Tips on investing in furnished apartments in Germany
What you need to know
- For many landlords, renting out a furnished apartment instead of an unfurnished one seems to cost more money and time, as not only are they responsible for buying and maintaining the furniture, but they also bear the furniture’s depreciation costs.
- However, furnished apartments are particularly popular among students or working professionals who only stay in a city for a certain period of time.
- These tenants are often willing to pay higher rent for furnished apartments; therefore, this can pay off in the long run.
Your next steps
- This article will explore its benefits and disadvantage and share some tips of investing in a furnished apartment in Germany.
- The Repayment Calculator evaluates your personal and financial set up and scans through the whole market to find you a mortgage that is in your best interest.
- Our financial advisors are experienced and will guide you through every step. Our goal is to help you find the best loan.
List of contents:
What is considered as a furnished apartment in Germany?
Even though the term “furnished” is not a legal term, the German civil code (Bürgerliches Gesetzbuch) does require landlords to provide at least more than half of the necessary furniture in the rental apartment. These furnishings include but not limited to:
- Tables and chairs
- Cabinets and dressers
- Sofa or armchair
- Washing machines
- Kitchen appliances
Benefits of renting out furnished apartments in Germany
Higher rental income
One obvious benefit of renting out a furnished apartment is that landlords can charge tenants a higher rent. The extra amount charged on the rent is called furniture supplement; the amount is not fixed and the calculation methods vary. It is also not necessary for landlords to disclose the fair value of the furniture and the calculation of the furniture supplement.
Moreover, the people who rent a furnished apartment are often businessmen who stay for a limited time for work, and their company is usually responsible for managing the rent payment. In these cases, landlords most likely would receive rental payments on time.
In general demand for furnished living space is not great in Germany; however, in cities like Berlin and Munich where demand is far higher than supply, it is not difficult to look for prospective tenants at all.
The costs of furnishing an apartment, such as building a kitchen, buying a sofa or table, may be tax deductible for the landlord. Landlords may be able to depreciate all furniture that costs less than 800€ after tax at the time of purchase in full as advertising costs in the same tax year. And more expensive furniture must be depreciated on a straight-line basis over the assumed lifespan of the particular type of furniture. Moreover, if furniture or parts of the apartment has to be repaired, the repairing costs can be tax deductible.
Disadvantages of renting out furnished apartments in Germany
Landlords should be aware that there would be a loss in value in furniture as it is subject to be worn by tenants. Investors should also bear in mind that they should procure new furniture after 10 years at the latest, depending on the quality and resistance of the furniture. As a result, this would reduce profits.
It is rather rare for a tenant to stay in a furnished property for a long period of time. Therefore, investors should be prepared to manage changing tenancy frequently. This includes handover procedures, repairs or refurbishments of the apartment, finding new tenants etc. Investors should take all these additional costs into account when deciding whether to rent out a furnished flat. There are also other responsibilities related to furnished apartments, for example. If the washing machine or TV is broken, the landlord must take care of the repair.
Important tips in regards to writing rental lease for rental apartments in Germany
Handover report and inventory list
At the beginning and conclusion of the lease, the landlord must record every detail during handover in a written report, including when and to whom the flat will be handed over, how many keys will be handed over, reading of energy and water meters and what the condition of the flat is.
Landlords should create a comprehensive inventory list that records every single object in the apartment and their quantities. And for valuable furniture and technical equipment, they should include the brand names in the list and attach photos with it. Tenants and landlords then sign two copies of this list.
It is common for landlords to charge tenants a security deposit even for temporary rental. In general, tenants should pay the rent for the first month and the deposit before the transfer of the apartment. Both landlord and tenant should also keep a receipt that acknowledges the payment.
Nevertheless, when you decide whether you want to invest in furnishing the apartment before renting it out, you should first assess all the potential benefits and costs thoroughly. Therefore, it is important to discuss available options with a mortgage advisor before making your decision.
It can be a daunting task to find the right lender that offers the best deal when you plan to invest in a furnished apartment. Discussing with a mortgage expert can help ensure that you receive a tailor-made solution. Being well informed about the estimated total cost, funding opportunities and financing options can surely save you time and money!
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