Where is the return on the property hidden?

Hi Bieber,

even though the admins don't like links, your linked article is very entertaining and I also think it is largely accurate. Homeowners tend to give their house too much or too little love. The return is therefore sometimes good but usually rather not so great (own opinion) :D And even if it would have been better with stocks over X years, at least you still have your own roof over your head, so yes, not too bad a feeling after all ;)

even if the admins don’t like links

I have completely according to the rules not posted a link, but only a URL. --- Hmm, after rereading the rule, I realized that "references" are also strictly prohibited. That would be very unfortunate ... I will have to be more careful in the future, but then I also can’t help with the return calculation.

And even if it would have been better with stocks over X years, at least you still have your own roof over your head, so yes, still not too bad a feeling

The question is what value you assign to this roof (to be determined by sale, which is why return calculations always include a clear end of the action). Apart from that, questions of return certainly do not concern owner-occupied residential space.

The question behind every link is first of all for what purpose... Advertising is not desired, the reference to a newspaper report is possibly something different.

The question is what value you assign to this roof (to be determined by sale, which is why return calculations always include a clear end to the action). Apart from that, questions of return certainly do not concern owner-occupied living space.

Exactly: a clear end to the action. For me, the return already plays a role – even if it is owner-occupied. Therefore, I found the article at least entertaining, because – even if I am not actively thinking about it now – maybe in 10 years I really want to live somewhere else. In that respect, the return is interesting. But this probably drifts too far away from the concerns of the OP :confused:

I would take another look at the income side. Especially in the greater Munich area, €12 per sqm is far too little, even for single-family homes. Especially with a garden and a good location, significantly more can be achieved, since even high earners can no longer build (no building plots available). In our new development area, more than €2000 cold rent is paid for a 140 sqm semi-detached house (plots around 230 sqm). What might also be interesting for you: rent it out to large companies - they always pay - even if no board member is currently looking for a place to stay.

Thanks for the answers, but so far nobody has been able to help me with a return calculation.
Assuming a personal tax rate of 30% (estimated), a loan of €200,000 for the stated conditions, expected rental income of €3,600/month, no rent increase, including depreciation, excluding renovation costs (for now), I come to a return of 1.4% in my Excel sheet. Inflation excluded, so basically nothing. In case of doubt, with rent loss due to tenant change or other issues, renovation costs, rather a loss than value preservation, which is the minimum goal.

Is this calculation realistic? If yes, it is obvious that this option is pointless.

Hello,

In my opinion, you are making a conceptual error because you calculate the repayment over the entire loan term. After 6 years, however, you would be finished and would have achieved a return of 1.4% by then. I'll leave it like that for now, as the point is the fundamental error:

After 6 years, the properties have a remaining term of about 54 years, and the basic return without ongoing costs (according to your calculation!) then rises to €43,200/1.7 million => ~2.5%.

So a jump of 1%, which you haven't even considered yet, at least if I understand your calculation correctly. Moreover, neither the land nor the property is worthless after 60 years if properly maintained. In the described location, it is to be expected that the increase in land value offsets inflation—so with your numbers, a positive return remains.

There are probably some other minor inconsistencies, but the 2.5% return is still too low to cushion the risk, so in your situation, I would recommend a developer/AR model with 6-10 apartments and later external property management.

I would never develop a single-family house/semi-detached house for rental myself but would always sell the land or lease it as a hereditary building right, so the suggestions made here are already quite good.

Best regards
Dirk Grafe