ᐅ Multi-family residential building as an investment property in a city with an aging population
Created on: 2 Oct 2016 12:08
M
MaxPower90
Hello everyone, my concern is not directly related to building a house, but maybe some of you will find it interesting and want to join the discussion, which I would appreciate. Given the low interest rates and the fact that I have saved some equity, I am planning to buy 3 to 4 smaller condominiums to rent out, or even better, a small multi-family building.
I come from the Ruhr area and want to buy in this region as well. Of course, with a property, just like with a nice vacation, I want good value for money. At first glance, for example in Herne, you can find properties without maintenance backlog yielding around 7% net annual rental return. In my opinion, this high return is linked to the fact that Herne is not an attractive city for any age group. I have reviewed all the population forecasts I could find online, and Herne is aging faster than average and is projected to lose up to 10% of its inhabitants by 2040.
My question to you is: Is investing in a city like this likely to be a losing strategy due to falling property prices and probable vacancies? Or could it also be an opportunity if the micro-location is good (shopping facilities, public transport, parks, etc.) and the building could potentially be converted to be barrier-free in the medium term? Especially considering the attractive rental yield and the fact that retirees, whom I imagine to be “good” tenants, might be the main target group.
I have never bought residential property before and find it really difficult to assess. I look forward to your opinions!
I come from the Ruhr area and want to buy in this region as well. Of course, with a property, just like with a nice vacation, I want good value for money. At first glance, for example in Herne, you can find properties without maintenance backlog yielding around 7% net annual rental return. In my opinion, this high return is linked to the fact that Herne is not an attractive city for any age group. I have reviewed all the population forecasts I could find online, and Herne is aging faster than average and is projected to lose up to 10% of its inhabitants by 2040.
My question to you is: Is investing in a city like this likely to be a losing strategy due to falling property prices and probable vacancies? Or could it also be an opportunity if the micro-location is good (shopping facilities, public transport, parks, etc.) and the building could potentially be converted to be barrier-free in the medium term? Especially considering the attractive rental yield and the fact that retirees, whom I imagine to be “good” tenants, might be the main target group.
I have never bought residential property before and find it really difficult to assess. I look forward to your opinions!
First of all, good evening.
My name is Nicole, and I happened to come across this discussion during my research for planning our future family home. I immediately felt addressed, as well as my earlier, somewhat naïve attitude.
In fact, I did exactly what Christian is planning back in 2005 in Dortmund. Unfortunately, I have little affinity for mathematics.
Facts: Purchase of a multi-family house (457m² (4,920 sq ft)) through a forced auction for €190,001 plus additional costs.
Immediate termination (special termination after auction) of one of the 8 residential units due to personal use, after I realized that this tenant wanted to claim rent reduction.
An elderly lady (93 years old) was also part of the auction (she had a right of residence, which became void through the auction).
Additionally, there was another tenant who later became a problematic tenant (rent dodger). The stories with this person are endless and worse than anything shown on TV so far.
No one can imagine how difficult it was to clear out the apartment! I couldn’t get rid of the smell even after long baths myself!
The apartment we moved into needed a complete renovation (which was finished a year ago).
However, I didn’t benefit much from this, as I left Dortmund’s northern district for the countryside with my family because of the children.
Over 11 years, with a lot of personal effort and long vacancies, we almost completely renovated the house.
Seven out of eight residential units are rented (mainly to students, doctoral candidates, and apprentices). The tenants were always carefully selected (credit checks and compatibility among them).
Managing the annual utility and heating costs should not be underestimated! The tax returns have also caused quite a bit of trouble.
Summary after 11 years:
Net rent income €2,444
A new loan of €215,000 (fully repaid in 20 years) with a monthly payment of €1,078
Estimated property value, despite being in the northern district, according to my bank: about €350,000 or maybe more.
From a tax perspective, according to my accountant, the house has already been a tax-saving model.
Question: Would I do it again?
Never in my life!!!!!!!!!!!!
I should have invested the money in a stock portfolio instead.
Oh yes, my equity at the time was barely €26,000 for the auction deposit.
Since I am a civil servant, I was able to get the loan back then. However, it caused many sleepless nights. I was so naive that I first won the auction and then applied for the loan—which is solely in my name.
I was young, foolish, and no, not blond.
I hope everyone now takes me seriously with my future house construction plans...
Best regards from the Lower Rhine region
My name is Nicole, and I happened to come across this discussion during my research for planning our future family home. I immediately felt addressed, as well as my earlier, somewhat naïve attitude.
In fact, I did exactly what Christian is planning back in 2005 in Dortmund. Unfortunately, I have little affinity for mathematics.
Facts: Purchase of a multi-family house (457m² (4,920 sq ft)) through a forced auction for €190,001 plus additional costs.
Immediate termination (special termination after auction) of one of the 8 residential units due to personal use, after I realized that this tenant wanted to claim rent reduction.
An elderly lady (93 years old) was also part of the auction (she had a right of residence, which became void through the auction).
Additionally, there was another tenant who later became a problematic tenant (rent dodger). The stories with this person are endless and worse than anything shown on TV so far.
No one can imagine how difficult it was to clear out the apartment! I couldn’t get rid of the smell even after long baths myself!
The apartment we moved into needed a complete renovation (which was finished a year ago).
However, I didn’t benefit much from this, as I left Dortmund’s northern district for the countryside with my family because of the children.
Over 11 years, with a lot of personal effort and long vacancies, we almost completely renovated the house.
Seven out of eight residential units are rented (mainly to students, doctoral candidates, and apprentices). The tenants were always carefully selected (credit checks and compatibility among them).
Managing the annual utility and heating costs should not be underestimated! The tax returns have also caused quite a bit of trouble.
Summary after 11 years:
Net rent income €2,444
A new loan of €215,000 (fully repaid in 20 years) with a monthly payment of €1,078
Estimated property value, despite being in the northern district, according to my bank: about €350,000 or maybe more.
From a tax perspective, according to my accountant, the house has already been a tax-saving model.
Question: Would I do it again?
Never in my life!!!!!!!!!!!!
I should have invested the money in a stock portfolio instead.
Oh yes, my equity at the time was barely €26,000 for the auction deposit.
Since I am a civil servant, I was able to get the loan back then. However, it caused many sleepless nights. I was so naive that I first won the auction and then applied for the loan—which is solely in my name.
I was young, foolish, and no, not blond.
I hope everyone now takes me seriously with my future house construction plans...
Best regards from the Lower Rhine region
Robby schrieb:
I hope everyone still takes me seriously regarding my future house construction.... Even more so now.
Best regards
Dirk Grafe
MaxPower9028 Oct 2016 08:50Robby schrieb:
Unfortunately, I also have a low affinity for math.Hey, that’s not very nice ; )
It’s great that you had the courage back then to follow through with everything. And despite the hassle and time investment, it seems to be paying off financially for you in the end, which is really what matters, I think. And it’s good that you now have reliable tenants. Finding those in the northern part of the city probably takes some patience.
I have since changed my plan a bit. I want to first buy a small single-family house in the suburbs of Dortmund for my girlfriend and me, and then a condominium in downtown Dortmund as an investment. I mainly decided on this because I want to own something with a garage, and I wouldn’t be able to afford a multi-family building for rental purposes. And with a condo, the risk of suddenly having to invest €20,000 (about $21,000) unexpectedly isn’t as high as with a multi-family building, although of course the returns aren’t nearly as high either. And with a home you can’t deduct anything from taxes, but you also don’t have the risk of rental income loss. It’s all a matter of calculation ; )
MaxPower9028 Oct 2016 09:35RobsonMKK schrieb:
I would carefully consider the idea of renting out individual units. Unexpected costs can arise that affect the entire condominium association (heating, windows, roof, to name the three expensive ones).You are right about that, but I can roughly anticipate this before buying the condominium. I can also see what is in the maintenance reserve fund. And if a special assessment is levied, it only affects me proportionally.
Of course, the cost will only affect you proportionally. How many units will the house have?
With us, having 3 units, the costs can quickly add up, so I would definitely keep that in mind.
And you might also be responsible for contributing to the maintenance reserve fund.
With us, having 3 units, the costs can quickly add up, so I would definitely keep that in mind.
And you might also be responsible for contributing to the maintenance reserve fund.