18 June 2019

This is the magic date of the rent freeze. When you are renting now, you are not allowed to exceed the rent of your property on that day. You are not even allowed to accept more if the tenant offers it (which is not unlikely in the current market situation). You would ave a long term legal risk because it is illegal.

Most likely in October 2020 you have to actively adjust your rent according to the table above with bonuses and reductions based on standard (e.g. fitted kitchen) or location, much like the rent table process already applied.

In a new post coming up we will explain in detail which steps a landlord in Berlin with residential apartments older than 2014 will have to take.

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Saturday 4 January 2020

Co-living - Currently One of the Most Promising Ways to Invest in Property

There are obviously many ways to invest in Real Estate. The Forbes Real Estate Council has looked at the current market situation and identified four trends that can be taken advantage of: Invest in a digital REIT, build a tiny home in your backyard, Angel invest in a Proptech startup or purchase a property for co-living.

Purchase a Property for Co-living.

I would like to dig into this option:

The Co-living movement is very much a reaction to the intensifying urbanisation and workplace nomads who can perform their job almost anywhere with internet access. Another driver is the ongoing price increase in urban areas around the world. Bigger units are hardly affordable, even for tenants with relatively high income.

Photo by Aw Creative on Unsplash

Investors are buying larger units with more than two or three bedrooms and rent the single rooms individually with shared, well equipped kitchen, bathrooms and lounge/living room. To meet the needs of the mobile generation most likely attracted to this form of living, certain standards have to be met: Fast WiFi, comfortable beds, security. A smart solution for laundry and responsive service in case of problems are a MUST.
On the financial side all utilities including e.g. electricity and TV-license have to be factored into the rent as they are key factors for mobility.
A set-up like this will command a much higher rent and, despite the inclusion of ancillary costs, a much better result than renting the entire unit to one household.

There are companies trying to offer just the shell room and will have some initial success in very tight markets but they will lose the tenants to more convenient set-ups as the competition is growing.

"It’s uncertain how large of a renter audience will be interested in this dorm-like life, but it’s gaining traction. Similar to the tiny homes, be sure to look into local zoning rules before purchasing a property." (Forbes Real Estate Council)