Multi-family house as a capital investment in an aging city

Are you crazy? You are about to give me €250K ...

If you show me the above-mentioned investment opportunity, I might do it. No, seriously, can you try to explain to me why you think my return calculation is wrong? Because I am quite sure that it only makes sense that way.

Think! - otherwise I will drag you to the notary at 8:00 tomorrow morning. Tomorrow in 15 years will then be the most expensive day of your life, and you won’t recover from it for another 30 years.

If you really don’t understand this, then please do yourself a favor and don’t think about acquiring a property for the next 10 years.

Best regards
Dirk Grafe

If you really don't understand that, then do yourself a favor and don't think about buying a property for the next 10 years.

Dirk, I have been immersing myself in the topic for weeks and I don't see why there should be a logical error in my calculation. It is (now) clear to me that over the entire 15 years I end up with a net return of about zero, although of course a larger portion of the property belongs to me at all times. It is also clear to me that €8,500 compared to €290K plus 15*€7,500 is about 2.1% if we talk about the return after paying off the loan. But I am actually investing the entire sum of about €400,000 not entirely from my own money, but a large part of it I pay from the rental income.

I am very grateful to you for all the input from you alone in this thread. But please relieve me now. Or are we perhaps just talking past each other? As a thank you, I promise you a bottle of fine Amaretto.

Christian

Just look at how Looman calculates the yield on faz.de. Create a table with all payments, XINTFUSS or something like that is the Excel function. (No idea which of you two is right, but it's not that hard to calculate. Of course, assumptions have to be made).

Dirk, I have been thinking about this topic for weeks and I don't see why there should be a flaw in my calculation. It is (now) clear to me that I end up with a net return of about zero over the entire 15 years, although of course a larger part of the property always belongs to me.

Think long about the last clause.

I also understand that €8,500 in relation to €290,000 plus 15*€7,500 is about 2.1% when we talk about the return after paying off the loan. But in fact, I don’t invest the entire sum of about €400,000 from my own money, rather I pay a large part from the rental income.

Many private property owners think like this, but it doesn't change the fact that it's wrong. Mathematics is not a humanities science. In addition, there are professionals in the real estate sector – if you enter a market with them (which you ultimately do, that is unavoidable) and want to achieve the same profits, then you have to think and act exactly like them. Or even be better.

What that means should become clear to you if you just reduce the purchase price of the property to €250,000 instead of the asked €290,000 and then calculate the same table you set up yourself. It does not matter whether you can actually push the purchase price that low – it’s about understanding what then happens with the numbers. This affects the entire calculation, massively. You have less incidental costs (property transfer tax), you have a smaller loan amount, thus less interest burden and you finish the repayment earlier at a constant repayment rate. In addition, the (theoretical) amount for provisions decreases – which does not change the actual costs for necessary repairs – and last but not least you are more likely and faster in the area of a tax-free capital gain in the event of a sale.

Unless you sell far below price to me – then of course I take that for myself.

I am very grateful to you for all the input from you alone in this thread. But please release me now. Or are we perhaps just talking past each other? As a thank you, I promise you a bottle of fine Amaretto.

Christian

Regards
Dirk Grafe