Sell apartments or keep them?

Well, I wouldn't call your equity almost nothing. Besides, you have secure jobs. Unless you belong to federal civil servants affected by structural reforms or a transfer-prone authority, like the Federal Police or something. If you keep the repayment low and rely on special repayments, and maybe still tweak the house, it will be challenging, but you could manage it. About 10k net rental income is suitable for special repayments. Of course, a trip to New Zealand every year is out of the question. :D

Such a high financing is too risky with just your income. When including rental income and worst-case sale, it looks much better.

Overall, it is "solid". I also assume that the rental properties are free of encumbrances and the rental income only passes through the taxes. Thus, also a manageable risk.

Hi,

My statement about the equity was purely related to the basic assets of the rental properties.
Our "own", saved equity is a lot of money for us, that's clear.
No, our location is - according to today's circumstances - safe.

The properties are free of encumbrances.

Regards

Brief note on the crediting of rental income. Even if you actually receive rental income, for the bank it does not exist because there is a usufruct (therefore, expenses/reserves are also not negatively considered). This can have a very negative impact on your financing or even cause the financing to fail (residential property credit directive).

Brief note on the crediting of rental income. Even if you actually receive rental income, for the bank it does not exist, because there is a usufruct (therefore no expenses/reserves are negatively considered either). This can have a very negative effect on your financing or even cause the financing to fail (residential property loan directive).

I think you are once again on the wrong track.

If the description of the OP is correct or I understand it correctly, he together with his brother is 50/50 owner of the rental properties AND each receives 1/6 of the rental income as usufructuaries. So he is both owner and usufructuary; the income appears annually on the tax return as income from VuV.

It is downright absurd to consider such income as non-existent—especially with the reasoning that the usufruct opposes it. The opposite is true—the usufruct guarantees each of the two brothers 1/6 of the income. In addition, a minimum share of 10% per usufructuary is legally prescribed, i.e., these shares cannot be retroactively set to zero; the legislator forbids that.

If your bank assumes it to be zero, you are welcome to do so—but I can assure you from my own experience that there are banks that have no problem at all to appropriately consider a property worth approx. €3 million (10 residential units at €300K each) and that generates €90K gross cold rent annually due to lack of encumbrances in financing. Anything else would be absurd.

In short: the financing situation here is quite good.

:

I am pragmatic with such things. The first thing I would do is sell the parents’ rental property to raise equity. It is a single property, moreover 500 km away from your place of residence, if no one else in the family is taking care of the property nearby or emotionally attached to it, then that is the simplest solution. It generates equity and saves you quite a bit of work.

Splitting the rental property is possible, but not as easy as you imagine. The construct with usufruct involved some brainwork by a notary and/or tax advisor, and you received shares in the course of the anticipated inheritance/gift. This is usually linked to conditions—if you dissolve these conditions because it is suddenly capitalized, that can have tax consequences. You definitely need to discuss that within the family with a tax advisor.

Moreover, the property would have to be divided into one or more individual apartments (certificate of separability, but for rental properties this is purely a formality), your mother’s and uncle’s usufruct rights would have to be capitalized and paid out proportionally to the value of the apartment to be sold or offset by an increase in shares of the remaining apartments.

You see … it is certainly easier for you if you sell your father’s parental house and/or keep the rental property as a whole without tinkering with the shares and find a bank that considers the value of your usufruct in the financing. This can be arranged within the family together with the bank.

Feel free to contact me personally for questions.

Best regards Dirk Grafe

If the description of the OP is correct or if I understand it correctly, he and his brother are 50/50 owners of the rental properties AND each receives 1/6 of the rental income as usufructuaries. So he is both the owner and the usufructuary, the income appears annually on the tax return as income from capital assets.

If he is indeed entitled to usufruct (I understood it differently), then it is also income creditable for his bank. I agree with you on that. But it reads differently.

By the way. No bank is allowed to credit income if it goes to someone else. Nothing more and nothing less needs to be considered here.