Sell or rent out a condominium for financing?

I own a condominium (built in 2000) that is worth approximately €150,000 - €170,000! (Currently self-occupied). Soon I will be buying a house, so I am considering what to do with the apartment. Until now, I thought selling would be the best solution. But now I have done the calculations and I am not so sure anymore...

Basically, I have two options (calculated with current interest rates):

1.) Sell the apartment
Proceeds about €150,000 -> required loan amount about €200,000; full financing over 15 years (monthly rate about €1250). In total, I would have to pay about €21,500 in interest.

2.) Rent out the apartment
Monthly rental income about €500 - €550, of which I would put €400 toward financing and use the rest to build reserves. I would be finished with repayment in about 23 years and would have to pay a maximum of €115,000 in interest. The apartment would still belong to me and would be a nice retirement provision (I have not made any other retirement provisions due to the interest rate situation).

But I still need to talk to a tax advisor to find out if the rental income would be tax-free in such a case. Renting also always carries a small risk if the tenant cannot pay, etc... that would be a problem for me (not to mention rental scammers).

The surpluses from the rental are subject to taxation. Surplus = rental income + received ancillary costs minus depreciation (2% of the acquisition or production costs) minus interest for loans of the condominium minus paid ancillary costs and maintenance costs. Has the loan for the apartment been paid off?

Consider rental losses. Consider repairs. Etc.

- there is no loan for the apartment! However, I would pledge it in the course of the house purchase so that the interest rates might possibly decrease further. (I calculated a loan amount of €350,000 for a construction project of €420,000; therefore hardly any equity - if you include the apartment as collateral, the installment should decrease).

- that's why I calculated conservatively regarding the interest rates and would also set aside 20% of the rental income.

But if I then have to pay taxes on the rental income, my calculation would be invalid anyway. (I thought if I include the apartment as collateral and encumber it with a land charge, it would be similar to not having paid it off - therefore there has always been a loan on it).

Of course, you earn income from V+V, maybe positive and have to pay taxes, maybe negative and receive a tax refund. At least you do not get all the additional costs (administrator, maintenance reserve) back from the tenant. It is a calculation example. Borrowing money for 1.5% or getting a return from the apartment of x%. The return is probably higher.

What you might want to have the tax advisor check if you take out a separate loan for the condominium is whether these interest payments would still be tax-deductible. With an existing loan, that would not have been a problem. With a new loan in connection with a change of use of the building, I’m not sure. I’ve been out of the income tax topic for too long and currently don’t have time to research it. Maybe can also give you a tip as a tax advisor.