Feasibility single-family house + land 550k-600k NRW

  • Erstellt am 2020-03-30 09:30:02

RomeoZwo

2020-03-31 20:45:44
  • #1
You take out a loan on your terraced mid-terrace house, depending on the conditions 50-90%. The money obtained from this you use as equity for your new single-family house. Last autumn I took out a loan at Deutsche Bank for a rental property condominium that I had already purchased with equity. At that time there was a 90% financing at ~0.6% for a 15-year term. The financial advisor said back then they even had better conditions for rental properties. The same advisor then also offered me a 10-year fixed deposit for 1%. Let's say you get 75% of €300K for the terraced mid-terrace house, that's €225K. If the interest costs were 1%, you could deduct €2,250 per year from taxes, or the tax on your rental income of ~€10K would be reduced by this amount. From this perspective, it would also be worthwhile to keep the financing for the rental property running as long as possible, repay little, and possibly accept slightly higher interest rates. The new single-family house could then be paid off faster.
 

priviticerul

2020-03-31 21:02:35
  • #2


That was also planned that way. However, I was not aware that I could claim the interest costs on the tax return even though the financing is needed for the future owner-occupied property. That means I would practically have to refinance my terraced house again through the bank (explicitly address this with the bank) so that I can claim it for tax purposes? Or is the process standard anyway, meaning property A is financed and the bank registers itself in the land register of property B, which is rented out, in order to claim that for tax purposes.
 

RomeoZwo

2020-03-31 21:10:09
  • #3

Correct – you need financing for your terraced house (property A) and as soon as it is no longer occupied by you but rented out (or there is an intention to rent it out), you can claim the financing costs for property A (which will be stated in the loan agreement) for tax purposes.
Additionally, you then need a (significantly lower) financing for property B (the new house) since your equity capital is available as free cash flow (FCF) and not tied up in property A. However, since property B is owner-occupied, it won’t benefit you tax-wise.

Let go of the idea that the financing of A is used for B. You finance property A to generate returns and long-term tax income. What you do with your FCF is of no concern to the state at first. And if you use it for property B and need further financing for that, that’s your private pleasure.
 

priviticerul

2020-03-31 21:18:58
  • #4


Great thing. Thanks. That will definitely be done that way.
 

Pinky0301

2020-03-31 22:13:10
  • #5

But only if the rental property is financed with it!

No, see above.

Attention! Discuss this with a tax advisor. I am sure that it does not work, but I am not a tax expert and could therefore be wrong. But my opinion is: financing that I take out for my own home cannot be deducted as advertising expenses, even if the rented property is leased.
 

Pinky0301

2020-03-31 22:15:12
  • #6
Where did you get the information that your construction works like that? To exaggerate, I could then repeatedly take out a loan on a rental property for 50 years or more and claim it for tax purposes, even though I buy one flashy car after another with it...
 

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