Real Estate
Real estate investments in Germany require from €20,000 for indirect investments (REITs, ETFs) to €100,000+ for direct purchase with additional costs of 7-15%. The main barrier is the high entry threshold and low liquidity with direct ownership. For most immigrants in the Boat phase, indirect investments through ETFs are more rational than direct purchase.
Ways to Invest in Real Estate
There are four main ways to invest in real estate, differing in entry threshold and level of participation [1].
| Method | Minimum Capital | Liquidity | Management | Suitable For |
|---|---|---|---|---|
| Own home | €80,000-150,000 (20% down + Kaufnebenkosten) | Low (months) | Full | Ladder phase, planning for 10+ years |
| Rental property | €100,000+ | Low (months) | Full | Ladder phase, readiness for operational work |
| REITs/ETF | From €25 | High (1 day) | None | Boat/Ladder phase, passive diversification |
| Crowdfunding | €500-10,000 | Low (years) | None | Ladder phase, high risk |
Buying vs Renting (for Living)
This is a decision with high emotional load for immigrants. After experiencing instability, there's a strong desire to "finally own something." Math is one factor. The psychological need for stability is another, and it's not irrational.
Criteria for Buying
Buying makes financial sense when all conditions are met simultaneously [2]:
- Ownership horizon: 10+ years (due to high Kaufnebenkosten of 7-15%)
- Initial capital: minimum 20% of value + purchase costs
- Income stability: worked in Germany 2+ years, permanent contract
- Price ratio: annual rent is more than 4% of purchase price (1:25 rule)
Criteria for Continuing to Rent
Renting is more rational when at least one factor applies:
- Location uncertainty: not sure you'll stay in the city for 10+ years
- Career mobility: job change may require relocation
- Lack of capital: don't have 20%+ for down payment without depleting emergency fund
- Alternative returns: difference between mortgage and rent can be invested in ETFs with long-term returns of 7% annually [3]
Psychological dimension: If you feel an acute need to buy housing — this is a signal to analyze, not to act immediately. What's behind this desire? Stability? Status? Control? Each of these needs can be satisfied in other ways with less financial risk.
Additional Costs When Buying
Kaufnebenkosten (additional purchase costs) amount to 7-15% of the property price. This money is paid on top of the property value and is not recovered when selling. This is what makes buying unprofitable when owning for less than 10 years [4].
| Cost | Amount | Example for €400,000 |
|---|---|---|
| Grunderwerbsteuer (purchase tax) | 3.5-6.5% (depends on federal state) | €14,000-26,000 |
| Notary (Notar) | 1.0-1.5% | €4,000-6,000 |
| Land registry registration (Grundbuch) | 0.5% | €2,000 |
| Agent (Makler) | 0-7.14% (split with seller) | €0-28,560 |
| Total | 7-15% | €28,000-60,000 |
Important: Grunderwerbsteuer varies by federal state (2026): the minimum is 3.5% in Bavaria, the maximum 6.5% in Brandenburg, North Rhine-Westphalia, Saarland, and Schleswig-Holstein. Saxony raised its rate to 5.5% (2023), Thuringia lowered it to 5.0% (2024) [5]. Agent commission has been regulated by law since 2020: buyer and seller split it equally, but seller can refuse the agent (then commission = 0%).
Investment Property (Rental)
Buying property for rental is an operational business, not passive income. It requires tenant management, repairs, legal support. Gross rental yield is 3.0-3.4% in Germany's seven largest cities and 4.1% on average across the 50 largest cities (2025) [6]. After deducting taxes, maintenance, and vacancies, net yield is often lower than a diversified ETF portfolio.
Factors For Direct Ownership
| Factor | Description |
|---|---|
| Regular income | Monthly rent (when tenant present) |
| Value growth | Long-term real estate price growth (historically 2-3% annually [7]; residential prices rose 2.3% year-on-year in Q1 2026 [15]) |
| Tax deductions | Depreciation (2-3% per year depending on construction year [16]), repair costs, mortgage interest deductible from taxable income |
| Using borrowed funds | Leverage increases return on own capital |
Factors Against Direct Ownership
| Factor | Description |
|---|---|
| High entry threshold | Minimum €100,000 own capital (20% + Kaufnebenkosten) |
| Operational work | Finding tenants, repairs, accounting, legal issues |
| Vacancy risk | Period without tenants = no income, but expenses continue |
| Problematic tenant risk | Tenant protection in Germany is high, eviction takes months [8] |
| Low liquidity | Sale takes 3-12 months, Kaufnebenkosten eat profit when owning less than 10 years |
| Concentration risk | All capital in one property, one city, one country |
Alternative: REITs and real estate ETFs provide exposure to real estate market without operational work and with full liquidity.
REITs and Real Estate ETFs
REITs (Real Estate Investment Trusts) allow investing in real estate from €25 with full liquidity. The fund owns commercial and residential real estate, collects rent, and distributes income to investors. Real estate ETFs buy shares of many REITs, providing diversification [9].
Types of Real Estate Funds
Evaluate funds by criteria: diversification, costs (TER), liquidity, currency risk. Find specific funds by index type in a screener (e.g., justETF).
| Fund Type | What It Includes | Typical TER | Features |
|---|---|---|---|
| Global REIT ETFs (developed markets) | REITs from the USA, Europe, Japan | 0.5–0.6% | Wide diversification |
| European REIT ETFs | European real estate | 0.3–0.4% | Less currency risk for euro investors |
Evaluation Criteria
| Criterion | Meaning |
|---|---|
| Diversification | REITs invest in hundreds of properties of different types (offices, shopping centers, warehouses, housing) in different countries |
| Entry threshold | From €25 (cost of one ETF share) |
| Liquidity | Sale within 1 trading day on exchange |
| Management | Passive — fund manages properties, you just own shares |
| Taxation | Dividends taxed as capital income (Kapitalertragsteuer 25% + Soli) [10] |
| Risk | REIT share prices fluctuate with market, may be more volatile than direct ownership |
Psychological factor: REITs don't give the feeling of "owning an apartment." If your need is stability and control, real estate ETFs won't satisfy this need, although mathematically they may be more efficient.
Real Estate Taxation
Tax on Sale
Profit from property sale is not taxed if you owned the property for more than 10 years. This period is called Spekulationsfrist (speculative period) [11]. If selling earlier, profit is taxed at your income tax rate (up to 45% + Soli).
| Ownership Period | Profit Tax |
|---|---|
| 10+ years | 0% (exemption) |
| Less than 10 years | Up to 45% (part of income tax) |
Exception: If the property was your primary residence for 2 of the last 3 years before sale, no tax regardless of ownership period [12].
Calculation example: Bought apartment for €300,000, sold for €400,000 after 7 years. Profit = €100,000. At 35% tax rate, pay €35,000 tax. If had waited until 10 years of ownership — tax 0.
Tax on Rental
Rental income is taxed as regular income (up to 45% + Soli). But you can deduct expenses [13]:
| Deductible Expenses | Examples |
|---|---|
| Depreciation (AfA — Absetzung für Abnutzung) | 2% for buildings constructed 1925-2022, 2.5% for older ones, 3% for buildings completed from 2023 (land not depreciated) [16] |
| Mortgage interest | Fully deductible |
| Repair and maintenance | Instandhaltung (current repairs), Hausgeld (building maintenance fees) |
| Management company | If hiring Hausverwaltung |
| Insurance | Gebäudeversicherung (building insurance) |
| Utilities | If not passed to tenant |
Net taxable income = rental income − all expenses.
Typical situation: In the first years, expenses (interest + depreciation) may exceed income, creating a tax loss that reduces your overall income tax.
Property Tax (Grundsteuer)
Annual tax on property ownership. Since the 2025 reform, it is calculated from the Grundsteuerwert (new assessed value) and the municipal multiplier (Hebesatz); for roughly two-thirds of owners the tax went up [17]. As a rough guide, €200-600 per year for an apartment [14]. When renting, can be passed to tenant through Nebenkostenabrechnung.
FAQ
This is not legal or financial advice.
I'm not a German citizen and don't have permanent residency — can I buy property?
Yes. German law does not restrict property purchases by citizenship or residence permit type — even non-residents can buy [18]. The barrier appears at the financing stage: banks assess income stability and residence status. With a temporary Aufenthaltstitel (residence permit), some banks decline or require more equity, and the loan term is sometimes tied to the permit's validity [19]. With a Niederlassungserlaubnis (permanent residence permit), conditions are comparable to those for citizens. The transaction itself is identical: notary, Grundbuch (land registry), Grunderwerbsteuer.
How much equity does a bank expect from someone with a short credit history?
The baseline expectation: Kaufnebenkosten (7-15% of the price) entirely from your own funds plus about 20% of the property price [19]. For buyers with a temporary residence permit or a short Schufa (German credit bureau) history, banks often require 30-50% equity or charge a rate premium [18]. Rate context: 10-year fixed mortgages average 3.93%, top offers 3.6-3.7%, 15-year fixed around 4.15% (June 2026) [20]. The more equity you bring, the lower the rate — banks price loans by loan-to-value ratio (Beleihungsauslauf).
What do I pay on top of the property price?
Kaufnebenkosten of 7-15% of the price [4]. Components: Grunderwerbsteuer of 3.5-6.5% depending on the state (2026) [5], notary around 1.5%, Grundbuch registration around 0.5%, agent — usually 3.57% (half of the standard 7.14%, split with the seller since 2020). For a €400,000 apartment that is €28,000-60,000, which you do not recover when selling. Banks almost always require these costs to be paid from your own funds — the loan covers only the property price.
Is rental income taxed?
Yes. Rental income is taxed at your personal income tax rate — up to 45% plus surcharges [13]. But deductions reduce the taxable base: AfA depreciation (2% for buildings constructed 1925-2022, 3% for buildings completed from 2023 [16]), mortgage interest, Hausgeld (building maintenance fees), repairs. In the first years, deductions often exceed rental income — creating a paper loss that reduces tax on your salary. Declared in Anlage V of the tax return.
When can I sell without paying tax on the profit?
After 10 years of ownership — the Spekulationsfrist (speculation period) under § 23 EStG [11]. Earlier only if you lived in the property yourself: the exemption applies if you occupied it in the year of sale and the two preceding years [12]. In all other cases, profit from a sale within 10 years is taxed at your personal income tax rate of up to 45%. The 10-year rule is a key argument against buying with a short horizon: Kaufnebenkosten plus potential tax eat up the profit.
Sources
- Immobilienverband Deutschland (IVD), "Investieren in Immobilien: Formen und Strategien", IVD Research, https://ivd.net/immobilieninvestments/ (as of 2024)
- Stiftung Warentest, "Kaufen oder Mieten: Was sich wann lohnt", Finanztest 10/2024, https://www.test.de/Mieten-oder-kaufen-Wann-sich-der-Immobilienkauf-lohnt-5906192-0/
- Deutsches Aktieninstitut, "Renditedreieck DAX 1948-2024", https://www.dai.de/renditedreieck/ (historical stock market returns)
- Notarkammer, "Kaufnebenkosten beim Immobilienerwerb", Bundesnotarkammer, https://www.notar.de/themen/immobilien/kaufnebenkosten (current as of 2024)
- Finanz-Tools.de, "Grunderwerbsteuer 2026 — Tabelle aller Bundesländer", https://www.finanz-tools.de/grunderwerbsteuer/bundeslaender-tabelle (as of 2026)
- Baufi24, "Mietrenditeatlas H2 2025 — Bruttomietrenditen deutscher Großstädte", https://www.cash-online.de/a/wo-sich-vermietung-noch-lohnt-blick-in-den-baufi24-mietrenditeatlas-712148/ (2025)
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- Deutscher Mieterbund, "Mietrecht: Kündigungsschutz und Räumungsverfahren", https://www.mieterbund.de/mietrecht/kuendigungsschutz.html (as of 2024)
- BaFin, "REITs: Grundlagen und Regulierung", Bundesanstalt für Finanzdienstleistungsaufsicht, https://www.bafin.de/DE/Verbraucher/GeldanlageWertpapiere/Anlageformen/REIT/reit_node.html
- Bundesministerium der Finanzen, "Abgeltungsteuer und Besteuerung von Kapitalerträgen", Stand 2024, https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Weitere_Steuerthemen/Abgeltungsteuer/abgeltungsteuer.html
- § 23 Einkommensteuergesetz (EStG), "Private Veräußerungsgeschäfte — Spekulationsfrist", current version, https://www.gesetze-im-internet.de/estg/__23.html
- § 23 Abs. 1 Satz 1 Nr. 1 EStG, "Steuerbefreiung bei Eigennutzung", https://www.gesetze-im-internet.de/estg/__23.html
- Bundesministerium der Finanzen, "Einkünfte aus Vermietung und Verpachtung — Werbungskosten", BMF-Schreiben, https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Einkommensteuer/2021-10-28-werbungskosten-vermietung-verpachtung.html
- Statistisches Bundesamt, "Realsteuervergleich: Grundsteuer 2024", Destatis Fachserie 14 Reihe 10.1, https://www.destatis.de/DE/Themen/Staat/Steuern/Realsteuern/_inhalt.html
- vdpResearch, "Immobilienpreise steigen zu Jahresbeginn 2026 weiter", https://www.vdpresearch.de/immobilienpreise-steigen-zu-jahresbeginn-2026-weiter/ (Q1 2026)
- § 7 Abs. 4 Einkommensteuergesetz (EStG), "Absetzung für Abnutzung bei Gebäuden", https://www.gesetze-im-internet.de/estg/__7.html (2026 version)
- Bundesministerium der Finanzen, "FAQ: Die neue Grundsteuer", https://www.bundesfinanzministerium.de/Content/DE/FAQ/faq-die-neue-grundsteuer.html (2025)
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- Dr. Klein, "Aktuelle Bauzinsen", https://www.drklein.de/aktuelle-bauzinsen.html (June 2026)