Rarely do I ponder my similarities to the common squirrel - I live in Berlin and don’t even have a backyard. Yet this year, I have found myself thinking about those furry creatures (didn’t Carrie Bradshaw, the fairy godmother of all pondering call them “rats in cuter outfits” or something?) more often than I like to admit, always with a faint smile and a warm satisfaction engulfing me.

As a global pandemic rages all around me, I can, more than ever, relate to their comfort of knowing that I am actively (well, semi-actively, but more on that later) doing something for my financial future. Hoarding nuts so to speak, human style. I bought a house as an investment property. 

The funny thing is: I kinda stumbled into, with very little intention and even less knowledge about the matter. The proverbial starting gun to my dabbling in real estate was fired by a friend who, honestly, never stood out as being an especially savvy finance whizz. But when the landlord he rented his Berlin apartment from approached all tenants about purchasing their individual units he must have had a moment of clarity (I can’t believe I never asked what actually perspired for him to come to this conclusion) - and made an offer for the entire house. Damn. Subsequently, he had a house. And I had a goal.

In hindsight, his (and ultimately: my) timing could not have been better, though: The real estate market was booming generally (exhibit a), with rents rising faster than purchase prices all over Germany (exhibit b). Berlin specifically, initially deemed “too big” a city immediately after the wall came down, was luring the young and hip and bold with dirt cheap rents, thus powering a fly-wheel of population- and subsequent rent increases. Turns out, it didn’t take a genius to understand that compared to other European capitals like London and Paris whose rental-price-horror stories are breathlessly whispered about, Berlin was definitely just as livable at a third of the cost. 

Thus begins my real estate tale. What have I learned, you ask? Well, these are the five biggest takeaways from this endeavour: 

1. That old chestnut about taking the first step … yeah … 

It’s true. It really is. If I look back now, more than 5 years later, I am amazed at the many steps we took to get here. The challenges, phone calls with lawyers and investment decisions. Not only am I amazed, I almost feel a retroactive sense of dread and inertia. How did I overcome it then, apart from whistling loudly and cheerfully as we embarked into the dark, dangerous forest? By only looking at the immediate next thing - and embracing our naivete to the fullest. We literally took one step after the next, which also creates that urgency you need, just when you need it. We only talked to banks once we saw the first property we liked. We only started researching notaries when we were ready to close the sale. And we definitely never thought about builders, property managers or real estate lawyers until we needed them. 

2. As with most things in life - it’s more fun if you are not alone 

Before I go on I should probably explain the “we” in this text that I have thrown around freely up to this point. Which also brings me to my second and potentially most important learning of this entire endeavour. I bought a house with my best friend. So technically, we each bought a half house I guess. Obviously, everyone’s situation is different and you probably shouldn’t favor a friend over a husband if you happen to have one that wants to buy a house with you … and if you feel capable and willing to do this alone: hats off to you! But from a totally personal standpoint - I probably wouldn’t have done this alone. And got majorly lucky that I didn’t have to. 

If you are anything like me, you might want to consider finding someone else to tackle this with. In my opinion, like with most hard things, it’s easier if you get to share the burden as well as the reward. It helps if you have both skill sets that compliment each other (he is the numbers guy, I am the creative writing type!) while sharing a similar outlook on financial goals, social responsibility and how to divvy up the work. 

3. Be prepared for this to be a lot of work, at least initially 

This point kinda directly builds on the first one. While taking it one step at a time certainly was the right strategy for us, one of the first things I tell my friends who ask about how we bought our house is that this was A. Lot. Of. Work. I guess all “get rich quick” schemes, whether they involve real estate or not, really are scams after all. Buying your first investment property or even building out a portfolio down the line might be great ways to invest or possibly eventually have that passive income that so many dream about. It might also be something you can do while you hold a full time job or raise a family (we did). But it certainly isn’t something that magically happens over night, without some hustle. 

Here’s what’s cost us the most amount of time in that initial phase until the first purchase, ranked from “biggest time suck ever” to “least time spent”- and how I have felt it’s easiest to get done. 

1. Actual viewings - because you drive all over the city to locations you have ever been to, because you wait outside and then tour and ask questions - this really just takes time. I haven’t found a way to make that change (but let me know if you do). Some, especially private sellers do weekend tours - otherwise you will have to try for after work slots or lunchtime. My least favored way of doing this was to take time off work. Naturally. 

2. Paperwork with banks - this is a lot of forms to fill out and a lot of supporting documents you need to collate, like bank statements. You can do this in between, whenever you have a few minutes, late at night. The best way to do this is to set up a sort of data room because you might need some of this stuff (like your passport copy) recurringly. Make sure to name all files consistently. 

3. That initial desktop research of going through hits on our property search, googling locations, looking at floor plans and aligning on whether each individual object was worth pursuing. This actually isn’t half bad, maybe also because it can be quite fun to dive into some of these properties and where they are. This is also something you can do whenever you have a moment. I found that it works best to do this daily - because some properties will get interest pretty quickly. But also because it can get overwhelming if you don’t stay on top of it. 

4. Correspondence with sellers and agents to answer initial questions and schedule viewings plus follow up questions on documentation etc. - this one is actually pretty painless. Keeping a running google doc really helps in my experience - unless you have such an impeccable inbox filing system that you can keep on top of it all with email and your calendar alone. 

4. Start with what you know - you can always get more experiential later 

When initially looking to buy, we very deliberately stuck to the two cities we know best and currently live in. Those happen to be Hamburg and Berlin, the two largest cities in Germany. As always, there’s two sides to that coin. Migration to big cities is a well documented megatrend globally - meaning on a macro level there will most likely always be demand for housing in those places. You supposedly also get a wider selection of available properties based on sheer size of the market alone as well as more property agents and firms. On the other hand, well, downsides: Prices tend to be much higher already in bigger cities, meaning it's harder to discover that underpriced gem you are hoping to find. We have definitely come across the properties that ended up being bought, unseen, by investors who clearly had more cash lying around than us. In the end, per my second point, we went with pragmatism: buying without viewing was not an option. Viewing in a different city is almost impossible while maintaining your life, commitments and job, just because it takes too much damn time. So even if word on the street is that city x is most underrated and promises big investment returns - I would probably stay somewhat closer to home initially. Additionally, and I think this can’t be overstated, you just have a better sense for the value of properties in cities you know - even if you don’t really know the specific neighborhood you are looking to buy in. You know the public transport system and its pains, you know how far away the attractions of your city, universities, and desirable neighbourhoods are. You gotta start somewhere. Start with what you know. 

5. If you “buy cheap” - you are probably more than half there 

God, this one seems obvious, doesn’t it. Yet, looking back on our first purchase and crunching the numbers now it can’t be overstated how big of a difference this made. After initially viewing multiple properties in a price range that makes me half cringe and half laugh in hindsight (per my second point: I really went big on the “honing your property skills by pretending to be so much more flush in cash than you really are”) we eventually found and bought a house that was overall much more affordable (read: smaller) but also sported some good initial financial indicators. 

While we’ll certainly do a whole separate post on the financials alone, these are some of the initial things you could be looking out for: 

• The obvious one (make sure to compare it to other listings if you haven’t already gotten a feel for the ranges): cost per square meter 

• Not only the second obvious one, the actual rent paid per square meter, but more importantly historic tenant turnover data: while in Berlin for example, where rent on mostly rent stabilized apartments with older tenants is mostly very low, we found that tenant turnover in our property was much higher than expected, allowing us to modernize and build out apartments much more frequently than expected, thus, in time, allowing us to increase rental income. 

• Apart from what’s already there, potential for additional space in the future can obviously skew your calculations - we have looked much more favorably at properties that have space for a second (smaller) unit in the courtyard for example or where you can build out an attic. Our house in Hamburg on the other hand is only two stories high with the surrounding buildings sporting four floors, meaning there’s probably potential to increase the rental space through additional floors. It’s unlikely that a property that’s completely non-viable financially becomes a good investment through this potential alone - but it’s something to consider as it might tip the scale. Don’t forget, though, that you will need to obtain valid building permits down the line - which might be an investment with an uncertain outcome in itself. 

How’s that for a high-level view on buying a house? It certainly feels like every single aspect of this post is worth diving into in a much deeper fashion, with a ton more resources for you to consider. And we might do that. But today’s goal was to make all this sound un-dauntig and doable. Did it work?

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