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Additional purchase costs for real estate

Steuern sparen mit Immobilien

The additional purchase costs or additional acquisition costs when purchasing a property consist of the real estate transfer tax, the notary and land registry costs and, if applicable, the broker’s commission. Depending on the federal state and broker involvement, these costs amount to between 5 and a maximum of 16 percent of the purchase price of the property.

Overview of additional purchasing costs

  • Real estate transfer tax: Bavaria 3.5%, all other federal states 5% to 6.5% (no sales tax)
  • Notary costs: approx. 1.5% (plus 19% sales tax = 1.8%)
  • Land registry costs: approx. 0.5% (plus 19% sales tax = 0.6%)
  • Notary’s expenses: if applicable, approx. 0.1% (plus 19% sales tax = 0.12%)
  • Broker’s commission: possibly approx. 3% to 6% (plus 19% sales tax = 3.57% to 7.14%
  • SUM: approximately 5% to a maximum of 16% (of the property purchase price)

Different property transfer taxes in the federal states

If you have other values: With the exception of Bavaria, almost all federal states have increased again and again. Thuringia reduced the real estate transfer tax from 6.5% to the previously applicable 5.0% as of January 1, 2024.

Mecklenburg-Western Pomerania6.0%
Lower Saxony5.0%
North Rhine-Westphalia6.5%

Additional purchase costs are usually not co-financed

The total acquisition costs consist of the purchase price and the additional purchase costs.

Banks finance up to 100% of the purchase price. The property buyer usually has to bear the additional purchase costs and other costs themselves, i.e. bring them with them as equity.

Even with so-called “100 percent financing,” the “100%” almost always refers exclusively to the property purchase price, not to the entire cost of purchasing the property.

If the additional purchase costs are also to be financed, this is 110 percent financing or “full financing”. In order to approve such financing, banks expect the borrower to have a very good credit rating.

If renovation and furnishings are also to be financed, this is referred to as 130 percent financing. This is rather unusual and is only approved by banks if you have excellent creditworthiness.

Real estate financing at 100, 110 and 130 percent
Label Financing amount needed equity
100% financing 100% of the purchase price 100% of the additional purchase costs (= 5-16% of the purchase price)
110% financing (full financing) 100% of the purchase price and 100% of the additional purchase costs 0
130% financing 100% of the purchase price and additional purchase costs plus renovation, furnishings, etc. 0

Additional purchase costs are subject to tax deductibility

In the following we use the term “deductible” for costs that can be fully claimed as expenses for tax purposes in the same year. We use the term “depreciation” for the “depreciation for wear and tear” (depreciation) over several years.

Writing and deposition
Write down Deduction for wear and tear (depreciation) over several years
Put down Costs are fully tax deductible in the same year

Whether and which additional acquisition costs can be written off for tax purposes depends on how the property is to be used.

Depreciation for owner-occupied property

If you use the property yourself, neither the purchase price nor the additional purchase costs can be written off.

There are the following exceptions, in which not the purchase price itself can be written off, but only the modernization and maintenance measures:

  • Monument depreciation: This requires official confirmation that the building is a listed building.
  • Renovation Afa: This requires an official certificate from the municipality that the property is in the official renovation area.

Depreciation and deduction for rented property (investment property)

If the property is rented out, the additional purchase costs are considered part of the acquisition costs and can be depreciated, together with the purchase price itself, over 40 (year of construction before 1925) or 50 years (“new building”, year of construction from 1925).

Depreciation period varies depending on the year of construction or start of construction or date of purchase
Age of the property Depreciation period AfA (“deduction for wear and tear”) per year
Year of construction up to 1924 40 years linear 2.5%
Year of construction from 1925 50 years linear 2%
Purchase or construction starts between October 1st, 2023 and September 30th, 2029 degressive (5% in the first year, then decreasing annually) Year 1: 5%, year 2: 5% of the remainder (95%) = 4.75% d. Acquisition costs, year 3: 5% of the remainder (90%) = 4.5% d. Acquisition costs etc.

Since the land cannot be depreciated (land does not wear out), we also have to reduce the additional purchase costs by the proportion that the land value makes up of the purchase price.

For a condominium in an apartment building, we assume that the land value is 15% of the purchase price and the apartment itself therefore accounts for 85% of the purchase price.

Accordingly, we only use 85% of the additional purchase costs for depreciation. In this example, 85% of the purchase price plus 85% of the additional purchase costs can be written off.

For a single-family home, the value of the land in the purchase price would probably be higher than 15%, as there is usually more land area per square meter of living space.

Purchase price: EUR 400,000
Additional purchase costs: 32,000 EUR (assumed: 8% of the purchase price, excluding sales tax)
Total acquisition costs 432,000 EUR
Building value: EUR 340,000 (85% of the purchase price assumed for apartments in an apartment building)
Land value: 60,000 EUR (15% of the purchase price assumed for apartments in an apartment building)
Depreciable: Building share of the total acquisition costs (= purchase price + additional purchase costs): 85% of 432,000 EUR = 367,200 EUR
Linear depreciation for “new building” (built from 1925: 50 years) 2% of 367,200 EUR = 7,344 EUR / year
Linear depreciation for old building (built before 1925: 40 years) 2.5% of 367,200 EUR = 9,180 EUR / year
Degressive depreciation for new buildings (purchase or construction starts between October 1st, 2023 and September 30th, 2029) 5% of 367,200 EUR = 18,360 EUR / 1st year (5% of remaining amount = 4.75% in 2nd year etc.)

Additional purchase costs: entry hurdle for investment properties

Without equity to cover the additional purchase costs, it will be difficult to get a property financed as an investment.

In this respect, the additional purchase costs represent an entry barrier when purchasing a property as an investment.

A direct investment in real estate, i.e. the classic purchase of an entire property, as Meine-Renditeimmobilie offers, is high-yield, safe and transparent.

Other forms of real estate investing, such as closed-end and open-ended funds and REITs, are less transparent. On the other hand, it is possible to get started with much smaller amounts.

Real estate bundled as a financial product (funds, real estate shares, REITs) compared to direct investment in a single, complete property
Investment form Transparency Minimum investment
Real estate as securities Not very transparent for investors. Providers have design sovereignty 50 euros and less
Direct investment in a single, entire property Nothing remains hidden from the investor. Individual design possible. 30,000 euros and more

The very attractive direct investment, on the other hand, is usually only available to investors who can afford the additional purchase costs of several tens of thousands of euros or who can alternatively provide investments as security.

If you have the necessary equity capital, we strongly advise you to look into purchasing an investment property.

Arrange a non-binding conversation and let us show you your options.

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