Using low interest rates for investment (for the self-employed)

Hi,

the title is a bit sensational, but I hope for an exciting discussion.

As a self-employed person, I have the following problem: high equity (500k+) but irregular income. Therefore, I hardly get any financing for my private purposes (our demands are also not insignificant). In this respect, I wonder if there are other ways for me to benefit from the currently low interest rates?

Who is familiar with the requirements banks set for financing properties/apartments that are intended purely for rental? These can be either condominiums or commercial properties. Are there good/bad experiences with certain banks? How high must the equity ratio be?

I would particularly appreciate experiences from self-employed people/entrepreneurs here.

Best regards

Hello Tom,

in your situation, very few people are like this, but I cannot understand your criticism regarding lending to the self-employed. Or you are simply at the wrong bank. Even the self-employed usually have income over the years with which loans can be serviced. If it were as you say, there would be no self-employed people with property, because only very few real estate is bought with wealth.

If your idea was the [Eier des Kolumbus], probably everyone would do exactly that. You will probably achieve a higher return than with a savings account, but you have to weigh that against risks and effort. The same applies to stocks or other investments. More return = less flexibility and more risk.

For rental properties, you should roughly aim for at least 20% + additional costs (approximately 30% of the purchase price in total). Below that, it becomes difficult without providing additional collateral.

Unfortunately, I still do not understand exactly what your goal is. Do you already own owner-occupied residential property yourself? In my opinion, the return here through saved expenses (wealth building) is still the most interesting.

Hi Toxic,

thanks for your feedback. My experiences are based on conversations with Haspa, Commerzbank, LBS in recent months. Due to the new lending guideline since March 1st, only fixed income is taken into account for self-employed people. For me, that is 5300,- EUR net. However, my actual annual income including bonuses, capital gains, etc. is rather about double that. This is how I was able to save corresponding equity in recent years. We also already have a condominium that I bought and financed accordingly in 2011. At that time, despite lower income + assets, that was not a problem. We now wanted to look for a house, as said, the demands are of course quite high. But I cannot get more than 600,000€ loan because "only" the regular income is used to repay the loan. The apartment as additional security was also not an option for the banks; if then only a sale preferably before signing anything new (so the exact wording).

In this respect, for the properties we were interested in, we had over 50% equity, which in my opinion makes little sense given the currently low interest rates. And when I also take into account the tax advantage for rented properties, the question arises whether it even makes sense currently to buy something of your own, or rather "to invest" and rent out.

That as a bit of background info.

Regards

I am also asking again for clarification: You could build a property for about 1.1 million (500 + 600). However, you find that this arrangement makes little sense because normally (income as an employee), you would be able to finance a higher amount and would have to use less equity (in other words, you want to use the leverage effect). On the one hand, you would like to have your own home (as a house) – on the other hand, you are not willing to use that much equity. Now you are considering acquiring a corresponding property as an investment and renting it out (because the financing conditions are more favorable here). Do you then want to rent it to yourself/yourselves? In other words – your company buys the property and rents it to the private person. This way, your company gains additional income (which is partially distributed to you) and you get your own home (which officially belongs to your company). Are your thoughts going in this direction? Although I do not quite understand why the bank does not accept the apartment as additional collateral (unless another bank still holds first priority in the land register because the financing is still ongoing).

I wonder whether you want to become a homeowner because it is nice to live in your own house and express and realize yourself there accordingly, or if you are simply looking for an investment to make more money from money.

Otherwise, the topic is very well handled by :)

Otherwise, the topic is very well in the hands of :)

YMMD