Location before yield
A property cannot be moved. A good location secures lettability and value over the long term. A seemingly high yield in a weak location often comes at a high price. Dresden is in demand as a university, research and semiconductor hub, but the individual location always remains decisive.
The key figures
The gross rental yield is the annual net rent (excl. utilities) divided by the purchase price. The net rental yield also takes account of purchase costs and non-recoverable costs. The purchase price multiplier shows how many years of rent the purchase price equals. Cash flow shows what remains each month, or must be topped up, after interest, repayment and costs.
Depreciation
For residential buildings, straight-line depreciation is generally 2% a year, 2.5% for buildings completed before 1925 and 3% for those completed from 2023. For new builds with construction starting between October 2023 and September 2029, declining-balance depreciation of 5% is available as an alternative, and under certain conditions a special depreciation allowance in addition.
Listed building
For listed properties, eligible renovation costs can be depreciated under Section 7i of the Income Tax Act (EStG) at 9% a year for eight years and 7% a year for four years. A certificate from the heritage authority is required. An experienced developer and a realistic share of renovation costs are crucial.
Risks
Vacancy, maintenance, interest rate changes on follow-up financing, changes in legislation and later saleability belong in every honest calculation. There is no guaranteed yield. Please discuss tax questions with your tax adviser. Manfred Braun will gladly work through the figures for your situation openly with you.
This guide provides a general overview and does not replace legal, tax or financing advice.
