There are no problems with the first. Germany is hospitable to those with free funds. Through purchase and sale, you can easily exchange real estate in your home country for an apartment or house in Germany, registering the property in your name. Of course, it is advisable to pay for the purchase by bank transfer from a German account, but the intermediary brokers will likely help you open one.
The entire process consists of the following stages. First, a property is selected, a letter of intent is signed, and a guarantee deposit is paid to the seller - usually a fixed amount independent of the price of the house (3,000-5,000 euros). Then a notary checks the documents for the property and also prepares the papers necessary for the transaction. The burden of mandatory payments for the transaction (including the state duty and notary fees) ranges from 5% to 8.5%. The so-called broker's commission (intermediary commission including VAT) amounts to 3.46% of the contract price.
The broker's commission is sometimes included in the above-mentioned 5% to 8.5%, sometimes not; it can range from 3.46% upward or downward to contract amounts. I would write that it averages 3.46%.
Immediately after signing and notarizing the contract, you acquire all the rights of an owner: you can move in, renovate, rent out the apartment, etc. You only cannot sell it or use the property as collateral. To do that, you have to wait for the relevant entry to be made in the local land register (Grundbuch), the equivalent of our BTI. Registration takes on average five weeks, and the entry itself is made by court order. (In this case, the court is not a judicial body. In Germany, it can perform various functions. In particular, the court decides on the registration of a company - for example, an LLC.) As a result of such a transaction, you receive permission to spend several months a year on a multi-visa. Depending on the rules in force in the particular federal state, the period ranges from two to six months.
For working people who intend to use the housing from time to time and do not plan to rent it out, this is usually enough. However, if rental income is part of your plans, doing so as a foreign individual is not very profitable. Taxes will be higher than for local companies. By establishing a legal entity in Germany (GmbH, or LLC in our terms), you can save considerable amounts. Moreover, the rental business allows the founder of the company to officially 'register' as a resident in the country, absolutely legally. The tandem of 'real estate + company' makes it possible to obtain first a one-year work visa, then a three-year one, and after that to appeal for permanent residence. It cannot be said that this happens automatically, but a competent lawyer hired by you can bring the matter to a successful conclusion. The homeowner-businessman will not have to search for suitable national roots, pretend to be a victim of a local war, or enter into a fictitious marriage.
One should not expect astronomical profits from the rental market. Stability is Germany's main virtue, and to minimize risk, one has to accept a modest return on investment. If a whole residential building is purchased for further renting out by apartments, or even with existing tenants, the average yield is up to 5%. Mixed property brings up to 12%. These calculations do not take into account income from renting out commercial spaces on the ground floor of the building, where shops, restaurants, offices, warehouses, medical practices, etc. are usually located.
The promise of super profits from rentals by some intermediaries can be attributed at best to advertising, at worst to the desire of a 'black' broker to profit from a client's greed. It is implied that you will entrust the search for tenants to this same optimistic gentleman. By inflating the price, he will diligently collect a percentage from you for the search for tenants - until you realize what's going on.
1. No one can inflate the price. There are legally approved limits where the minimum and maximum price is determined by the condition of the housing, location, floor, furniture - everything affects the price. And the price is monitored by the financial administration and the consumer protection committee. If you inflate the price, you can easily end up in court. The price can be raised once a year, when essential improvements are made (cosmetic repairs, built-in kitchen, air conditioning, etc.) plus an annual indexation for inflation. This is approximately 3% of the rental amount.
2. The maximum a broker gets when finding a tenant is the broker's fee, and its maximum amount is three monthly rents for the apartment. Also, during the property registration process, the buyer usually receives, among other documents, the calculated tax amount on possible rental income. It is calculated in advance by local financial authorities, based on the year of construction, layout, surrounding area, utility costs, repair deductions, etc. What is its approximate size? For a one-room apartment it can be about 100 euros per quarter (33 euros per month), for a two-room apartment - about 250 euros per quarter (83 euros per month). However, the owner in Germany always shares the tax burden with the tenant. The degree of the latter's participation in settlements with the budget is fixed in the rental agreement (Mietvertrag) and amounts to from 1/3 to 2/3 of the tax amount.
The tenant, in turn, usually pays all associated costs in full (garbage collection, elevator, concierge). In the case of a small apartment building, this utility fee (the so-called Nebenkosten) is 20-30 euros per month. If you do not rent out your apartment, then, of course, you will be obliged to pay it yourself.
In Germany, a landlord is well insured against any surprises. The procedure of the tenant paying a security deposit (Kaution) of two to three months' rent is mandatory here. The loss of a job by a tenant will also not affect your small business. Germany is a country of social guarantees, and the state will pay for a tenant who has become unemployed. However, the German social security system also has unpleasant sides for you: the owner is not entitled to arbitrarily increase the rent.
The contract itself is concluded for a term of at least one year. But in some cities, short-term rental can be a profitable business. For example, in Düsseldorf you can rent housing to exhibitors and guests of numerous trade fairs who come here from all over the world. For those planning to invest money in Germany, this city is generally very attractive. It houses representative offices of the world's largest companies (i.e., solvent tenants), and a reasonable cost of properties is combined with high rent for them. It is quite comparable to the incomes of homeowners in Stuttgart and Munich, cities where the price per square meter reaches record levels for the country. Having housing of similar size in Hamburg, Hanover and Berlin, you will earn less than in Düsseldorf. This city is a true optimum in terms of costs and returns.
The possibility of taking a loan from a German bank expands the potential for increasing personal capital. You, for example, buy one house, mortgage it, acquire the neighboring one, rent it out to Germans. With their rent, they buy back from the bank for you the apartment or cottage they live in. And your own, already paid-for one, meanwhile returns the investment and brings profit.
If you don't have the full amount even for one house, but you have a steady income and the ability to contribute a 'penny' monthly, then German banks will also be happy to work with you. Regularity of payments is valued above all. After passing a special credit check (Bonitatsprufung), a client can expect a reduction in the interest rate from the basic 9% to a preferential 4.5%. The procedure is that, having chosen the purchase property together with the bank, you do not make a down payment right away, but open a targeted savings account (Bausparvertrag) at the bank (Sparkasse). And over, say, a year, money trickles in from you bit by bit. The account gradually accumulates the amount required for the down payment on the housing, plus the bank also accrues interest on it as on a regular deposit. After the set period, the bank makes a verdict on the borrower's candidacy and the issuance of the amount missing for the purchase (up to 80-90% of the cost). After that, you can take possession. You become the owner in 3-30 years, depending on the term of the loan. There is also another, secondary financial scheme: you become the owner immediately, but you are also liable for the repayment of the loan with this same property (the above-described mortgage). In this way, you can buy housing on the secondary market, a new building, or even just a planned plot for construction.
Bausparvertrag at a German bank is generally quite a useful thing. German financial institutions do not refuse foreigners who pay regularly when it comes to lending for purchases in third countries. It could be Cyprus, Portugal, or any other stable country. So if you have decided to follow in the footsteps of German retirees and have spotted a summer house in the Mediterranean, then welcome here, to Germany.