Use of Credit vs. Equity

I'll play the spoiler now. You are buying an apartment at low interest rates at a time when these no longer exist. But not everyone has noticed that yet. In 2-3 years, however, that could very well be the case. What will you do if the real estate market in Stuttgart lets off some steam during that time? How much depreciation can you tolerate and how would it change your current view of the deal if the apartment were then worth 20% less? Also consider that "prime locations" will be the most exposed to a correction.

Basically, with a purchase now, you will irrevocably destroy a lot of money on incidental purchase costs. A broker fee would likely be eliminated here, so you would "only" lose about €40,000. For me, that is a strong argument against an interim purchase and sale. The apartment either justifies itself as a rental property, but then with strict scrutiny of the yield. Or not.

I’m going to play the spoiler now. You’re buying an apartment at low interest rates at a time when these no longer apply. But not everyone has noticed that yet. In 2-3 years, however, that could very well be the case. What will you do if the real estate market in Stuttgart lets off some steam during that time? How much loss in value can you afford and how would it change your current view of the deal if the apartment were worth 20% less then? Also consider that "best locations" will be most affected by a correction.

Basically, by buying now you will irrevocably destroy a lot of money in ancillary purchase costs. A broker would probably be out of the picture here, so it’s "only" about 40,000€ that you lose. For me, that is a strong argument against a purchase and resale. The apartment either justifies itself as a rental property, but then with a strict examination of the return. Or it doesn’t.

I see it similarly. In this context, I would also question why your landlord is offering you the purchase and why especially now.

So with 60% financing = 370 TEUR you would already get the best interest rates on the market. But between 60% and 80% utilization, the "interest rate difference" is no longer that big. So with just under 500 TEUR financing, it should also look good.

That means if you are already thinking about buying something "bigger" later, the goal here would be to finance the "optimal" way also "for tax purposes", i.e. so that you later have a lot of equity for the "owner-occupied property."

Because it is difficult to finance hardly anything now + then take out a large loan when moving to something bigger, and use that as equity for another property. Because the tax office will later only consider the loans you take out now at the time of purchase for rental & leasing.

Also good would be:
- longer fixed interest period: 20 years? or even more
- flexibility, i.e. change of repayment, because as a landlord you want to have positive cash flow, and you can deduct the interest, so it would be good if you can reduce the repayment. (If you can repay more, then you can invest it separately)

I'll play the spoiler now. You're buying an apartment at low interest rates in a time when these no longer exist. Not everyone has noticed this yet. But in 2-3 years, that could very well be the case. What will you do if during that time the real estate market in Stuttgart lets some air out? How much loss in value can you bear and how would it change your current view on the deal if the apartment were then worth 20% less? Also consider that "prime locations" will be the most affected by a correction.

Basically, with a purchase now, you will irrevocably destroy a lot of money in incidental purchase costs. A broker fee would likely be eliminated here, so it's "only" about €40,000 that you lose. For me, that is a strong argument against buying and selling in between. The apartment justifies itself either as a rental property, but then with strict scrutiny of the return. Or it doesn't.

hmm, why is everyone now expecting that we will have 20% lower property prices in 2-3 years?

currently, the following speaks against falling prices:
- Inflation, currently at 8.1% annually (trend rising... probably double digits by year-end... will it ease next year? Sure, going from 10% to 5% inflation is already easing...)
- Building is more expensive than ever... and this is unlikely to ease... (due to building material prices + legal requirements... just complying with energy standards alone)
- Housing shortage still exists... due to higher interest rates + prices many buyers and builders have dropped out... but those who want to upsize, what alternatives do they have? Look for something new, and how does the rental market look? Very bad... meaning we will see strong price increases here in the next years because:
- Housing as a capital investment no longer pays off (prices & interest rates & regulations), meaning less construction in the next years, so fewer rental units = the situation will not ease.

perhaps we will see falling prices in 2-3 years if they rise another 10-20% this year and next... otherwise very unlikely, especially hardly at all in metropolitan areas.
Due to long fixed interest terms (which many other countries don't have), there will hardly be any forced auctions in the coming years... moreover, there is still way too much capital in the market... and before people burn it by inflation, many buy real estate even if they pay 10-20 or even 30% above value...

just my opinion ;)

difficult to forecast the market.
Rents would have to rise sharply for the real estate sector to still be profitable at 3% interest.
At the same time, regulations and costs for renovation of existing buildings and new construction are increasing.
Furthermore, the political risk factor deters many.

However, if inflation lasts longer and rents rise, property prices should also increase.

I myself have also put our planned new construction investment on hold for the time being.
0.0 desire to put myself through that, I prefer to watch from the sidelines.
We have now invested in photovoltaic modules, as I do not believe that electricity will permanently fall again below 30/35 cents.
At least not in Germany.

Of course it is difficult to predict... but I think it is exactly hard to say that prices will fall.

I had many clients at the beginning of 2020 who said: ohh, Corona, I will wait a few months because then prices will fall... and what happened? 2020 was probably the year when prices increased massively.

And because, as you wrote:
"At the same time, the requirements and costs for renovation and new construction are rising.
Furthermore, the political risk factor scares many away,"
which will result in less being built... although there is demand for housing.... besides, we now have many refugees from Ukraine who will probably stay longer if the war continues, these are factors that hardly ease the market.

The tendency will probably shift to people staying longer in smaller apartments because they won't find anything bigger, and if they do, it is too expensive...

And maybe the 3-4 person family will soon build 120-130 sqm instead of 160-180 sqm again... who knows... but there are hardly any plots of land either...