A couple of years ago we have recommended buying a block (one full multifamily house), but nowadays the market is flooded with money and hardly anyone owing a block sells. On top, the prices climbed and today one or two Mio will get you hardly any good multi-family-house in a promising area.
What is the way-out?
Our advice is to buy a portfolio of flats with the following parameters:
- urban/downtown at least a well known district
- brand new development / building
- furnished rental, on a 6 month plus contract
- small units
The first point is the location as always in real estate. Berlin prime locations are relatively cheap compared to anything else in any western capital city. Additionally prime is the last to go down in a crisis and the first to come up.
The second point helps to keep maintenance low and ensures the best legal situation as new buildings are partially exempt from certain (socialist) laws to „protect“ renters.
Third furnished flat help to attract a certain type of renter that I call „young urban professional“ and insures again to be exempt from certain legal traps. Furnished rentals should not be misunderstood with AirBnB-Style day to day rentals. In fact, those rentals are not legitimate under most condominium rules anyway and very contract with a rental period of fewer than 6 months will bring up VAT issues.
Fourth and last the small units ensure a high tenant turnover and therefore a steady potential to increase rents. The rule is the bigger the flat the more lifestyle situations it might cover on the renter side, this leads to a longterm stay of the renter and minimizes rental income optimization on the middle to long run. On top small flats will sell even if in the future the value doubles or triples. The rent price tag, as well as the sales price tag, will stay more affordable compared to bigger flats.
Hope this helps for a first overview, let me know if you would like to go deeper.
Please start our conversation with an email and give me your full contact details including your cell phone number.
Best regards, Alexander Korte