Commercial Real Estate in Germany

Experience of getting profit out of overseas real estate has long ago become a routine for the US and European citizens. The pattern was as follows: a private person acquires a flat or a cottage in some resort or a European capital in the capacity of the 'second house'. While the owner is absent, the 'first house' is being leased. When the owner is back to the 'first house', the 'second house' is vice-versa being leased. Not that long ago this type of investments was a stable source of income and reliable support during pension.

Nonetheless, the world economic crisis has altered the situation. Now, when most Americans and EU citizens do their best to minimize expenses, having a flat in a foreign country becomes a big burden, first of all because of the increasing taxes.

So here a question comes: what should one do in order not to lose this income or better preserve it at the same level? The answer is easy: One must invest in commercial property in Germany. During the past 10 years Germany has been sustaining a leader position for those who were investing in commercial real estate. The receipt of success is: Germany has always stood amongst the most stable EU countries and maintains this position now, when the crisis is at the height. Statistics show, that the prices on commercial properties in Germany (flats and houses) are lower than in any other EU country.

Let's take a closer look at private investment options and kinds of commercial property able to bring you constant income.

It's the first standard option. Most Germans don't possess houses and, thus, rent them. That's why flat owners of such cities as Berlin, Frankfurt, Munich and Hamburg do always have significant income. When an investor acquires a flat with a lessee he does not need to search for lodgers, because they are already there. In case the lodgers have signed an unlimited contract with the previous flat owner, they are going to stay for long, quite a long time. The only disadvantage is that you will never be able to move in such a flat, having a right to exclusively earn money on its leasing (annual rate 5-7%).

They represent the second option. You buy a house with several flats, which are already rented by someone. The pros and cons here are all the same as in the option above, but your annual rate increases up to 6-9%.

Acquiring of a ready business is another option of investments in German commercial real estate (hotels, motels or small enterprises). Doing so, you kill two birds with one stone. You get a long-run business, which is successful and profitable. You find investing funds easier because banks finance easier the already existing enterprises. Besides, if you are a fresher in what concerns dealing with business, you do not have to start everything from scratch. You just get a 'polished' enterprise that works.

There are some minuses, though: bad reputation, huge debts and a decrease in profitability - all this may influence your profits a lot. But as soon as the risks are controlled your annual rate may come up to 12% if not higher.
Here comes a question: why to invest in such a business? Who would sell an enterprise, which brings sky rocking incomes? Unprofitability is not the only reason for a business to be sold. Causes may differ: willingness to launch a new business, problems with partnership and a need of removal are also quite often. Besides, lots of entrepreneurs develop their business with the scope of heir future retrading.

Experts perceive that the market of commercial properties in Germany will keep its potential attractiveness to the overseas investors. Though, with the ever growing demand, the offer remains limited: during the last decade, German population has significantly increased while building of new living areas has not become in any case more rapid.
According to the Institute for Marketing studies Empirica, recently the price on housing areas of 60-80 square meters built prior to 2000 has increased in 3, 4% (respectively to 2009). In Berlin this index has come up to 14%, in Cologne and Bonn - 12%, in Hamburg - 7%.

According to the German legislation, foreign citizens have a right to acquire commercial real estate with no limits and obstacles (same as it is in Switzerland). The only condition is the presence of legal origins.