Real estate as an investment
What needs to be considered?
We’ve probably all had a similar experience at some point in our lives, whether it’s the feeling of standing in awe and admiration in front of a castle rebuilt according to historical models and experiencing the spirit of the past, or the feeling of strolling through a bustling old town and admiring the charm of proud merchant houses that date back to the time of the Hanseatic League. All of this is made possible because those involved show both the willingness and the commitment to preserving culturally and historically significant buildings for future generations. In this place, special emphasis is placed on the preservation of historical landmarks. This ensures that the framework conditions for the preservation of architectural cultural assets are complied with. The law establishes these conditions for the protection of historic buildings and monuments and is administered by the competent monument protection authority. An overriding public interest is the most important requirement that a building must meet in order to obtain the status of a “listed building”. Age alone is not decisive. The classification protects the building from being demolished or subjected to structural changes. The definition of certain measures and their implementation is the responsibility of the various federal states that make up Germany, for example. In addition to the United States, other countries such as Spain, Portugal, Italy, and France each have their own regulations, which may be different from ours.
What requirements should a listed property meet?
In Germany, a plot of land is referred to as a listed building or architectural monument if it is entered in the official list of monuments. It will then be added to this list. In the context of current monument preservation practice, these are buildings that exemplify the style typical of their respective eras. Therefore, from an architectural and aesthetic point of view, they deserve protection and conservation. The preservation of listed real estate, which is considered part of the cultural heritage, is financially supported by the state through subsidies. For example, a property owner who wants to carry out remediation measures can take advantage of tax benefits for that particular purpose. Nevertheless, it is necessary to follow very strict regulations established by the Monuments Office and required by law. However, listed buildings can also meet the criteria for investment properties and be held as investment property.
The importance of monument protection for the real estate market
Buildings such as castles, fortresses, monasteries, old manor houses, half-timbered houses, windmills, water towers and historically significant residential or commercial buildings are often suitable for monument protection. Anyone considering purchasing such a building should research the implications in advance and make an informed decision. This is because historic preservation comes with various rules and laws regarding repair and use, but in return, it offers fascinating tax opportunities and benefits. In addition, the acquisition comes with the obligation to ensure the maintenance of the building, which may be required by the municipal authority responsible for the preservation of historic buildings.
Tax incentives for investors and private users
There are numerous motivating factors that can lead to the purchase of a home for sale. One of the reasons could be the desire to acquire a unique structure and restore it to its former glory through various forms of restoration. In this scenario, idealism and passion play an important role, as do the financial resources available. However, investors are also looking for such unique homes in sought-after locations in order to be able to rent them out profitably in the long term after renovation.
The state rewards the cost of renovating a listed building, which is usually far higher than the cost of routine renovations, with tax incentives that can sometimes be quite significant. Anyone who invests in the renovation of a building with the intention of renting it out afterwards can write off the renovation costs as income-related expenses over twelve years. In this way, maintenance costs can be fully covered by the tax benefits available.
If the new owner intends to live in the property himself after the sale, nine percent of the cost of maintenance and renovation can be depreciated over ten years. This corresponds to a total of ninety percent of the investment.
The acquisition cost, which can be deducted with different depreciation periods depending on the year of construction of the building, is a cost element that happens to be incurred for all rental properties.
Can the purchase of a listed building be worthwhile?
Buyers and investors are likely to find the previously discussed tax benefits appealing. However, be careful if you intend to make a profit after only a short time since the completion of the work on the renovated property. The eventual buyer will not be able to take advantage of the tax benefits and will therefore base their purchase decision on the current market price, which may result in a negative profit. It is recommended to own the property for at least fifteen years to avoid this.
In most cases, listed rental properties have a high degree of attractiveness. Therefore, a higher rental income is achievable if the property is appropriately located. Demand for housing is expected to remain high in attractive cities, and there is a good chance of finding financially stable tenants looking for something unique in these areas.
Listed apartments are also often located in areas with poor building fabric. Despite the stable value of the region, it is extremely difficult to make a profit from a sale there, due to the low prices of both houses and land. There is a good chance that there will not be the same growth in value as is common in more economically attractive regions.
Distribution Germany
- E1 International Investment Holding GmbH
- Sportplatzweg 4, 65201 Wiesbaden, Germany-Hesse
