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!

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.

SUMMARY:

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.

How to Prepare Your Property for a Sales Transaction

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.

Increase of residential building permits by 5.4% in 2014

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.

Sign up for information updates at condos.city-of-berlin.com

The New Lifestyle Center of Berlin-Mitte

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

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.

Purchase cost for German Real Estate 2015

Housing Market Report Berlin 2015

Housing Market Report 2016 now available, just click this text

Further increase in demand drives up rents and prices in peripheral locations

• Asking rents for apartments increase in 2014 by 6.6 per cent to € 8.55 per square metre
• Demand pressure shifts from established prime locations to inner-city peripheries and the peripheral residential areas
• No price bubble anticipated, but inflated prices in individual locations evident
• Lively financing market with controllable risks for banks - New build volume increasing, but insufficient to satisfy demand.

 The peripheral locations on the Berlin housing market are becoming increasingly attractive. Following the particular concentration of rent increases in popular inner-city areas in recent years, pressure of demand is increasingly shifting to inner-city peripheries, areas outside the centre with good transport connections and to modest city outskirts. This is one conclusion of the latest Housing Market Report Berlin, jointly published for the first time this year by Berlin Hyp AG and CBRE GmbH, which presents current developments and background information on the Berlin housing market. It is based on the evaluation of more than 100,000 recorded offers for rental apartments and condominiums as well as apartment buildings in the first three quarters of 2014. All rental apartments have been assigned to the 190 Berlin postcodes, enabling small-scale analyses and trend observations of micro-locations.

Please enter your name and email below to receive further information and a download link for the report.

Housing Market Report Berlin 2015

Prices for German residential and commercial property in 2014

The fourth quarter of 2014 saw the rise in price

for German residential and commercial properties continue further. The vdp property price index advanced 5% on the corresponding quarter one year earlier and currently stands at 122.6 points.

Rise in residential property prices continues; commercial property price increases weaken slightly.

Multi-family houses:
+ 7.2 %*
Owner-occupied residential housing:
+ 4.3 %*
Office properties:
+ 1.9 %*
Retail properties:
+ 3.3 %*
Q4.2014
* compared with the same quarter the previous year

These are the results of the vdp Property Price Indexjust published. For the full report follow this link.

For support in the identification of the right investment targets please visit our website at www.falkenberg-solutions.com. Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities. We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. Please use this link to the contact facilities provided there to place any requests .
Uwe Falkenberg

Prices for German residential and commercial property in 2014

Germany House Prices 2013 in International and Historical Perspective

The economic research institution of Deutsche Bank DB Research has published their results on current property prices in Germany. Here is the translated content:

Germany house prices in international and historical perspective. 

With the rise of the German house prices concerns have increased that a housing boom has begun, which could end up with noticeable negative impact on the German economy. Our analysis of house price cycles in OECD countries shows that the current price increase in Germany, compared with past climbs, are moderate. Compared with other OECD countries, Germany shows even well below-average prices. We expect that the increase in real estate prices will continue in Germany, but the formation of a bubble is unlikely and the price increases are the normalization of the total housing market.

The development in different areas are obviously different. Munich and Hamburg are closer to a possible "bubble" than e.g. Berlin which is still highly undervalued compared to other European capitals like Warsaw and Budapest, not to mention Paris or London.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities. We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. (Also see our free property market Research Service) Please use this link to the contact facilities provided there to place any requests .
Uwe Falkenberg 

Germany House Prices 2013 in International and Historical Perspective