Buy an apartment on credit and rent it out

Hello everyone,

I have roughly (!) considered the following (I don't have a detailed plan yet) and would appreciate some suggestions from you on whether this is realistic.

I am buying a small apartment in my village for, including all fees, €40,000. I take out a loan for the entire amount, say from the Sparkasse, with a 20-year term, 2.5% guaranteed interest, and 3.9% repayment.

So I pay about €210 per month. I am assuming a net cold rent of €250, from which I of course still have to deduct the non-recoverable ancillary costs. Let's say I break even more or less.

If the rent never defaults, after 20 years I own an apartment for which I ideally never paid a cent, and I will receive rent from the 21st year onwards.

Does this roughly check out or have I forgotten something important? I am aware that things like damage to the building, rent defaults, extraordinary repairs in the apartment can occur.

Thank you in advance for all suggestions!

You forget the repairs, tenants who don’t pay, hoarders, reserves.

Then the income is taxable!

Our dream is over.

PS if it were that easy, everyone would do it.

What now exists in our city are so-called administrators who take care of everything for you, even rent defaults.. they handle everything, even the accounts.

Tenants who do not pay, the risk is of course always there. Reserves should be included in the [Hausgeld].

Do I pay exactly the same taxes on rental income as I do on my salary? In other words, if I now pay 45% of my gross income in taxes, will I also have to give up 45% of the rental income?

As far as I know, at least the interest on the loan is deductible in the tax return, just like repairs.

1. Do not consider non-allocable additional costs + reserve.
2. If the community decides to carry out measures, then you must also pay for them - even if you do not want to. (Example from practice: apartment value approx. €60,000 in a high-rise building. There was a discussion about whether balconies should be renewed. This would have meant a special levy of €20,000!!! per apartment, but it was narrowly rejected).
2. Consider regular renovations, rental losses, rental costs, etc.
3. Only the loan interest is tax deductible, not the principal repayment. That means with high repayments you have to expect increasing taxes over the years.
4. You can calculate the tax burden with your marginal tax rate.

Property. The gross return under the conditions you mentioned is not bad, BUT no one can answer from a distance what remains net in the end. Especially in the village it may happen that residents prefer to move away – who will then rent the apartment. What is the apartment worth with missing demand?

People buy the expensive rental units for several hundred thousand because demand is simply much more important than the low purchase price. Simply put: high selling price = high demand = less risk from vacancy, hoarders (with high demand you can choose the tenant and demand the most outrageous guarantees ...)

If things go badly, your rental income will also push you into a higher tax bracket. Then you pay a higher tax rate on your entire income. My father-in-law rents out a house and 2 apartments and gets annoyed every year about four-figure tax back payments. I would really have that calculated in advance.