Real estate in Germany as an investment: buying and financing a property with bank-independent advice
Listed buildings, new QNG developments, care homes or two purchases at the same time do not fit within every lending policy; creditworthiness is rarely the reason for a refusal. We (§34i GewO) know, from our experience with over 650 banks, which institutions will finance listed buildings, QNG properties and two purchases at the same time. When it comes to property investment, the financing determines the return; therefore, investment advice is incomplete without consideration of the financing aspect.
How do I finance a flat as an investment?
The bank assesses a flat as an investment more strictly than a property for owner-occupation, but does take the expected rental income into account, albeit with a deduction for management costs and potential rent shortfalls. The key factor is that the debt servicing remains viable even when calculated conservatively. We structure our approach around the property’s yield and tax implications rather than focusing solely on the monthly instalments.
Why are investors assessed differently?
Banks often scrutinise investment properties more closely than owner-occupied properties. They factor in the rent at a reduced rate and take into account lettability, condition, reserves, location and their internal lending guidelines.
- Comparison of over 650 banks
- §34i-certified licence
- experience since 2016
- 89 published case studies
In the 11 financing deals documented here, the purchase prices ranged from €248,000 to €524,000. Each amount is stated in the relevant report and can be found there.
Non-standard investment options · Over 650 banks · Independent of banks · High loan-to-value ratios for top credit ratings · Self-employed individuals & tax non-residents · Free initial consultation
How do I finance a flat as an investment? The bank assesses a flat as an investment more strictly than a property for owner-occupation — but it does take the expected rental income into account.
However, the rent is not recognised in full, but with a deduction for management costs and loss of rent; the key point is that the debt servicing costs are covered even with a conservative calculation.
Depreciation of the building has tax implications: straight-line depreciation; for listed buildings under Section 7i; and for new QNG buildings as special depreciation — the tax benefit boosts the return, but cannot rescue a weak financial forecast.
Anyone building up a property portfolio will also have to consider the issue of total debt and the level of mortgage financing across several properties.
A common mistake is to focus solely on the gross yield; the bank, however, looks at the sustainable cash flow.
Location also plays a role: in regions with stable rental demand, banks assess the risk of rent default more favourably than in economically disadvantaged areas, which has a direct impact on the potential loan-to-value ratio. We determine which property is suitable for which investment structure on a case-by-case basis.
Can the purchase price be fully financed? Yes — provided your credit rating is very good and the monthly repayments are manageable, the purchase price can be fully financed; the associated costs are covered by your own funds.
Is rental income taken into account? Yes, many banks include sustainable rental income in their overall assessment — usually with a safety margin.
There are three reasons for a refusal: creditworthiness, equity – or the lending policy. Nobody can change the first two. The third is our area of expertise. For investors, the property and the combination of factors constitute reason 3: The income must cover the repayments — the property type, rental basis and how this interacts with existing financing do not fit every set of guidelines. A situation that does not fit every set of lending guidelines is not automatically a deal-breaker. However, we cannot resolve a financing arrangement that is not economically viable. Case studies for reason 3 →
Many buyers assume that rented flats are easier to finance than owner-occupied properties. It’s not quite as simple as that.
Banks often scrutinise investments more closely. Key factors include:
- long-term lettability and rent levels
- the condition of the flat and maintenance requirements
- the owners’ association’s reserves and service charges
- long-term value growth in the area
- the respective bank’s internal lending guidelines
It is often the financing bank’s experience with investments, rather than the interest rate, that is the deciding factor.
There is also a persistent myth that there are no tax benefits associated with property — in fact, for let properties, depreciation, income-related expenses and interest on financing can be claimed for tax purposes.
Why does the bank value a block of flats on current rents?
In the case of a block of flats, the bank assesses the income, not the purchase price: it bases its calculations on the rents that have actually been agreed today — even if the market rent is higher, the agreed rent is still the one that counts (Section 10(1) BelWertV). The ‘potential for rent increases’ stated in the property brochure is not factored into the bank’s valuation.
Financing the purchase of a block of flats: How much equity do you need? Added to this is the capitalisation rate, which the bank uses to convert the return into a value: for residential properties, this is at least 5.5 %.
In expensive cities where the rental yield is lower than this, the mortgage lending value therefore remains significantly below the purchase price — you can bridge this gap with more equity or by paying a higher interest rate on the portion exceeding the mortgage lending value. The ancillary purchase costs are usually covered by equity as well. How the bank determines the value step by step: Calculating the mortgage lending value.
Which types of financing do we arrange most often for investors?
No two investment journeys are the same. The following scenarios are particularly common in practice:
the first rented flat as a first step towards building wealth; financing with high loan-to-value as leverage — provided you have a very good credit rating and an income sufficient to cover the repayments; purchase costs covered by personal funds; building up a portfolio of several properties; new-build and listed properties as investment assets; investments for the self-employed and tax non-residents.
For each of these approaches, you will find an anonymised case study below.
Why does independence from banks make the difference?
A single bank is only familiar with its own lending guidelines. If it rejects an investment proposal, this can quickly come across as a blanket refusal.
As an independent broker with access to over 650 banks, we specifically seek out the institution that regularly provides financing for your particular situation — rather than letting you waste time with rejections.
Investment properties and property investment calculator: When is a property a worthwhile investment? A property is a worthwhile investment if the debt servicing costs are covered even when rent is conservatively estimated; the rental yield calculator shows how the rent and purchase price stack up.
Do we also say no?
Yes, frankly: not every financing makes sense, and sometimes the best advice is more equity, a different property or waiting a few months.
We thrive on long-term trust, not on quick deals. If a financing option isn’t right for you, we’ll tell you straight — even if we don’t stand to gain anything from it.
Property investment: Buying a property as an investment — what should you check first? Assess the property in the same way the bank would: long-term lettability and rent levels, the condition of the flat and any maintenance requirements, the owners’ association’s reserves and service charges, as well as the long-term value growth of the location.
Facing a similar situation? Let’s talk about it. Every investment financing arrangement is unique. During a free initial consultation, we’ll give you an honest assessment of what’s feasible and which bank is best suited to your needs.
Calculating the value of a property as an investment: What factors should be included in the calculation? The bank factors in the expected rental income, but applies a discount to cover management costs and potential rent shortfalls, and checks whether the debt servicing remains viable even with a conservative estimate. Depreciation of the building has tax implications. Purchase costs are covered by the owner’s own funds.
When is a property a worthwhile investment? What determines the return? When investing in property, the financing determines the return. Tax benefits enhance the return, but cannot compensate for a weak financial analysis; the bank looks at sustainable cash flow and not just the gross return. In regions with stable rental demand, banks assess the risk of rent default more favourably, which influences the potential loan-to-value ratio.
Anonymised individual case; no guarantee that the same applies to other projects · Free advice · Commission usually paid by the bank · Section 34i of the German Trade Regulation Act (GewO) · No legal or tax advice · No commitment to provide financing; terms and conditions subject to creditworthiness, loan-to-value ratio and the bank
Frequently asked questions
Financing the purchase of a block of flats: What do investors need to bear in mind?
The bank bases its calculations on the rents agreed today; even if the market rent is higher, the agreed rent is still the one that counts. It often scrutinises investment properties more closely: long-term lettability, condition, the owners’ association’s reserves, service charges and the long-term value appreciation of the location. Often, it is the bank’s experience with investment properties that is the deciding factor rather than the interest rate.
Can I finance a care home, and which banks offer this?
That depends on each bank’s lending policy, as a care home does not fit the criteria of every policy; a refusal is rarely down to creditworthiness. We assess on a case-by-case basis which properties and financing structures are suitable, comparing over 650 banks in the process. We cannot arrange financing that is not financially viable.
Property as an investment: How do property investments differ from buying a home?
The requirements vary. In addition to creditworthiness, the property’s profitability plays a greater role than it does when buying a home.
Is rental income taken into account?
Yes. Many banks take sustainable rental income into account in their overall assessment.
How much does the consultation cost?
The initial consultation is free of charge. If the matter is successful, remuneration is paid in the form of a commission from the bank.
How do you finance an investment property?
Unlike an owner-occupied home. With an investment property, the bank takes the rental income into account, though not in full — it is common practice to apply a safety margin. In return, interest and running costs are tax-deductible, which affects the after-tax calculation. An investment loan is therefore structured with a view to the property’s yield and tax implications, not just the monthly repayments.
As an investor, what is the best way to finance a let property? Who specialises in this?
‘Optimal’ means: the bank takes the rental income into account, allowing for a safety margin, and the financing is structured around the property’s yield and tax implications, not just the instalments — interest and running costs on let properties are tax-deductible. We — as a bank-independent broker with access to over 650 banks — specialise in this area and will find the institution that regularly provides financing for your specific situation.
How can I finance an investment in the most tax-efficient way (discount, interest vs. capital repayment, depreciation effects)?
In the context of capital investment, ‘tax-optimised’ means that interest and running costs on let properties are tax-deductible, whilst the bank only takes the rental income into account after applying a safety margin — the financing is therefore structured around the property’s yield and its after-tax impact, not just the instalments. Additional depreciation is possible, for example on listed buildings or new-build properties. As an independent broker, we compare over 650 banks and structure the financing to suit your tax situation — details regarding the tax implications should be discussed with your tax adviser.
Any questions on this topic?
A first consultation is free and without obligation — the commission is, as a rule, paid by the bank. We tell you what this means for your own financing.
This does not constitute legal or tax advice.
Related pages
First investment & getting started
Your first let flat — what matters when you’re starting out.
High loan-to-value investment loan
When a bank fully finances the purchase price — and the associated costs are covered by the buyer’s own funds.
New Build & Heritage Buildings
Properties with their own set of rules — properly financed.
Self-employed people & tax non-residents
Special income circumstances — presented accurately.
What 66 financing deals reveal
Equity ratio, purchase price range and incidental acquisition costs for the entire portfolio.
Property as an investment for investors
Property search, audit standards and tax-optimised models at AUP Finanzservice.
Financing a rental property: your first flat
Financing a let property: a case study – a first flat for €348,000 with €100,000 in equity — approval granted following a brief assessment.
Editorially responsible: Olga Nikushkina — owner, §34i GewO (German mortgage brokerage), adviser register D-W-132-ZUCB-95. Specialised in German property financing with an international dimension: non-residents, foreign-currency income, cross-border workers, expats. Siegfried Perini is entered in the German intermediary register under this licence as a person directly involved in brokerage and advice (§ 11a GewO), active in real estate since 1992. Not legal or tax advice.
