All Forum Posts by: Israel Sternbuch

That's correct - as far as the bank is concerned (as you mentioned in your first post) - the bank doesn't care what you do with the money, as long as you pay up (from US income, Polish income - whatever. I guess a non-recourse will be focused on the value of the US property only.

But from our guy's point of view - he would certainly want the US loan taken with purpose of acquisition in Poland to be repaid / refinanced by the Polish deal. So here we go again, we need the PLN income / appreciation to work well vs USD for cash flow and final repayment.

Bottom line, we don't know how /what will be acquired (income property? Own use?) so this discussion is pure theory at the moment:-)

Dear M,

To your first point - this happens everywhere, sometimes inner city expensive areas can be just near the "Hood" (Harlem few years ago? South side of Chicago? Just a few of many).

Low investment costs, usually, have a good reason. Duisburg is a industrial city with all the problems that come with it, and I can't elaborate too much here but in private I can explain the dynamics why Duisburg is problematic. Plans for revitalization are on the table, but these will - if at all - materialize only in the long term.

The mistake of entering a cheap investment as a beginner will be a expensive lesson down the road - and I have paid for the lesson in the distant past and happy to save you those costs and anguish.... Rather join a experienced investor, or get friends / partners and make a syndicate headed by a pro, that will give you purchase power.

You want to rent it furnished? Define your target audience first. Student accommodation might work (a lot to talk about it), Short term lets are not really for Duisburg (Business or Airbnb) and will just be a waste of time & resources.

Re Multifamily: one of the biggest mistakes I see foreigners are doing when investing in a market like Germany, is the lack of cost control. If you are 1 apartment out of 10, you are liable for 10% of the running costs for the building without having any control over decision making (WEG, Wohneigentumsgemeinschaft) and this can be crazy. 

Look, bottom line - there are many ways where professional investors keep profits at maximum vs expenses (for example: purchase costs can be prohibitively expensive, but if you buy the company holding the asset - there are ways you don't pay the acquisition tax (sometimes 6 and 7% of the pp!).

A lot to discuss, bottom line - money can be made, even nice money, but those walking in blind are simply crazy:-)

All the best,

Israel

@Mike Lambert you missed my point.

The main issue is his exposure to the $ vs Zloty rate, long term which can hardly be hedged.

Example: Our guy draws 500'000$ equity in $ from the US property, converts into Zloty and buys a asset that generates PLN income. This loan will have to be repaid / refinanced medium to long term, so he will have to repay his US loan with Zloty proceeds... There is hardly anyone in the financial market who would hedge it for him for long term at these amounts (on serious cash there are some creative structures out there). Keep in mind if he needs to repay monthly out of the income, he has to convert it to $ and transfer - another cost that makes no sense unless it's a real big thing...

On the other hand, a local loan in PLN would be ideal, if he gets 75% LTV his forex exposure will be limited to just 25% or so. Loan in PLN, repay in PLN, as simple as that (and that's what any small investor should do when using $ to invest overseas; limit exposure to a absolute minimum, certainly when the income is in a exotic currency (no offense, but PLN is no CHF, EUR or GBP as of yet:-)

op

Dear M,

The area is simply a disaster zone; I suggest you check the crime rates / Unemployment figures for Hochfeld before you step foot, let alone invest a single €. I personally wouldn't touch the place, but it's a matter of opinion - some people would buy in the "Hood" but I wouldn't, certainly if you are not a local! It's cheap for a very good reason.

Other areas of Duisburg are much better, but if you are a beginner I would suggest you to look for less industrial cities in the area (Essen, Dusseldorf, Köln & Bonn). More expensive, less yield but a much safer play.... Remember Germany is unique (vs US etc) in terms of tenant protection, so if you make a mistake it could be costly afterwards. And I would never touch a apartment, Multi family only (only way to keep expenses in check).

The biggest agent doesn't mean the best.... Most of the times the small local outfit is the best choice, both for service & costs.

Expat connection? Aim for the more established cities above, Dusseldorf Köln would be a good idea.

I'm not German but speak a fluent German, and have close to 2 decades of experience in the field.

Glad to help if needed!

Hi Marek,

It's possible (with PEKAO and ALIOR), but there are some serious restrictions to it - at least as long as you don't earn Zloty as a income locally. And you will need - amongst others - a PESEL (ID number).

Keep also in mind that if you use equity in the US property you have, your loan will be USD - whatever plans you have in the future (will you earn Zloty? If yes you will be exposed to exchange rates).

Bit of work but absolutely possible, would suggest that you take a morgage broker - not a DIY matter:-)

Good luck!

Have plenty of experience in the German market, and will be pleased to join a group and share knowledge!

Yes, I do.

what's the question?