All Forum Posts by: Israel Sternbuch

It could very well be the case due to COVID19, because some things have changed and banks are more catious...

Lenders have increased the amount required as deposits on mortgages. Bank Ochrony Środowiska, Pekao Bank Hipoteczny and PKO Bank Polski have raised the minimum required down payment on a property to 20 percent of the purchase price from 10 percent, while ING Bank Śląski is now asking not for a 20-percent deposit but for 30 percent (again - this is for locals earning locally, not exactly our issue but it certainly does have a effect).

This follows the move by the National Bank of Poland to decrease its reference rate to 0.5 percent, the lowest in history (which is a boon to those with existing mortgages), but margins on mortgages have risen from an average 2.03 percent to 2.15 percent between the beginning of March and mid April...

Let's see where this goes Marek, keep us all posted! Curious where this hot market will move. 

And how do the say? "Powodzenia":-)

@Joe "This is very difficult to achieve with properties that are listed on the market as Tim mentioned because of the high closing costs here for real estate agent fees, etc" - because you are looking for rental candidates (not selling the property), the classic official fee would be 2 months rent (not terrible, compared to other markets) and can be squeezed down as well... So your property should be attractive enough to them because on the brokerage side it will not be a deal breaker.

@André - the market in Wiesbaden is strong and healthy, there is hardly any effect of the American Army in the city because Wiesbaden is Wiesbaden! Other smaller locations, mostly in Rheinland Pfalz (take Grafenwohr in Bavaria as a extreme example) are depending on the US Army and are commanding the local rental demand.

Recall heavy marketing 15 years ago or so, for NATO leased houses (homes leased to service men, location was "nowhere".... But a lease of 10, 15 years to NATO was something you could sleep at night safely with) - about 5% yield, but once they pull out it's a ghost town:-) (search "NATO Mietvertrag", you might find a few broker websites that still market them....).

"I will say that I think the USA is by far the best place to be a property investor" - I would beg to differ....

Indeed, the US does have a very developed market (for all the reasons you mentioned), but the fact that a market is less liquid and less researched is only of benefit, because it gives the creative and ambitious investor a serious advantage. The sometimes "boring" German multifamily, a distressed Barcelona asset awaiting renovation or a Dutch cluster of apartments can sometimes be real gems which in the US would be "attacked" be dozens of investors - might be just the cherry awaiting your pick!

Keep in mind, that these markets (as example) are also much less volatile because of the same reasons... Those who went the US way, where high LTV etc were available - indeed finished flat on their face when financial markets squeezed the liquidity out (Ireland is a very good example); boom & bust & boom....

In terms of who comes closest to the US - if that's what you are after - I would guess the UK is quite similar, but again - IMHO it's not that much of a advantage to the individual investor.

It really depends on how the local banks look at your transaction; in some countries (mostly the developed Real estate markets, such as the UK for example) they will look mainly at the property value, property income generated & potential income etc. In other countries, they will look at your own income much closer and this is where it might become complicated due to the fact that you are not local (buying under a local LLC might at times solve the problem, if furnished with enough capital).

My experience is mainly in Europe & ME, but I assume the problems you have in S. America are for the very same reason.

Hi there!

A distressed asset takes time & effort to find but it's absolutely possible. Keep in mind that a "eye for design" is good but not as critical as other qualities such as "smelling blood" (recognize a deal when it appears) - and even more important, to think on how to make it happen at the right cost (construction costs can differ dramatically, when you take non-local labor and know how to get the materials on cheap etc). German business plans are mostly useless, if you focus on the target as a investor (example: they believe that capital repayment to the bank is considered a good thing, so when they have a choice of 1% annual repayment of the loan vs 4% they will pick the latter, even if it kills the cash flow.... Cash on cash return doesn't mean much to them. You get the point:-)

On rentals below average, there can be several reasons - only a good look into the area & history of the tenancy can tell you what is the reason. Also the Rucklage (amount in reserves for CapEx) can tell you if much has been done, as well as current going average rent in the area, etc etc.

Feel free to send me a PM if you want to learn more!

I think the closest to Bigger pockets in Germany would be Wall Street (https://www.wallstreet-online....), albeit you have to remember that due to the different nature of the people (US vs Germany), dynamics there are slightly different. 

I personally believe that you can invest (almost) everywhere in any developed, as long as you learn and understand what the specifics of the market are . It's always good to diversify; being exposed to a different currency, a more stable marketplace etc - as long as you know what you are doing, you are being realistic and ready for some adventure in life:-)

It's a culture issue (same in CH and other locations) where home ownership is less common, people tend to stay long term, sometimes for all their lives. It's not always a good thing as explained (there is almost no room to raise rents & squeeze the potential).

The 2 examples you brought, are actually apples and oranges: the first one is mixed use (Commercial + Residential on top) so any calculation you have on sqm price & yield is worthless (yields on commercial are always higher, because residential is considered safer....). The second property is a short term aparthotel style, so it's generating a higher yield - that's why sqm pricing is also higher!

The real value can be found in distressed assets, undermanaged, underperforming etc. These above are none of those and upside is very limited (unless you convert the Commercial into Residential, subject to Baugenehmigung).

There is room for argument if Germany, with the current immigration / social structure, coupled with the left leaning policies of some Länder (Berlin as a example) which are very tenant friendly, is a place which can be a short to medium term play.

Covid19 will also have a effect, less on low to medium range but certainly on higher end Residential; on commercial (which, by the way, is not a bad idea for a beginner! If he has enough €) it will certainly have.

Denkmal isn't that bad, it does have  a very high/attractive depreciation rate for taxes, which of course affects the bottom line cash flow (and if you know your way around, using non-german workers etc - costs can be not as terrible as you might imagine..).

I agree with you fully, it's a 50/50 play - still IMHO he can minimize that exposure by using part equity from the US and part local morgage.

(It might even be our guy plans to use the property himself... in which case your option is certainly the best - depending on the terms he gets on his US refinance).

Excellent comments Daniel.

The role of a broker is indeed different, I think what he was after is more of a Management agency for the property (which is more important, long term). Most brokers on the main portals have IVD or similar, but have seen already guys with every certificate on the wall who are not very honest at all times:-)

Gross yields are mainly cut by maintenance costs & repairs - these rules are mostly tougher than the US and can sometimes turn a attractive initial yield into negative cash flow. Tenant protection gives you some stability (longer term tenancy is common practice) but the upside is limited as well (increased rent by CapEx).