How to Finance a Rental Condominium?

We can finance rented condominiums through our loan partners up to a maximum of 100% of the purchase price. However, this requires a "reasonable" property and, above all, a good credit rating. If you think you can buy and finance a rented condominium without a minimum of financial reserves, you are mistaken (even if some self-proclaimed real estate gurus like to claim the opposite).

Many banks and savings banks (but not all) have tightened requirements for investors over the last few years. Some banks have implemented income limits, while others require a higher surplus in the sog. Budget bill (= comparison of monthly income and expenses). In addition, banks also have different approaches to rental income and to sog. Management costs. In practice, this means that banks calculate very differently for an investor than for an owner-occupant. So it can happen that the financing of an owner-occupied apartment would be possible without any problems, but the banks "shake their heads" at the same apartment as a capital investment.

How much equity capital must be used?

If you want to be considered a capital investor, you must expect to invest your own capital as well (and not only that of the bank). As a general rule, you should pay at least the incidental acquisition costs yourself. Whether and in what amount further equity capital is necessary or. is useful depends on various factors, for example:

  • the valuation of the property by the respective banks (if the purchase price is significantly higher than the banks' valuation, more equity is definitely required)
  • the interest rate conditions for different loan-to-value ratios
  • Your own asset situation (after using equity, you should still have enough reserves)

Contrary to the popular opinion of many "real estate experts", tax components do not play a real role in the equity investment.

Do grace loans make sense?

In the old days, people liked to finance rented properties with grace loans. To do this, you took out a loan with a bank, which you then repaid in one sum at the end of the agreed term. For this one has then parallel to the loan usually a capital or Fongebundene life insurance concluded. The people were then often calculated that the return from the savings contracts is higher than the loan interest "after tax. This was a good deal, but mostly only for the banks resp. Agents of such "tax-optimized combination financing". At the latest since the abolition of the tax privilege for newly concluded life insurance policies, the issue had been settled.

Today, banks generally no longer offer grace loans (except in combination with building savings contracts). When financing a rented condominium, you should expect a minimum repayment of 2% per year (hardly any bank does it below that). With a high loan-to-value ratio or "advanced age", however, the required repayment may well be higher.

Whether an amortization-free loan in combination with building savings pays off (which can happen), must be considered and calculated individually. Basically, the shorter the total term of financing, the less such models pay off. This is rather a case for a long-term financing (20 years and more).

Speculation period of 10 years?!

If you resell a property before 10 years have passed since you bought it, you generally have to pay tax on the gain. The only exception is if you used the property yourself in the year of the sale and the two years before that. However, the same is true if the property is owned by a dependent during this period (e.g.B. Child) was left free of charge.

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