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The rising trend of rent and buying prices is going to continue to increase steadily as in the last couple of years. Housing space is becoming rare, especially in metropolises. In this article we are going to show you in which areas both buyers as well as renters have to pay an especially steep price.

Experts confirm the continued drastic expansion of the Real Estate market. The main reason for this is the current low level of interest rates. This leads to a constantly rising number of investors joining the lucrative Real Estate market – something especially affecting renters looking for a new place.

Housing space still is especially scarce but also desirable in big cities. But this development is also affecting agglomeration areas as well as smaller university areas. As housing space in these areas is scarce rent prices are rising rapidly. A rise of up to 10% is predicted in large German cities for the year of 2018.

Only in rural areas do prices in the Real Estate market remain mostly steady. This is mostly cause by young people being drawn to the city creating a constantly increasing shortage of housing in said cities.

The five most expensive and desirable cities in Germany are:

  • Berlin
  • Munich
  • Hamburg
  • Frankfurt on the Main
  • Cologne

These metropolises are known for their high population and are the most expensive ones concerning prices of building and renting in Germany.

The average rent index in German cities obviously looks different: On average an apartment in Germany cost about 6,78€ to 9,61€ per square meter. This is shown by the rent index of Immowelt which gets its data from analyzing the offers on its platform.

A similar picture is painted when looking at single- and double-family houses. As objects of purchase are in high demand prices are increasing as well. Meanwhile owners can rejoice at an enhancement in value. Prices in Hamburg for example have doubled in the last 10 years.

Due to this, smaller cities close to popular cities are becoming more lucrative. The current level of prices is low but they show great economic potential thanks to steady growth. This phenomenon can for instance be observed around Cologne.

Most popular districts in Cologne

Belgisches Viertel

The trendy district between Stadtgarten and Aachener street is filled with the charm of a big city in the usually placid Cologne. Not only trendsetters and creative minds are congregating here but more and more business people are establishing themselves here. The Brüsseler square is an ever-growing center for young designer and artists who are opening their shops here. Still, this area is not as international as one might think: residents are mostly young Germans – Asian supermarkets and Turkish kebab shops are a rarity.

Other than that, this district is not missing anything: big and small theaters, a lot of recreational areas thanks to the Stadtgarten and Grüngürtel and a concentrated passion for creativity. Rent is quite high compared to other districts but chic new constructions projects like the Spichernhöfe are drawing high earners to the Stadtgarten.

Nordstadt

A district comparable to the new and old town in the north is hard to find in Cologne as it is not only located centrally but also has a provincial flair. Here opposites meet and go hand in hand. Nordstadt is very multi-cultural – families are living side by side with higher earners and media representatives. Another charming point of this district is the notable absence of big chain stores – many owner-managed shops create their own identity with a variety of products. Moreover, beautiful restaurants are found here offering a big diversity of cuisines from around the world. Cultural highlights are the two arthouse cinemas, Metropolis and Filmpalette, as well as the Raketenclub and the old fire station/Alte Feuerwache.

Südstadt

Südstadt is characterized by its small corner pubs, owner-managed shops and diverse residents.  Young families and long-time residents are living here – glad about multiple schools and kindergartens. Moderate rent also attracts students and professors. But making Südstadt the talk of the town thanks to a variety of big construction projects: To connect the southern parts of Cologne and the inner-city the KVB is building the North-South-train for years now. Furthermore, big companies moved to fancy newly constructed buildings attracting many new inhabitants of Cologne to this district.

Ehrenfeld

It is difficult to put the special flair of Ehrenfeld in words. Next to scruffy corners/areas and junk shops gentrification breathed new life into the district. Many young people moved here thanks to low rent prices. As a result, stores and trendy pubs sprang up. Today a great variety of people are living in the former worker’s district.  No longer do only unemployed people and foreigners live here next to the old-established but so do doctors, lawyers, freelancer, young families and singles. On top of this, Ehrenfeld sits in a very well-connected location: a motorway approach road, a train station, four tramway lines and only a few minutes by bike to reach the inner city. This way the lack of green spaces can be overlooked – one cannot have everything after all.

How do I become a real estate investor and what should I consider?

As a real estate investor, you invest your money into income properties. These serves as a long-term and lucrative source of income multiplying your fortune. Therefore, the bought objects will not be used by you directly be resold or rented out to a third party.

We will show you how to become a real estate investor in these five steps:

1. Choosing objects and funding

First you will need to develop a strategy. For this you have to decide on which kind of real estate you want to acquire. This decision can also be influenced by your equity/capital – a single apartment can be less expensive, and therefore be attractive concerning price, but it offers a lower potential for income returns. Furthermore, a plan for the property should be decided on – simply retaining for your own portfolio, renovation and renting it out afterwards or reviewing rent are examples.

At the same time, you should think about how to fund the property. You could for example use borrowed capital to invest more than your own equity allows. With inflation rising you can even profit by doing so: Your loan loses value thanks to inflation decreasing the value of your debt as well. Furthermore, you will profit from fixed interest rates on your loan while interest rates develop upwards.

2. Your property

The first thing to consider is location. The property should be somewhere with a good infrastructure and an attractive inner city. This could be in a big city like Cologne or in surrounding towns oftentimes used by commuters. It is important to regard these things to avoid your property staying vacant.

Moreover, building substance is vital. It is best to personally check the property for this. Estimating maintenance costs is also important as the properties age is not always the sole crucial point in this/This is important for estimating the maintenance cost as age is not always the only crucial point for it.

3. Tenants

To even get any income returns with your property the most important part is obviously the rent. If there already are tenants living in the object you should check the rental agreements – e.g. does an effective beauty repair clause exist? Ascertain the value of security deposits and if the tenants keep to a regular payment schedule to assure your rental income. If the object is vacant inform yourself on local rental terms. Not every application you will get is going to be reliable as experience shows paying rent long term is not possible for everyone. Examine your applicants thoroughly.

4. Expense budgeting
When buying an income property, you need to consider multiple expense factors – e.g. real estate transfer tax, broker fees and notary as well as land registry costs. In addition, there are possible funding, renovation and running repair costs. You get rental income at least high enough to cover expenses and at best higher in return. Your difference is your profit.

5. Realistic risk assessment
When renting out a property unforeseen expenses are always possible as well as loss of rent. It is difficult to control these. Do not shy away from expecting these problems and create an adequate cushion for them.

We gladly help you to become a successful real estate investor.

Energy Pass

The energy pass is supposed to allow comparing properties around Germany on the basis of their energetic state. In reality this is almost impossible though. The documents got changed a lot over time and energy carriers were rated differently. In addition, energy costs are determined by a variety of factors not possible to depict on the pass.

Fundamentally there are two different kinds of energy passes:

Consumption-based energy passes are using the actual energy consumption in the last three years of the property’s tenants. But things like different efficiency per tenant, vacancy as well as tenants with or without children need to be considered while not being part of the energy pass.

Demand-based energy passes on the other hand only consider structural aspects like heating systems, insulation and quality of windows.

Since the ENEV came into effect 2014 energy pass classes (A+, A, B, C and D) are also depicted. Compared to older energy passes guidelines to reach the green area are much stricter for energy passes.

We gladly apply for an energy pass on your behalf

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