Real Estate
You can invest in German real estate in two ways. Indirectly — through REIT shares and real estate ETFs, from the price of one share. Directly — with own capital from €75,000 at a price of €300,000: 20% of the price plus Kaufnebenkosten (additional purchase costs) of 5–12% (2026). Whether buying a home pays off depends on the Kaufpreisfaktor (price ÷ annual cold rent): in the calculator's model at a 4.4% rate, buying beats renting and investing the difference over 10 years only at a factor of about 18 or lower; the calculation is in Rent or Buy a Home in Germany. In the Boat phase (the first 24 months after moving), a short credit history and an unclear horizon limit direct purchase; indirect investments don't require either.
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 | from €75,000 (at a €300,000 price: 20% + 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 5–12%)
- Initial capital: minimum 20% of value + purchase costs
- Income stability: worked in Germany 2+ years, permanent contract
- Price ratio: in the calculator's model at a 4.4% rate (2026), a Kaufpreisfaktor of about 18 or lower for a 10-year horizon and about 20 for 20–30 years; Finanztip considers a factor above 25 expensive [14]
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. The buy-or-rent calculator assumes 6% a year by default. That is a model assumption; historical stock market returns depend on the period chosen [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 5–12% of the property price (2026). This money is paid on top of the property value and is not recovered when selling [4]. Because of these costs, buying rarely pays off in under 10 years: in the calculator's model, even at a factor of 16 the buyer only overtakes the renter in year 8.
| Cost | Amount | Example for €400,000 |
|---|---|---|
| Grunderwerbsteuer (real estate transfer 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) | 0–3.57% (buyer pays at most half since 23 Dec 2020) | €0–14,280 |
| Total | 5–12% | €20,000–48,280 |
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 23 December 2020: if the seller hired the agent, the buyer pays at most half (§ 656d BGB) [21]. The rule covers flats and single-family houses; a buyer of an apartment building (Mehrfamilienhaus) can owe the whole commission.
Investment Property
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 Hamburg, Munich, Frankfurt and Berlin (second half of 2025) and 4.17% on average across the 50 largest cities (first half of 2026) [6]. After taxes, maintenance and vacancies, less than the gross 3–4% remains; the result also depends on price growth and leverage.
Factors For Direct Ownership
| Factor | Description |
|---|---|
| Regular income | Monthly rent (when there's a tenant) |
| Value growth | Home prices grow unevenly: +1.9% year-on-year in Q2 2026 [15]; the calculator's model assumes 1.5% a year |
| Tax deductions | Depreciation (2–3% per year depending on construction year [16]), repair costs, mortgage interest deducted from taxable income |
| Using borrowed funds | Leverage increases return on own capital, and when prices fall, the loss too |
Factors Against Direct Ownership
| Factor | Description |
|---|---|
| High entry threshold | For a €400,000 flat, at least €100,000 of own capital (20% + Kaufnebenkosten) |
| Operational work | Finding tenants, repairs, accounting, legal matters |
| Vacancy risk | Period without tenants = no income but continued expenses |
| Problem tenant risk | Tenant protection in Germany is strong, eviction takes months [8] |
| Low liquidity | Sale takes 3–12 months; over a short holding period, Kaufnebenkosten eat up the price gain |
| Concentration risk | All capital in one property, one city, one country |
REITs and real estate ETFs give you a share of the market without operational work, and they can be sold on any trading day.
REITs and Real Estate ETFs
REITs (Real Estate Investment Trusts) are listed companies that own real estate and pay out most of their profit to shareholders. A REIT owns commercial and residential property and collects the rent; its shares trade on the stock exchange on any trading day [9]. Real estate ETFs buy shares of many REITs and other property companies, providing diversification; one ETF share costs from €25.
Types of Real Estate Funds
Criteria for assessing funds: diversification, costs (TER), liquidity, currency risk. Online ETF screeners show funds on the same type of index side by side.
| Fund Type | What It Includes | Typical TER (2026) | Features |
|---|---|---|---|
| Global real estate ETFs (developed markets) | REITs and property companies in the US, Europe, Japan | 0.25–0.6% [7] | Broad diversification |
| European real estate ETFs | European real estate | 0.33–0.4% [7] | Less currency risk for euro investors |
Evaluation Criteria
| Criterion | Value |
|---|---|
| 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 the exchange |
| Management | Passive — the REITs manage the property, you only hold shares |
| Taxation | Payouts and the Vorabpauschale are taxed as capital income: Abgeltungsteuer (flat tax on capital income) 25% plus the Solidaritätszuschlag (solidarity surcharge), 26.375% in total without church tax. The Teilfreistellung (partial tax exemption) depends on how the fund is classified (0–80%); checking the classification is a question for a Steuerberater [10] |
| Risk | REIT share prices fluctuate with the 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 (speculation 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: no tax on a sale within 10 years either if you lived in the property yourself for the whole time from purchase to sale, or in the year of sale and the two preceding calendar years [12].
Calculation example: Bought a flat to rent out for €300,000, sold it for €400,000 after 7 years. Simplified, ignoring Kaufnebenkosten and AfA: profit €100,000; at a 35% tax rate, €35,000 tax. On a sale after 10 years of ownership, the tax is 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); contributions to the building reserve only when the owners' association spends them |
| 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.
Renting out and selling within 10 years are questions for a Steuerberater (tax adviser).
Property Tax (Grundsteuer)
Annual tax on property ownership. Since the 2025 reform, most states calculate it from the Grundsteuerwert (new assessed value) and the municipal multiplier (Hebesatz); Bavaria, Baden-Württemberg, Hamburg, Hesse and Lower Saxony use their own models [17]. According to WISO Steuer, based on 46,000 real cases, the tax went up for 66.5% of owners (2025) [17]. When renting, it can be passed to the tenant through the Nebenkostenabrechnung (annual statement of running costs).
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 (5–12% 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: in September 2026, 10-year fixed mortgages average 4.2–4.3%, a 15-year high [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 5–12% 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 — up to 3.57% (for a flat or single-family house, since 23 December 2020 the buyer pays at most half of the commission) [21]. For a €400,000 apartment that is €20,000–48,280, 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, except unspent reserve contributions), 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 more than 10 years of ownership — the Spekulationsfrist (speculation period) under § 23 EStG [11]. Earlier only if you lived in the property yourself: for the whole time from purchase to sale, or 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; as of 2025)
- Finanztip (as of 2026), "Kaufnebenkosten beim Hauskauf" (notary and Grundbuch, GNotKG), https://www.finanztip.de/baufinanzierung/nebenkosten-hauskauf/
- Finanz-Tools.de, "Grunderwerbsteuer 2026 — Tabelle aller Bundesländer", https://www.finanz-tools.de/grunderwerbsteuer/bundeslaender-tabelle (as of 2026)
- DAS INVESTMENT (February 2026), "Mietrenditen steigen leicht – aber nicht in den Metropolen" (Baufi24 Mietrenditeatlas, second half of 2025), https://www.dasinvestment.com/baufi24-mietrenditeatlas-mietrendite-steigt-leicht-aber-nicht-in-den/; Baufi24 (18 August 2026), "Baufi24-Mietrenditeatlas: Bruttomietrenditen steigen auf 4,17 %", https://www.baufi24.de/presse/pressemitteilungen/mietrendite-trend-082026/
- justETF (2026), real estate ETF profiles, TER: VanEck Global Real Estate 0.25%, iShares Developed Markets Property Yield 0.59%, Xtrackers FTSE Developed Europe Real Estate 0.33%, iShares European Property Yield 0.40%. https://www.justetf.com/en/etf-profile.html?isin=NL0009690239; https://www.justetf.com/en/etf-profile.html?isin=IE00B1FZS350; https://www.justetf.com/en/etf-profile.html?isin=LU0489337690; https://www.justetf.com/en/etf-profile.html?isin=IE00B0M63284
- Deutscher Mieterbund, "Mietrecht: Kündigungsschutz und Räumungsverfahren", https://www.mieterbund.de/mietrecht/kuendigungsschutz.html (as of 2024)
- Gesetz über deutsche Immobilien-Aktiengesellschaften mit börsennotierten Anteilen (REITG, as of 2026), § 1 (a REIT is a listed stock corporation), https://www.gesetze-im-internet.de/reitg/__1.html
- Einkommensteuergesetz (EStG, as of 2026), § 32d (25% rate); Investmentsteuergesetz §§ 16, 18 (fund payouts and Vorabpauschale), § 2 Abs. 9 and § 20 (fund classification and Teilfreistellung), https://www.gesetze-im-internet.de/estg/__32d.html, https://www.gesetze-im-internet.de/invstg_2018/__16.html, https://www.gesetze-im-internet.de/invstg_2018/__20.html
- § 23 Einkommensteuergesetz (EStG), "Private Veräußerungsgeschäfte — Spekulationsfrist", as of 2026, https://www.gesetze-im-internet.de/estg/__23.html
- § 23 Abs. 1 Satz 1 Nr. 1 Satz 3 EStG (as of 2026), exemption for own residential use: the whole holding period, or the year of sale and the two preceding years, https://www.gesetze-im-internet.de/estg/__23.html
- Einkommensteuergesetz (EStG, as of 2026), § 9 (Werbungskosten), § 21 (rental income), https://www.gesetze-im-internet.de/estg/__9.html, https://www.gesetze-im-internet.de/estg/__21.html
- Finanztip (as of 2026), "Mieten oder kaufen: Was lohnt sich für Dich?" (a Kaufpreisfaktor up to 20 is relatively cheap, above 25 expensive), https://www.finanztip.de/baufinanzierung/mieten-oder-kaufen/
- vdp (August 2026), "Uneinheitliche Entwicklung der Immobilienpreise" (vdp price index, Q2 2026), https://www.pfandbrief.de/uneinheitliche-entwicklung-der-immobilienpreise/
- § 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" (how it is calculated), https://www.bundesfinanzministerium.de/Content/DE/FAQ/faq-die-neue-grundsteuer.html (2025); Buhl Data Service (WISO Steuer), "Grundsteuer-Umfrage" (66.5% pay more, 46,000 cases), https://www.buhl.de/steuer/grundsteuer-umfrage/ (2025)
- Urbyo, "Baufinanzierung und Kredite für Ausländer:innen in Deutschland", https://urbyo.com/de/darlehen-fuer-auslaender (as of 2026)
- Hypofriend, "Baufinanzierung mit befristeter Aufenthaltserlaubnis", https://hypofriend.de/de/baufinanzierung-mit-befristeter-aufenthaltserlaubnis-das-sollst-du-wissen.aim (as of 2026)
- Biallo (September 2026), "Bauzinsen auf 15-Jahreshoch: Was Käufer jetzt tun sollten", https://www.biallo.de/baufinanzierung/news/bauzinsen-15-jahreshoch/; Interhyp (10 September 2026), "Zins-Update September: Bauzinsen über vier Prozent", https://www.presseportal.de/pm/12620/6349741
- Bürgerliches Gesetzbuch (BGB, as of 2026), §§ 656a–656d "Maklerkosten bei Wohnungen und Einfamilienhäusern" (in force since 23 Dec 2020; flats and single-family houses only), https://www.gesetze-im-internet.de/bgb/__656d.html