Sell or rent out a condominium for financing?

Basically, the interest on loans for a privately used property is not tax-deductible; not even if secured on a V+V property.

However, there are structuring options on how to – tax-wise legitimately – allocate the interest on loans to the V+V area. Recently, the BFH issued a ruling on a model, which I don’t have here at the moment (I won’t be back in the office until Monday). I found the model somewhat complicated, it involved a GbR if I remember correctly – but it was very bank-friendly. I then talked to a colleague about it and we came up with simpler solutions/tricks like selling a condominium to the wife, who finances it externally and then rents it out (the bank just has to cooperate because of the new debtor; in the BFH case the bank probably added another debtor to the contract). Then the interest on loans is where it ought to be :).

As already mentioned, the questioner should calculate about EUR 1500 / year in additional taxes from the rental.

I would join Musketier and Merlin and advise you to get informed here. In the end, your calculation is void because the tax office does not accept the collateral and loan interest in the profit and loss statement. You should also consider that there can definitely be rental losses.

Thank you for all the answers - I will probably sell the apartment after all. My gut feeling tells me that this is better.

I would do that too.

...just calculate whether alternatively a fixed interest rate of 5 years (or even a variable interest rate at zero point something) would be attractive if you keep the apartment. If in 5 years the interest rates are still as low as they are today (not entirely unlikely, with the ECB policy...) and the tenant situation is relaxed, then you simply conclude another 5 years, otherwise you sell the apartment in 5 years. With a bit of luck, you will have two paid-off properties by retirement.