Letting an Apartment
What to look out for when renting an apartment?
If you own your own home and would like to rent it out permanently, it is a good idea to consider the basic aspects in advance. As real estate experts, we support you in your search for suitable tenants and advise you on possible returns.
1. Obtain professional advice
We support you in the optimal exploitation of your investment in real estate. For this purpose, we make our expert knowledge available to you in order to advise you on determining the right rental price. In addition, we prepare meaningful exposés, carry out inspections with interested parties and help you with tenant selection, credit assessment and the drafting of contract documents. We will also be happy to place advertisements for you on relevant platforms.
2. Information on financial issues
So that you get the best possible return, we take care of determining the optimum rent. Here we use our many years of experience and comprehensive knowledge of the real estate market. We know the target groups in the respective districts and know the characteristics that distinguish a location.
3. Drafting and concluding contracts
As a rental service, we take care of the drafting of the rental agreement and ensure that your requirements as a landlord are fully met. We always take into account the current legal situation, for example with regard to the execution of cosmetic repairs.
Letting an apartment
Letting a flat can have long-term consequences and should thus be thoroughly planned. Not only must prospective landlords be aware of the legal and tax-related aspects of letting, they must also ask themselves a series of other practical questions. How can I find a suitable tenant? What expenses do I need to keep in mind, and how can I make a profit? Are there certain obstacles that could get in the way of letting profitably? Read on for answers to these questions – and to ensure successful letting.
Things every landlord should keep in mind
When letting a flat, owners take on additional responsibilities and duties beyond those they may already have vis-à-vis the property itself and/or a homeowners association. These may include continued contributions to the maintenance of community property, regular attendance at homeowners association meetings, and making sure tenants comply with house rules. The tenants’ obligations, for their part, relate mainly to the maintenance of the apartment and the paying of running costs. Concretely, tasks for owners who let may include:
- preparing an annual service-charge bill for the tenant
- taking care of necessary repairs or maintenance work
- communicating with tenants seeking to change or terminate their rental agreement
Further obligations to keep in mind when letting a flat:
- declaring the rental revenue in your income tax statement
- submitting to the tax authorities a statement certifying the economic viability of letting your property
- ensuring the property’s accessibility and usability
- ensuring that the property can be heated from 1 October to 30 April of the subsequent year (required by law)
- authorising tenants to sublet if they submit a legitimate request
- authorising the accommodation of the tenant’s close relatives so long as it doesn’t result in overcrowding
Before making the final decision to let, you should also consider whether you’re really ready to transfer usage rights to your property for a prolonged period of time and whether the rent you’ve set is realistic and legally sound.
Commission a broker or go it alone? Advantages and disadvantages at a glance
To successfully let an apartment, what you most need is time. You may be lucky and find a suitable tenant through personal contacts, but that’s not something you can depend on. More likely is that you’ll have to list your apartment offering in a newspaper or online real estate marketplace. If you prefer to outsource this task, you can hire a professional agent. The advantages are clear:
- a professional agent will take all the necessary measures to ensure a smooth rental process, from the moment the apartment is advertised to the moment the lease is signed
- brokers will thereby save you a great deal of time and effort, since you won’t personally have to host viewings
- brokers will also handle all communication with potential tenants, who may have a lot of questions
- brokers can pre-select the most attractive applicants according to your criteria
- they can also provide professional advice regarding price determination and lease preparation
The downside to commissioning a broker is that due to a regulation passed on 1 June 2015, you will be responsible for covering the brokerage fee as the party requiring the broker’s services. The brokerage fee for a rental property usually comes to somewhere between one and two net monthly rents (excluding heating costs) plus VAT.
Letting directly will save you money, but cost you time and effort. Maintaining an online listing, communicating with prospective tenants, organising viewings, choosing the right tenant, and finalising a rental contract are all time-consuming tasks. The decision for or against an agent should thus also take into account the property’s general condition, its location, and the amount of rent you plan to charge. Centrally located, well maintained, and reasonably priced flats will be relatively easy to let; for all other types of property, a real estate professional tends to be a smart investment.
How to design a professional listing
Whether or not you decide to work with a broker, it’s crucial that you assemble all relevant information regarding your property in compact form. The best way to do this is by creating a real estate listing. It should contain not only basic information such as the rent, total area, room layout, and property location, but also photos and links to videos of the property, as well as vivid descriptions of its unique advantages.
Information to include:
- the total number of square metres as well as a breakdown of square metre per room
- a floorplan
- the property’s location, preferably with a link to an online map
- the total rent, including operational costs, heating, and other utilities
- the sum of the deposit
- any additional costs
- information regarding amenities and special perks, such as the type of heating, kitchen build and furnishings, balcony/patio/garden/backyard, communal spaces, parking spaces, etc.
- proximity to public transportation, schools, stores, parks, hospitals, etc.
- the earliest possible move-in date
Images and videos are crucial for attracting prospective tenants to your listing. Even if your written description is flawlessly composed, few prospective tenants will request a viewing without having an initial visual impression of the property. Make sure to use realistic photos, taken during the day and from several angles. Include a video link to help prospective tenants decide if your property is a good fit for them.
If you plan to use your listing for an advertisement, you should keep in mind that the disclosure of certain details regarding your property’s energy efficiency is mandatory. The relevant data is listed in your energy certificate, which, since 2015, must be produced for any sale or rental agreement. Energy certificates are always issued for entire buildings rather than individual units.
The specific details you have to provide regarding your property’s energy efficiency depend on the type of certificate (demand certificate or usage certificate). These may include:
- energy sources (heating)
- final energy usage or demand
- energy efficiency classification and benchmarks
How much rent should you charge?
When determining a rental rate, several factors should be taken into consideration. Adjusting your rate to the market and local indices will increase your chances of finding a tenant and help you stay in line with regulations. There are several ways to calculate a realistic rent price. Check your local rent index for comparable rents and make sure not to exceed them by more than ten percent, which would be in violation of German law. In places without a legal rent cap, 20 percent above average is the maximum amount considered permissible.
Other factors to consider include the location, amenities, and general condition of the rental property. If you see that comparable flats are on the market for a prolonged period of time, you might want to consider lowering your rental rate. If you feel like you may have missed something when calculating the rate, you can try using an online rent calculator, a free tool provided by many real estate agencies on their websites. All you need to do is enter basic data about your property, and the tool will calculate the appropriate price automatically.
Arranging a viewing: how does it work?
Managing viewings can be a time-consuming task, especially if there’s a high number of applicants and you’d like to avoid mass viewings. That’s why it’s important to clarify well in advance, ideally by phone, if prospective tenants will be a good fit in terms of expectations, financial means, and the total number of prospective inhabitants.
If possible, try to schedule several back-to-back viewings per day. You should plan around 30 to 45 minutes for each so that you have enough time to get to know each applicant and answer any questions they may have. Don’t sugarcoat your answers; trampling toddlers and barking dogs will be a problem for peace-seeking tenants, and you’re not doing anyone a favour by concealing dated installations or poorly maintained sanitary devices.
Choosing the perfect tenant
In the end, a significant part of the selection process will boil down to personal chemistry. But there are a few formal criteria to consider as well. You will need to run credit checks, collect application forms, and get written confirmation from applicants’ current landlords that they are not behind on their rent. Free templates for the latter are available to download online, though you should make sure to consult reputable sources only. Double check that you’re not inadvertently asking for information you’re legally barred from soliciting, such as an applicant’s criminal record, planned or existing pregnancy, or membership in associations or political parties.
It’s also common practice to ask for proof of income – an applicant’s last three paystubs, for example. If applicants do not have incomes of their own, as is often the case with students, you may ask for a guarantee from their parents or other family members instead.
You’re also permitted to ask prospective tenants about any personal habits or activities that may place a burden on neighbours, such as making music, smoking, or operating a business out of their home.
How to prepare a rental contract
Not only must your rental contract comply with statutory provisions, it should also cover all agreements, rights, and obligations accepted by both parties.
Many tenant and landlord associations offer free templates of rental contracts on their websites, though it’s important to keep in mind that the interests represented by each group may not always align. Both parties, in any case, should be willing to find a mutually acceptable compromise. Since a contractual agreement can have far-reaching consequences for both parties, consulting a legally trained real estate expert before finalising the contract is always a good idea.
The three types of rental agreement:
- a standard lease, which excludes the possibility of a rent increase for the duration of the tenancy
- a graduated lease, which specifies a temporal and financial framework for possible future rent increases
- an index lease, which allows for annual rent adjustments tied to the German consumer price index
In general, a rental contract should include all relevant information about a rental property – a description, exact calculation of the living area, net rent, additional costs, start date of the contract and, if applicable, end date. Tenants and owners must be identified in the contract by name. Make sure to bring a copy of the house rules to give your tenant at the lease signing!
Key handover: what you need to know
Once the contract has been signed, it’s time to schedule a key handover. Make sure to document this appointment using a so-called handover protocol, in which the condition of the property at the time of handover is confirmed by both parties.
The handover protocol should include:
- the names of all persons present during the handover
- the date and time of the handover
- the number of keys issued
- any existing defects or damages to the rental property
- meter readings for gas, water, and electricity
- if applicable, a meter reading for district heating
The handover protocol should be drawn up in duplicate and signed by both parties, with one copy for each.
Once you’ve successfully let your property, don’t forget to include your rental revenues on your income tax return. The exact amount you owe will depend on your individual tax rate. Both the net rent and operational costs are considered taxable income, though you may deduct any expenses documented in your property management’s accounts. For property owners, the straight-line depreciation method applies; that means that you’re entitled to claim the so-called depreciation allowance (Absetzung für Abnutzung, or AfA), which is designed to cushion property owners against value depreciation due to structural erosion.