Real estate as an investment
All investment opportunities that fall under the “Real Estate” asset class are considered real estate investments.
The acquisition of real estate can occur directly through the purchase of a specific property as well as through the acquisition of a stake in companies which are themselves property owners.
Based on the different reasons motivating investors to invest and due to the different key features in each case, direct real estate investments can be divided into tax-optimised properties, existing properties and new properties.
Indirect real estate investments are open-end real estate funds, closed-end real estate funds and real estate companies/REITs.
Listed properties − a tax-saving model with real value
Listed homes exude charm. They are usually situated in attractive inner-city locations and have an air of cosiness and comfort. Plus they come with another particularly appealing detail: listed properties are an excellent tax-saving investment.
With housing construction subsidies no longer being paid, claiming depreciation on a listed building has become even more tempting. It offers a last legal way of gaining government funding for a property purchase.
How the tax benefit works
Each year for ten years, owner-occupiers can claim on their income tax returns 9 per cent of those costs that “are necessary for preserving the building as a listed structure or for its meaningful use,” according to the wording of the law (Sec. 7  German Income Tax Act [EStG]). As a result, owners who live in their listed building can deduct 90 per cent of the investments as years go by. The situation is even more favourable for investors, who are permitted to write off 100 per cent of the costs over twelve years. The law allows for 9 per cent annually during the first eight years, and another 7 per cent in the remaining four years. The tax-saving scheme pays off especially for high and dual earners.
The profit is in the purchase
Sellers of listed properties are mostly to be found in cities in eastern Germany, as suitable properties in the western part of the country are already rare and therefore expensive. In order to truly profit from the tax benefit, the ratio between rental income and purchase price needs to be right. An investor should not pay more than 24 times the amount of annual rental income as a purchase price for listed properties subject to tax concessions. As a buyer, you should also examine the property for yourself in person. That way, you can best get a sense of whether the projected level of rental income can in fact be achieved.
Compliance with official requirements
Tax gifts are only available to properties that are lawfully designated as “listed”. The tax authorities require a valid certificate that attests to a building’s status as listed from the historic preservation office. Construction activities may only begin once the notarial deed of sale has been signed. Those costs allowable against income tax are also precisely regulated. They include such things as roof and facade renovations, the installation of new windows and the installation of modern heating systems. The historic preservation office responsible for your listed property will furnish verification for the tax authorities. Incidentally, owners who remodel a listed building do not have free rein. Dormers and skylights are frequently not approved, for example. The size and shape of windows usually cannot be altered, either.
If you are interested in investing directly in a listed property, you can enter your contact information through the following link and request a free, non-binding consultation:
Listed properties as an investment and tax-saving model
Buildings of historic importance and listed properties are one of the few remaining ways − if not the only way − to save on taxes nowadays and secure tax benefits. With this project, we have presented to you the relevant benefits of making a direct real estate investment for the purposes of tax optimisation.
If you are interested in receiving a personalised offer for acquiring a listed property or a building of historic interest in order to reduce your tax burden, simply enter your contact information on the following form and one of our specialists will get in touch with you shortly. The consultation is free and non-binding, of course.
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Baron Investmentvertriebsgesellschaft mbH
Phone: +49(0)40 / 18 04 074-0
Fax: +49(0)40 / 18 04 074-77