Need your assessment for the renovation of a rental property

Therefore, I was surprised that the post by "Galdreth" [...] was rated much more positively by almost everyone than my request.

With , it was about owner-occupation, which is a completely different perspective (as I already told you).

If I look at the rental index of the city of Essen and take the street "Milkdelle" in Haarzopf as an example, it shows me a customary local comparative rent of 5.95. Then, if I enter your other data (single-family house, size of the apartment, etc.), I get 7.98€/m² with a new heating system, which I can increase to a maximum of 9.05€/m² with further energy measures (windows, facade, etc.).
With about 180m² of living space, the measures beyond replacing the heating would bring you no more than €2,500 of additional cold rent per year.
Taxes and subsidies aside – it simply isn’t worth it!

Dr. Hix, I notice you have a firm opinion in your "it's not worth it." Yes, there is indeed a difference between self-use and a rental property.
In Galdreth's project, it is about his financial existence and possibly his marriage. For me, it is a project that "only" involves a chunk of money, which might not improve my small pension. I do not have the pressure that Galdreth has, but I also cannot afford a failure.

Times are currently changing, if you think, "if the tenant saves on heating costs, then it doesn't pay off for the landlord." That may still be financially true at the moment, but I think over the next few years property owners will have to pay the CO² tax. I decided on geothermal energy in 2011 when building new – the subsidy had just been cut – yet I would still make the same decision today.

What is the reward? Reward is not only cash but also security, creditworthiness, credit possibility even during macroeconomic changes, and joy in ownership. I believe there are enough users in the forum who look back at their completed construction projects with pride after an "insane time."

I mean, selling brings me nothing if I cannot safely invest the money at 2 - 3% interest – and making a small fortune on the stock market from a large one – that’s not my thing.

I first need money in 5-6 years because of retirement, so it lies in the savings account. But I would have to sell now – that is clear.

By the way, there is no cap on rent increases for new rentals in tenancy law, but an 8% limit on the energy renovation costs, which of course are not realizable! The rent with 2 x 750 euros is more than realistic, even apartments are more expensive here. So I pay off a bit over 5 - 6 years with income that I wouldn't have if I sold, and the house still belongs to me. While the money lies under your mattress, I could pay off the loan. Afterwards, I would have a renovated house, which would have cost me an additional 50K of my already declared special repayment. A two-family house with a value over 500K with the option of sale or rental – where I prefer the latter and pass it on to the next generation. One can certainly assume security and value retention/inflation protection of the property. The already declared tax depreciation of 11,000 euros p.a. over 5 years is, as you say, "six of one, half a dozen of the other," for me cold hard cash, and with it, I finance my vacation once a year.

I will stay away from the project if the costs are too high and/or I cannot find companies that can also implement it timely. I will stop if someone convinces me that the effort is too great and simply nonsense, and that one should then think about a new building right away. Energy consultants from the greater Essen area are hereby encouraged to contact me, advise me, and possibly accompany the measure.

Mr. Hix, I find it okay if you see it differently, but then you could be a bit more concrete than just saying "sell it and then it’s fine."

Or keep the house as it is and only fix the heating and be annoyed for another 25 years with repairs and CO² tax, and deal with tenants who rightly complain about the windows, poor building fabric, and heating costs?

There was a study by the DIW in the early 2010s that, among other things, found that private landlords on average only achieve a return of just over 2% and, after deducting inflation, actually lose money on renting. They just don’t realize it because every month "good" money lands in their account and any potential investments have long been mentally written off, or apparently hardly anyone accounts for it on a long-term basis.

So I pay something off over 5 - 6 years with income that I wouldn't have on a sale and the house still belongs to me. While the money lies under your pillow, I could pay off the loan. After that, I would have a renovated house, which would have additionally cost me 50K of my already explained special repayment

My point is that you neither recoup the costs of your "complete renovation" within the desired period through higher rental income, nor through depreciation, nor through subsidies. Resulting from this is my advice: rent out as unsanitized as possible or just sell.

You simply add the rental income that would be achievable anyway to the "benefit" of the complete renovation, although you could achieve it in any case. That means: If you put an ad online tomorrow, you could rent the house (unsanitized) as of 01.01.2020 for €5/m².

However, if you only carry out your planned renovation, you could rent it out at best by 01.09.2020, then, let’s be generous, at €8.50/m². So after the renovation you earn €3.50/m² additionally. With 182m² we are talking about roughly €7,650 p.a., which does not even cover the loss from the extended vacancy (5*182*9=€8,200) in the first year.

Added to this are risks such as vacancy, problem tenants, botched renovation, cost increases, "rip-offs," further repairs on the unsanitized structure, and so on.

The exciting question is therefore: Can you really pay off €175,000 by retirement with at best €7,650 plus any tax advantages? I think "no," but please get professional advice in this regard.

But if – and this is the impression I've gained here – you simply "feel like" doing the project and potential losses don't hurt you anyway, please don’t let some jerk on an internet forum stop you.

I only need money in 5-6 years because of the pension, so it is on the savings account. But selling I would actually have to do now - that is clear.

If you really need money in 5-6 years, then long-term renting is the wrong option anyway. I can only agree with Dr. Hix on all points.

Bemi project from Galdreth is about his financial existence, possibly marriage. For me, it is a project that "only" costs me a chunk of money, which might not improve my small pension. I don’t have the pressure like Galdreth, but I also cannot afford failure.

I really hope that my marriage doesn’t depend on the construction project. Our project also involves a good deal of idealism, which drives the energy efficiency efforts. Economically speaking, it certainly is not the optimal solution in our case. Basically, I think it’s good that energetic refurbishment has gained high importance. However, when considering finances, you have to calculate very carefully whether it is worthwhile with the subsidies.

Hello Galdreth, I did not want to offend you regarding "the marriage." However, I deal professionally with construction clients and there are indeed some marriages that have not survived the construction period. I must admit, I only skimmed your project – but I can say that KFW 55 is already ambitious. Yes, the subsidies are often not sufficient to cover the additional effort. Therefore, for this house, I only renovated the roof, windows, and joint facade as individual measures since I did not want blown-in insulation. Then immediately without interior roof finishing but already with large windows and heavy insulation with heat protection. I live behind this house and enjoy the measure every day. The value has since doubled here in Hamburg, but you would only benefit from that if you sell. I agree with you that an energy-efficient renovation is worthwhile in the long term. So I will continue to pursue my project in Essen in order to then make a somewhat wise decision for myself, which will at least lead my investment to success in the long term. I wish you good nerves and success with your house construction project.