RAS Special Bonus Edition: Your most pressing real estate questions answered

We are doing something new here! I present to you: the Rente aus Stein mailbag! Answering reader questions so that you don’t have to ask!

Mar 31, 2022

Hello friends and welcome to a bit of an unusual edition of Rente aus Stein. We are doing something that I am actually incredibly excited about … answering your questions!! Call this the RAS mailbag if you will. A bonus edition, coming into your inbox for free. Why now you ask? Well, a look at the calendar provides an easy answer. We love our new structure with four posts to any given topic as they have really given us an opportunity to go deep … but when the calendar gives you an additional Thursday in a month, why not take the opportunity to tackle some of your questions?

Whether you have emailed, commented or asked us in a more personal setting (which, yes, is absolutely referring to our friends that we looped in for some feedback in the early days) - there have been so many thoughtful, relevant questions over the months that we have been collecting in a big, unwieldy Google doc. Time to make it a little bit less unwieldy by randomly picking out three to answer today.

If you have a question that you would like us to answer in one of the next editions, here’s how you can submit your own by the way - keep them coming, we love hearing from you! Not only are we going to research the s*** out of them for you - we promise to also really try and relay our own personal experience, whether flattering or not :/

Oh, and one more favour to ask: as you are among the awesome people already subscribed to this newsletter - why not forward it to a friend that is interested in real estate? Thank you!

Let’s get to it - and please tell us what you think!

Question: A friend of mine recommended using a credit broker to find the right bank for a real estate mortgage. What do you say?

This is a good one and - full disclosure - I think we can actually answer this one fairly easily because we have done both on different properties: gone straight to a bank but also worked with a broker. Which is maybe already a hint that, as with most things in life, there’s not really that one clear cut answer. Instead, you should try to understand the pros and cons for each scenario and then make an informed decision about what’s right for your personal situation.

The pros for going to a broker are fairly obvious: apart from the fact that, well, a broker’s job is to get you several offers for you to easily compare, there’s another big advantage we found. Especially if this is your first real estate rodeo, there’s a certain amount of hand holding you can expect from a professional like that which is going to make things easier for you. And if you fear that your offers will be more expensive, simply because there’s a middleman or -woman that also wants to get paid - fear not. Even though brokers are paid through commissions, many tests in Germany have actually shown that they will get you absolutely competitive - if not the best - deals on your loan. Ha. If you want to check out a few of the bigger, more well-known brokerages, we have compiled them for you here. You are welcome.

The biggest advantage to going directly to a (or your preferred) bank in my opinion is that you most likely already have an established relationship and, more importantly, can continue to build that out. As we have mentioned in one of the last editions: we did absolutely take a sliiiightly worse offer once for the sake of a relationship that felt right / better. So the bottom line and to answer your question is: try both, go with the best conditions but don’t totally negate the personal side of the relationship which might prove an invaluable (if intangible) benefit down the line, especially if you should run into problems of any sort. Cool? Cool.

Question: Old or new? I’m planning to invest in real estate but can’t make up my mind: I find it difficult to invest in older buildings when I don’t know what structural risks they might bear - while prices for recently completed apartments seem way too expensive … any advice?

I think this is a common question all real estate investors to be have to ask themselves at the beginning. The fabled crossroads, so to speak. In an attempt to not go the well known route of “it depends” again (because very often it DOES depend!!) … we are choosing to actually give you some whole-hearted and steadfast advice on this one: you are probably better off buying an older property - as long as you keep a few important points in mind. The difference in price plays a major role here with average-sized newly built apartments having been reported to be up to a whooping 180,000 Euro more expensive than existing properties - and a difference in price means there’s a much bigger upside potential for your investment down the line.

However, the price difference isn’t the only reason we think it makes sense to search for an older property with “good bones”, though: you mention the risk involved in buying a used home, when I would argue that there’s actually an even higher risk in going the other way: you actually have a real risk of construction delays (especially these days, with all the supply chain issues that continue to plague the world) as well as teething problems that come with a building that just hasn’t been put through the wringer yet. One last argument if you are not yet convinced: there is about 4 to 5 times as much supply for you to choose from. I think this all speaks for itself.

As for the things to keep in mind to minimise the risk of your older gem:

Make sure to double check on all things “substance” before you commit - and bring a pro!
Use potential damages in older buildings to re-negotiate the price
You buy cheaper but might have to make higher investments in the short- to midterm - adjust your financial planning accordingly

Good luck!

Question: I think I found the right property. What do I do next? What mistakes are crucial to avoid?

Amazing, congrats! A few things that come to mind:

Make sure to bring a professional to assess the property with you - whether that’s a fully blown appraiser that you pay a fee, an architect friend or something in between
Realtors (on behalf of their sellers) will try and hustle you along - and the market also doesn’t really scream “we have all the time in the world, there is no one else interested” at the moment. But please, take your time and do not rush this decision. It’s a big one and you need to be sure. Better to let a good deal pass you by than making a very bad deal quickly I’d say
Invest a bit of time to find a good notary - you need one and if they don’t suck that will make a huge difference (believe me, it happened to us!)

Of course, there’s a ton more to think about and I am going to shamelessly use your question as a plug to say “Subscribe to Rente aus Stein and our entire archive is available to you!” I promise it’s worth your time and money because we have covered questions like “some things to not forget when you buy a house” and “making your life easier after the transaction” in the past in great depth.

Godspeed and let us know how it goes!

Next week, on Rente aus Stein: We are going back to our regularly scheduled programming. A free for all post on how to settle on the best real estate strategy. Why not subscribe to read all four posts next month?

Disclaimer: We are not lawyers (sadly) and as such can’t give you legal and/or tax advice. We are simply telling our story in the hope that it’s inspiring to you.