The first part is about building wealth in general, and then we go more specifically into the newest options here in Berlin. Of course you can otherwise always check and have a Zoom presentation, or a call with me if you have special questions. And I do have a membership side, which will be for free for any of the female founder space members. So you can always see the newest properties. That’s something I can share later on in the after network I just learned. So that’s a great feature.
Building wealth is something we don’t learn in school and people who go into economy or into any academic situation, learn a little bit more about this, but I think it’s very important to understand there are eight reasons why you can’t avoid becoming wealthy with real estate, and why is that so. So imagine you buy a condominium and you rent it out, you get most of the purchase price from the bank. Why is that? And that is our first part, our first point of these eight points: with relatively little money, you buy something relatively expensive. So that means you have 10% that you put down and you have your average income because you have an average income, you can ask for a loan.
And that’s something I will specify later on, that it’s also possible when you don’t live in Berlin or you don’t you’re not a citizen of Berlin. And that we have different companies who specify, especially in English. So also for non-European or any European, anybody can buy property not only in Berlin, but all over Germany. And this leverage effect is especially interesting in the so-called A, B, C, B, and C, environment. So B is for example, what we call speckle in Berlin, everything that is surrounding the big capital, but also the big cities here in Germany. Cuz right now Germany is like a magnet and there’s a lot of people starting new jobs, starting a new life in the big capital in Frankfurt, Munich, Hamburg, and Berlin. And interesting to look into these areas, so-called B and C areas start to get interesting as well because these are areas where you have maybe a good connection with the train or with the s train into the city.
And you have really interesting prices. So most of the money comes from the bank. That’s the leverage effect. The return from the rent, let’s say 2% after deduction of all costs, you get 100,000. That is 2000 euros on only 10,000 invested. So 20% of return on your invested money, 20% return on equity, let’s say the property increases, the value increases and that’s something we can, we will later on, see in Berlin, we can see it’s up to 12% yearly in Berlin. And it’s increasing right now. And then you have 2% even with inflation. So your assets grow again by 2000 euros and you still have only invested 10%, 10,000 euros. Okay? And that’s what we call the leverage effect. And that’s our number one point to understand. We call it the secret of capitalism because without this leverage effect, you wouldn’t jump into this league of, of actually saving money in the long term.
And that’s the incentive to save money. Something that normally is not our focus from the beginning. I know what I’m talking about because I was a dancer at the beginning. Art was the most important thing for me and for me, it’s also a world that opened up and that is really interesting to learn. Maybe one or two of you already have this economic background and it’s different, but I think it’s good to understand this accumulation. The biggest problem with your wealth accumulation is probably you in the sense of you plan to save something and you, and then you don’t do it consistently over time. There are always different reasons for that. The life situation changes. You get kids, you move, you have another job you plan to save, and then you don’t do it consistently over time. You plan to buy stocks to hold forever and then you sell them when prices fall or rise sharply.
You keep looking for some new investment quickly instead of just continuing with what you’re already doing. And there are studies about this that show that this behavior is quite common and it hinders wealth building. None of this will happen to you after you buy a condo. You will pay the saving installment into the bank and no matter what, you have to do this on a monthly basis. And you will do it from the rent in the form of repayment. So if you buy, for example, in a B, we call it B location, and there are opportunities even sometimes under a hundred thousand euros. You start with a very small apartment. Somebody she just had a baby herself and she started in Panco a little bit outside of Panco 50,001 room apartment. And she was already able to buy the second one in the same building because she likes the building so much.
She likes that everything is safe and secure and she gets her payment from the tenant and she likes the tenant. She builds a good connection to the tenant. She doesn’t ask for too much, she just, what is the average rent? And so the rent is already repaying the loan and that is the consequence of this model, Mia, just because the next vacation is coming up or new lease are or something you are hardly going to suspend the bank, install installment or sell real estate. You will never do something drastic. We will be persistent with it. And that is the psychological trick of building something for the long term and thinking long term. Even if we don’t like to hear it, sometimes we have to be pushed a little bit to come closer to our happiness. This point is stronger over time than you think and it holds a wonderful dynamic for you. Okay?
Creating sudden wealth, that’s number three. So real estate is a non-parent market. Every apartment is like a dress. I say. That means that for each property, there’s an individual price, there’s individual features, upsides, downsides, and above all, you know, below or an object market value because maybe somebody needs to sell very quickly. Somebody doesn’t want to renovate or something. So other people sell for different reasons and that is your opportunity. There are many properties that are sold below market value for various reasons, time pressure, boring as no desire to renovate, et cetera. If you find such a bargain and asset value is created for you already at the time of the purchase. So we always say when you have the keys of the car, the car already has less value than you paid for it. If you have a brand new car. And it’s the opposite with real estate. When you get the keys in your hand, you have the chance to really build the value and to really make it more valuable not only for you but as an objective asset value. For all other forms of investment, gold or bonds or stocks, everyone always pays the current price. Below market value doesn’t exist and therefore the purchase profits are reasonably more interesting with real estate.
Okay? This is number four, and it gets even better. Let’s say you renovate an apartment and renew, for example, the old seventies bathroom for 5,000 euros in the new rental, you know, you now get 50 euros more rent per month. In eight years the bathroom has paid by itself, but you still get the 50 euros more rent. Now you don’t only get more rent, you also increase the value of the property. Why? Because the value of the properties termed by the rent, a common factor depends strongly on the location. This is why we always say purchase price times 20 should be the annual code rent. So in this case, 50 euros times 12 months, factor 2020 is 12,000 euros. So you have invested 5,000 and immediately created 12,000 euros just by doing the bathroom. Okay? Try this with your shares. You cannot influence the timeline that much.
You cannot influence the stock market that much, but you can influence the value of your property so you have it in your hands. Okay? That is our point number five that you can make more out of this and inflation. So protection against inflation is really important to us. Value appreciation through general rising real estate prices is a nice extra, but not the reason for buying a property. The reason to buy it is the rental income that will pay off your property over time. So after some time you paid everything off, now the regular payment belongs to you. Therefore even if property prices for temporary you, your tenants will not move out nor will they be able to reduce the contracted rent. Therefore, in a location where you can always rent well, preferably with a positive population forecast and finance with reserves, then you never have to sell.
Okay? So reserves means to always put a little extra like 1515. Is there a question? Okay, let me know if there’s any question. So that’s super important is that if you always have this little extra, there’s a question. We have actually 4.5% inflation at most. This is important to know that you can, you don’t really speculate with something because it has a market value and the market value increases and the market timing doesn’t work. And it’s certainly not a systematic way to build up wealth. A property must pay off when you buy it and when, and then pay itself off no matter what is the property price. Okay?
All right. So this is now about the number six, let’s say, okay, I have to see if I can see, you have to tell me if you can see everything and say you have 1 million euros in your account when you retire. First of all, congratulations. That is of course, if you have started with one studio apartment, maybe you bought a second, a third maybe with four or five apartments, you make your own calculations, then you know how much you get when you are a senior citizen. But what are you going to do now? Pay yourself 2,700 euros every month for 30 years. And what if you get older besides inflation, your money will be worth less every year. So you could buy shares, but what do you do when they’re very expensive right now or if you already have shares, but they have just fallen sharply when you need the money to live on, because you live the money you are forced to sell again and again, regardless of the price development.
Let’s say you bought an apartment 30 years ago instead, which has paid itself off via other rent. In the meantime, the installment to the bank has been eliminated. In the meantime, you can keep much of the rent for yourself forever, no matter how old you get. And at some point the rent may go to your children. So if they need to study, they already have an extra income. Here is again, the number of inflation. We have very high inflation in Germany right now, 4.5 in October. If you own real estate inflation means three things to you. First, your rental income goes up. Rent increases with inflation are common. Beware that your maintenance costs also go up for water heating, electricity, but they’re less than rent. And the value of real estate increases with inflation in the long run. And your debts become worthless in the sense of money being devalued.
So the debts are lower, but the increase of your apartment or property is still higher. So real estate has a permanent built-in inflation protection. One’s wealth and passive income is built. It is not eroded in inflation. So this is why I think especially for women who are freelancers, who are entrepreneurs, it’s good to have this long-term mindset, number one. Number two, even if you say, okay, my average monthly income is not that high yet, but then you have a goal to go, you know how many percent, maybe 20% later you want to put to the site to have actually a little bit of a buffer to start from. And once you know, they see the tax advisor sees your regular income and or, you can pay yourself as a managing director of your company, a regular income, then you have a steady way to go.
And even with a small apartment, you can build sort of an empire here. So does this have anything to do with coincidence or mi lack? No, not even with the market timing. The right time to enter the market can be anytime, can be now real estate works and has always worked if you know how and you don’t use it as a consumer later on, I will show you, can also do it as a consumer because of the Berlin market, if you don’t want to rent. But this is the idea as I told you about this b and C locations, that is really a smart investment to start with. Then it can add to your happiness. You want to learn how to do it and build up your own wealth with real estate, then we have good news for you.
You can start with us here in Berlin. Now the different groups, who do this, I’m part of the vocation group, for example. They do this all over Germany now. Then as vile mentioned, there’s also Fin Marie, they also help women to build wealth. And there are different communities, of course, they’re also Facebook groups, women groups. And I think it’s just good to explore what the options are. And I can give you four or five examples when it comes to how to get a loan, for example. And this is the introduction part, to buy a property here in Germany. So even during the pandemic in comparison to the other European countries it was generally still a good idea. And there’s a lot of going on. Really the last two years the market hasn’t stood still. So let’s have a closer look together.
I can help you understand that it’s not so complicated when you’re non-European. That’s something we can go into the specifics of your situation, but I’m just going to show you now the different points. We are just touching five out of these points but if there’s general more questions, of course I can always answer more. So is it a good time to buy? That’s the first question I always get. Yes, the German market is still stable. The economy is stable also due to all the programs that the politicians had and the steady hand also of Mrs. Merkel, for example. So we had a lot of government help even for digitalization for companies who had a tough time during the pandemic. There were a lot of programs to help these. So we don’t see that much of an effect yet.
And there are a lot of growing parts or growing businesses here in Germany. There’s a lot of potential also in digitalization, in the startup scene, especially in Berlin. So for historical reasons, Berlin still has room to grow. You know, it was two cities and there was a void space called the wall, and there’s so much space still around it and so much creativity around this, especially the old wall. You might know Kretz back was one of the most creative but also poor areas. And now it’s one of the most developed areas, especially, um, CREs back and my current. So Berlin also offers a lot of new real estate projects if you want to be on the safe side and you go with someone to plan like an architect where they already plan a new building, that’s also a solid investment.
And you also have in between these in between areas, affordable apartments. This is an example where you can see this is actually from 2018. I will show you more current ones in a minute, but here you can see how much the different boroughs of Berlin differ. And that’s the same for the so-called C and B locations. And so you know for example, if you look at sea locations in the west of Germany, you have between Du Kern, cologne so many small, not only villages, but cities, they’re so well interconnected. So it has become one booming area there. And that’s the same with Berlin. There are booming areas now that you know, 10 or 20 years people would’ve laughed about. Like, you know, panco vetting even housing has developed and you can see here you just have to search for the right opportunity.
Coronavirus now in the last three years has developed towards 10,000 for square meters. Among other reasons, there’s the pop population growth. We have undergrowth from being under 3 million now, 3.5 million going towards 4 million people here in the population in Berlin. The rising property values was 12% going up sometimes to 16% in some areas, as you can see, because each area is a little bit different. So, the rising of the burden, value of the value is very dynamic and currently we still have a low interest. We don’t know how long, but for now it’s really interesting. Low interest between one and 2% you can get a loan already and it’s a steady trend still in this year. Everybody can apply for a mortgage. And then we also have different ways of finding property.
One is the way we do it, and of course there’s always these big portals or you have your local mala, your local real estate. If you are only interested in one area, that’s also possible. Here again, you see from 2011 the development of the prices until 2017. This is for 9 million HOA for houses, the other one was for apartments. And here you can see how much the prices, especially in the southwest area actually where I am now, have developed. So here you see the meat prize you know, going up to 25 per square meter. Simple is still like six or seven years per square meter. And here you see from 8,000 to 14,000 in these dark red areas. Okay. And in these areas that are more sort of normal, you can see, you can still find something between 1,300 and 2,500, you know.
So I think this is still a good sign that now is the time to search for these opportunities and how much you can afford. That is the best. If you can get a pre-approval mortgage. And that’s something I can always help with is basically getting all the papers together, have the pre-approval in your pocket so that when you start, you don’t start like a tourist, who doesn’t know anything about real estate, but you already have a know-how and you already have a good idea of what you can actually afford, you know, and which neighborhood is the most affordable for you? And finding property, as I said our motto is finding instead of searching. So, basically we take people by the hand, and that’s personally accompanying somebody from two months to three months. This is how long it normally takes.
And then we really start from eight, you know, going on, on a walk, going on a tour, seeing five to six apartments on our first tour. And then every week you get five to 10 apartments. And we will not rest until you have your perfect apartment. If it’s for you to use as a family apartment or for yourself. Then we also have architects, you can do any layout changes. Two room apartment can become three rooms, apartment four rooms become maybe two giant rooms or, you know, these are things that, as I said before, it’s also your creativity, what you do with a given apartment.
This was for example, a high class apartment that we sold. This one also, this was a new building on an old building in a very nice area, which is still undervalued. It’s actually a beautiful area of a temple. Maybe you know it from Temple Ho for Fed. This was a duplex in Fri Heim with a very nice terrace. And here I show you a little bit of what’s new on the market right now. So these are things we were looking for, a family for big apartments around 800,000. You can see five rooms. This is four rooms, around 750,000 in our current. And as you can see, it’s renovated. You don’t have to do so much. These are quite expensive apartments because they are overlooking the temple of Fed. You can see the Alexander Tower from there.
So there you see it, it says three rooms, but to be honest, it’s a five room apartment and you can make two apartments out of it. So large. As you can see, 160 square meters, you have three terraces. So you could even use it as a co-living space or co-working slash co-living space. And only use part of it for yourself. So it’s a very interesting area of town. But of course that’s the higher end of the prizes because it’s top roof and top roof is always the most wanted area. Of course. Here in STIGs you can also have six rooms for 900,000, as you can see also 134 square meters. So all of these are big apartments because we were looking for big apartments here. Much nicer price. 500,000 for four rooms, 112 square meters there. You have to do more here.
This is an investment that is interesting for around 500,000. You are in one of the roaring areas of British Heim. You also see the Alexander Tower. You are on the top of this whole building. You have your own elevator. It’s a little bit of a luxury feeling, but it’s perfect to rent out short term for tourists or for students. And this would be an investment in the middle of the city. But of course there you have to start with 500,000. So 20% of 500,000 is already a big sum. So for all these bigger apartments, as I said before, and in the middle of the city, you have higher prices, of course. You can see that here. This is a new building, everything is already sold on this one Tia Garden. It’s a very nice architect and you are very close to hands and fiddle. And it has the feeling of the architect of Baha, and it’s quite new here in the middle of the city. Near Stein Plats, one of the most interesting places in Park. You have a studio apartment, which could be rented perfectly for one or two students, and it’s only 375,000.
So you can see the prices differ amazingly. My current meter of course is the highest price you can get, but even here in Japan, you can get something from 380,000. And since the begi public transport in Berlin, it’s quite nice. So these are apartments that we find, we get offers every week before they’re on these different marketplaces like IMO Scout and they might be interesting for you. So this is something we would send you every week, or you have a look in our membership area. This is a wonderful penthouse, new CROs back, for example. So these are opportunities that you can always get when you are basically in our community or in our loop for searching. Okay. So think out of the box. That’s what I always say is, if you know, can you change one apartment into two apartments, the layout, so that the value of the apartment becomes different story for yourself.
Also, you can have just a mix of self usage and, and renting out. We also have for 13 years of program for guest parents. So maybe you rent out to a nice guest student, you get an extra 700 euros per month for a student or 500 euros per student. And this could be an enhancing experience, especially, you know, like also with a pair if you’re open to, to share your house but there are very different possibilities in Berlin and I think that’s the amazing feature of Berlin that you always have nice surprises and really interesting opportunities. So once you found the apartment with us or with IMO Scout and you have your pre-approval already in your pocket, that’s really important. You have saved at least this 10% in your account, or you plan to have this maybe from your parents or from the family, then you should actually reserve the apartment.
You take your time and that is the purchase process. And that’s something we guide you through also in different languages if needed. The notary has to read the contract in German one time completely but it’s also possible we work with notaries who do bilingual contracts or we go through the contract together to make sure that you always understand what you’re buying, what are the implications of this, cuz it’s a big transaction and you don’t do it that many or that often in your life. So it’s super important to understand everything from beginning to the end. So first make your reservation on the property and have all necessary document documentation for your specific property at hand. Then it’s the partition of the division, the condominium, the history of the building, the minutes of the last three years, economic plans, was there some kind of dispute, how is the whole condominium, is it a nice neighborhood?
And do the neighbors get along with each other, the other owners in the building and that will give you a good inside of the situation. And if there are disadvantages or only advantages of the property. And we can also give you our expertise to have a closer look. Then the notary basically has the liability that everything goes according to plan. That, there are no hidden agendas, no hidden other owners maybe there cannot be any hidden damages also. So it’s a very safe process here in Germany. When you sign the purchase contract in front of the notary, the notary will read the entire contract and he has to make sure that both seller and buyer fully understand the terms. Then when you sign the purchase contract, then it takes quite some time. You also get the permission to have a loan and your, your name will be canceled in the bank or the mortgage broker gets the, the notary contract will register the mortgage to secure the right bill for this property. So they also will write their name into the contract, and then it takes four to six weeks, sometimes eight weeks until you can actually pay the apartment.
And then you will transfer the total purchase price, including your own capital the loan, the taxes of course. And then you start paying the condominium, which is a monthly payment. And the taxes are quarterly small sum. In the beginning the taxes were 6%, the notary is about 1.52% altogether with the land register and the real estate broker has changed. So basically it’s now half and half, the seller pays half and you pay half. So it’s not up to seven point 14% anymore. It’s like 3.9% including taxes. And when you buy something with us, it’s only 2.5%. Then what is next? The rental break and the rental cap, that was something really heated discussion here in Berlin. Basically there will be a rental break all over Germany with the new government, but it will be a mild one.
So it’s not a restriction where you get a penalty that was unconstitutional. They tried to do that here in Berlin was unconstitutional, but there is a rental cabin. It makes sense that people don’t pay over 30, 40, 50% of what is normal in that region. So there’s always, you always have to remember it’s an 80% rental, um, market in Germany. 80% of the people are tenants and they are protected by law. Which means you still have a good chance to rent out middle or or short term rental, especially when it’s furnished apartments with a certain higher rent. But it has to be a reasonable amount, you know?
So why is that then, especially in Berlin? It’s interesting maybe to understand because in Berlin you know, we also had this Airbnb discussion. We also had a law in 2014 not to have it as a tourist attraction anymore because if you rent it out for only a couple of days, then your apartment becomes like a hotel. Okay. And a hotel is in Germany, VEBA. So that is basically like an office space. And we don’t want to turn over the apartments because we have a lack of apartments around 200,000 loans in Berlin. And the new government wants to build over 400,000 new apartments now and there’s a lot of building and construction going on right now anyway. So there is really a valid understanding that it has to be a good mix of people.
You know, it’s good to have condominium owners and tenants in the same area. So it’s a good mix. It’s not going to be a ghetto situation in any way. And I think that’s super important and it’s one of the nice things and the nice quality of living in Berlin. So that doesn’t mean that you don’t have the opportunity to rent out by days or by weeks, one room and or 50% of your apartment. It’s just not a hundred percent. So that’s important to understand. Sometimes if you had a former office space and you turn it into a hotel or you turn it into a guest house pension, then you have the permission already to use it, then it’s your business. And that’s also an interesting business model, but then it’s, it’s sort of a different business to understand that.
And your vitamin C is the knowledge to always gather all the information you can to have creative thinking about how you want to do the outcome of how your partner will look and the details. For example, if you rent out one room and it has lovely details, then there will always be guests who want to come back. I have a friend who actually has still a vacation rental and it’s very close to the water. You can even take the boat and you can just have a lovely weekend in Berlin. I can also recommend you can book it with him and then of course he, with his creativity, he built a jacuzzi, you know, he built a sauna. He already created more value. So that’s something that is without limit of course.
My recommendation, thank you, is my company. So my recommendation is always to make the decision for property. It is an excellent investment and it will give you the freedom for your future plans. Alright, to wrap it up, I think, I will give you a little overview about the property market in general in Germany. And good to start thinking even if you think, okay, this is something I am able to do maybe in one or two years from now, but to have this in the back of your mind and to make a long-term plan for yourself, that’s always a good idea. And the points about how to buy in Berlin what comes next in 2022, besides the new government, we also will have a ministry for construction and apartments. So there will be new laws, but also new opportunities for climate-friendly living.
We have a whole movement, tiny house movement already that is very popular also for small income. And I can always recommend some solutions for small incomes and interesting enough, more and more Germans wake up and they say, oh, my pension will be very small. I want to build my dream home now and I want to realize it now. And for them here, you see the criteria. It’s important. Some of them say to have a free space to have this oasis. Now during the pandemic there was a flood of people going to Brandenburg, more nature. They want a wide view, you know, and not so many want to have luxury. Here you see 95% of the Germans say it’s a good idea to be rent free at some point, to have the freedom to create your own home and the security as a senior citizen.
So it starts to become also a reason for the German people to more and more to either buy something for their kids when their students and at least 91% see it as an advantage to secure their money the investment, you know? So basically our service, if you take the big service package of three months, is like a one stop shop. We also offer just one to five hours consultation or a one week tryout. You want to try it, you know, and then it’s like, you know, you are as a German, you have all the advantages of a German tool to people see it as a very good motivation. If you have an agency like us and they see that you’re serious about it, having the reservation will be much easier as well. So step one, how do we work? We will check your request and you will receive the first consultation for free. Step two, we review your financing together. Step three, we will discuss real estate offers and step four, when you purchased your property, questions of utilities, the notary, everything around the practical stuff. And we soon also will have an application for that. And then you have your new home. That’s the idea.
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