How to buy real estate with 0€

Learn how to enter the real estate market with varying budgets, from 0€ to 1,000,000€, exploring strategies, financing options, and tax benefits in Germany 🏡.

Key Takeaways

  • Buying real estate is possible with varying budgets, offering opportunities for financial growth and stability in Germany’s market.
  • Investing with no savings requires alternative financing sources, emphasizing the importance of initial equity in real estate ventures.
  • With limited savings, focus on increasing income and savings through side hustles to enter the real estate market effectively.
  • A 10,000€ investment enables the purchase of small properties, emphasizing leveraging and minimizing personal investments.
  • A 25,000€ savings allows for considering down payments, highlighting the balance between cash flow and initial investment returns.
  • With 50,000€, investing in renovation properties can maximize tax benefits, facilitating future property acquisitions.
  • Diversification with €100,000 means buying several properties, which reduces risk and increases long-term financial stability.
  • Investing €1,000,000 allows for leveraging a real estate GmbH for tax benefits, providing enhanced financial efficiency.
  • Initiate investments as a private person, transitioning to a real estate company for tax benefits and strategic financial management.

Introduction

Buying real estate with zero euros in the bank may seem impossible, but it’s a reality for some. You’ve probably seen ads featuring people with flashy lifestyles claiming it’s achievable, and it might seem too good to be true. So, how realistic is it to purchase property in Germany without any savings?

The truth is, it is somewhat possible and easier than you might think if you know the right strategies. While it gets simpler with more money, having the right knowledge can open doors even if you start with nothing. In this PerFinEx real estate article, we’ll explore the best ways to invest in real estate, regardless of your financial situation. Let’s dive into the strategies that can help you invest in property, whether you have zero euros or a substantial amount in the bank.

0€: Get Equity from Somewhere

If you have zero euros in the bank but want to invest in real estate, you’ll need to find a source of equity. While it is theoretically possible to finance more than 100% of the property value with a bank, covering even the closing costs, this is not feasible without any savings. For instance, we recently financed nearly 174% of a property value for a client—an extraordinary case involving a couple with high incomes and substantial investments. They bought a top-notch property, and we managed to convince the bank to cover the property, closing costs, renovations, and furniture.

However, this is not a typical scenario, especially if you have no savings. Despite what some social media gurus might claim, financing over 100% is not a realistic option without some initial capital. But don’t lose hope—there are alternative ways to gather the needed funds. You could consider borrowing from family, who might be willing to support your financial future. Employers sometimes offer attractive loan terms to their employees. Additionally, some property sellers might agree to a seller loan, especially if they don’t have immediate plans for the money.

Another strategy is negotiating with the seller to cover the closing costs. By financing 100% of the property value through the bank while the seller handles the closing costs, you can acquire the property without spending your own money. Moreover, if you have leads on high-value properties but lack the funds to buy them, you can refer these properties to us at PerFinEx. If we purchase them, you’ll earn a tipster commission. Just ensure the properties are top-tier, as lower-quality ones won’t meet our standards.

5.000€: Try to Save More Money

Let’s say you have 5,000 euros saved up and you’re eager to invest in real estate. The truth is, this amount still makes it very challenging to break into the market. You might see properties listed on sites like ImmoScout for less than 100,000 euros, which can seem enticing. However, financing these properties is almost impossible. The average mortgage amount in Germany is nearly 300,000 euros. At a 4% interest rate, a bank would earn around 200,000 euros in interest over the life of the mortgage, which is significant for real estate investors because it’s tax-deductible.

If you only need a 100,000 euro mortgage, the bank stands to make about 65,000 euros in interest. This is for essentially the same amount of work as a larger mortgage, as the bank still needs to scrutinize the property and your financial situation thoroughly. So, from the bank’s perspective, would it prefer to finance smaller mortgages with much lower returns? Probably not.

Therefore, our advice is to save a bit more money to improve your chances. If you need guidance on how to do this, our articles can help. For instance, our recent article on side hustles provides strategies to boost your income, enabling you to save more effectively. With a little more in your savings, you will be in a much better position to secure the financing needed for real estate investment.

10.000€: Buy Your First Small Property

With 10,000 euros saved, things get interesting because you can now realistically purchase your first property. While you won’t be buying a mega-mansion in Munich for 25 million euros, you can certainly secure a smaller property to get your foot in the door. Everyone starts small, and this is a great way to begin your real estate journey.

For example, one of our listed properties is worth 156,000 euros, and you can purchase it with an investment of just 8,000 euros, which covers the closing costs. Financing 100% of the property’s value through the bank is an option. If you’re interested, you can find this property and others here.

You might not get the best interest rate with 100% financing, but many real estate investors don’t mind because the interest is tax-deductible. The key is to understand that your equity is a far more valuable resource than worrying about a slightly higher interest rate. This approach allows you to leverage your money more effectively.

Most of our clients prefer to finance 100% of the property value if both the property and their personal financial situation are favorable. By doing so, they maximize their investment potential while preserving their cash reserves for future opportunities. This strategy can help you build a robust real estate portfolio over time.

25.000€: Downpayment Interesting?

If you have 25,000 euros in the bank, making a down payment becomes a viable option to secure a lower interest rate. The decision to make a down payment ultimately depends on your personal real estate investment strategy. Let’s revisit the 156,000-euro property example. If you choose to buy it without a down payment, your initial investment would be 8,000 euros for closing costs, but you might be slightly cash flow negative, around 70 euros per month. This minor negative cash flow is manageable given the large amount financed.

On the other hand, if you decide to make a 10% down payment, investing nearly 25,000 euros, you would be cash flow positive from the start, with a surplus of 83 euros per month. The critical question here is whether the additional 15,000 euros investment is worth the monthly cash flow benefit. Personally, we would prefer having 15,600 euros in hand now over receiving 83 euros monthly in the future, especially considering the tax implications. Positive cash flow is taxable, whereas a slightly negative cash flow can offer tax benefits.

With 25,000 euros available, you can afford a down payment if you prioritize minimizing your interest rate and achieving immediate positive cash flow. However, this decision should align with your long-term investment goals and financial strategy. Both approaches have their merits, and the right choice depends on your individual circumstances and investment philosophy.

50.000€: Renovation Property

With 50,000 euros in the bank, real estate investment becomes not only more accessible but also highly tax-efficient. If you have this amount of savings, it’s likely you also have a substantial salary—more than 67,000 euros as a single person or over 134,000 euros as a married couple—placing you in the 42% income tax bracket. Paying taxes might not be enjoyable, but taking advantage of tax deductions can be quite rewarding, especially if you can benefit from a 42% tax reduction on your expenses.

We discussed this in our article on seven real estate tax tricks. Buying a new construction often comes with a higher price tag and no immediate tax deductions. Conversely, purchasing an existing building and renovating it allows you to deduct the renovation costs immediately. This can result in substantial tax savings, potentially tens of thousands of euros, which can help you reinvest in another property next year without using your own money.

For example, if you invest 20,000 euros in renovations, these costs are immediately tax-deductible. At a 42% tax rate, you would receive 8,400 euros back from the Finanzamt (tax office). This amount exceeds what you need for another property investment, effectively enabling you to buy another property next year without any additional personal investment. This strategy not only maximizes your current investment but also sets you up for continuous growth in your real estate portfolio. Isn’t that a fantastic way to leverage your savings and tax benefits for future investments?

100.000€: Diversify with 2+ Properties

If you have 100,000 euros available, perhaps from a big bonus or a golden handshake, it’s crucial not to invest all of it in a single property. Diversification is a fundamental principle of successful investing. Spreading your investment across multiple properties mitigates risk and enhances your chances of financial success. By investing in different types of properties in various locations with diverse tenant profiles, you reduce the impact of any single property’s performance on your overall portfolio.

Imagine you face an issue with one property—such as a vacancy or unexpected repair costs. If all your money is tied up in that one investment, your financial stability could be significantly affected. However, with multiple properties, the income and performance from the other investments can help cushion the impact, providing you with greater financial flexibility and security.

Moreover, diversification allows you to be more strategic in managing and growing your portfolio. You can choose to sell one property while retaining others, giving you the flexibility to adapt to market changes or personal financial needs. By spreading your risk, you not only protect your investment but also position yourself to take advantage of different opportunities in the real estate market. Diversifying your portfolio with two or more properties is a prudent approach to achieving long-term financial stability and growth.

1.000.000€: Real Estate GmbH

At the million-euro mark, real estate investment takes on a new dimension. This is the threshold where it becomes advantageous to consider forming a Real Estate GmbH (a German limited liability company) for your investments. Why? Because a company can benefit from significantly lower tax rates on rental income—around 15% compared to the 42% you might pay as an individual investor. This substantial tax saving can enhance your investment returns considerably.

However, it’s essential to recognize that forming a Real Estate GmbH is only worthwhile if you have a substantial real estate portfolio, typically in the millions. The costs associated with setting up and maintaining a company can be high, including administrative expenses, legal fees, and accounting services. Therefore, these costs need to be outweighed by the tax benefits to make the Real Estate GmbH a viable option.

Moreover, operating as a company offers other advantages. It provides a structured framework for managing multiple properties and potentially attracting investment from other parties. It also offers limited liability protection, safeguarding your personal assets from potential business liabilities. This setup is particularly beneficial for investors aiming to build a sizable and diverse real estate portfolio, leveraging the tax efficiencies and operational advantages that a corporate structure provides.

In conclusion, while the initial setup and ongoing costs of a Real Estate GmbH are significant, the tax benefits and additional protections make it a smart choice for high-value real estate portfolios. This strategy can maximize your investment potential and ensure more efficient management of your real estate assets.

Conclusion

In conclusion, the journey of real estate investment can start with little to no initial capital. Begin as an individual investor, gradually building your portfolio. As you accumulate properties and experience, transitioning to a Real Estate GmbH can offer substantial tax benefits and operational efficiencies. Remember, patience and strategic planning are crucial. After holding properties for ten years, you can sell them tax-free to your own real estate company, optimizing your investment returns.

We encourage you to explore these strategies and tailor them to your financial goals. Real estate investment is a powerful tool for wealth creation, and with the right approach, you can achieve significant success. If you need personalized guidance or have any questions, feel free to book a free meeting with us. We are here to support you every step of the way. Wishing you all the success in your real estate endeavors, and we look forward to seeing you in the next discussion. Happy investing!

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