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Real estate as a retirement provision 

Letzte Aktualisierung am 16.11.2023

Wir schreiben das Jahr 2023: Seit vier Quartalen sinkt das Bruttoinlandsprodukt (Q4 2022 bis Q3 2023) und die Inflationsrate liegt bei ca. 4 Prozent. Preise für Getränke und Tabak sind um circa 9, für Nahrungsmittel um etwa 6 Prozent gestiegen. Herkömmliche Anlageformen wie Tagesgeldkonten und Sparbücher werfen keine akzeptable Rendite ab und die Angst vor anhaltender Rezession  greift um sich.

Viele Arbeitnehmer, die ihr Leben lang für einen genußvollen Ruhestand gearbeitet haben, sehen ihre Träume platzen. Und sie fragen sich voller Reue: Was habe ich falsch gemacht? Und warum habe ich mich nie selbst um meine Altersvorsorge gekümmert und mich stattdessen immer auf andere verlassen?

Fortunately, about 25 years ago you You have invested money in a propertywhich you have since rented out. That earns you another 1,000 euros month after month. And that for the rest of your life.

Es gibt viele Wege, um Ihre Rente aufzubessern. Die sicherste und rentabelste Option? Eine Immobilie als Kapitalanlage und zur Altersvorsorge in Form einer vermieteten Eigentumswohnung.

In addition to the benefits of a lucrative source of income, real estate brings real estate as a retirement provision and capital investment, real estate also has other advantages. If you have the purchase of real estate financed by a bank, the investment is already possible with a low equity investment. Your tenant pays off the mortgage indirectly for you and you can continue to build up your assets year after year. build up your assets year after year.

Other advantages:

  • The value of the property/s increases over the years. 
  • You can bequeath your real estate to children, grandchildren, etc. 
  • After ten years, the sale is tax-free.

Retirement provision Real estate: Tax

You are now already aware that the sale of a property is tax-free after ten years. However, there are further possibilities to use a property as a retirement provision in a tax-advantageous way. There are numerous items that you can deduct from tax as an investor. These include, for example, all income-related expenses, depreciation on the value of the building or flat, insurance costs, tax consultancy costs, financing costs (interest) and ancillary costs for refuse collection or caretaker services.

Retirement provision Real estate or ETF/shares

ETFs und Aktien könnten eine Alternative zu Immobilien darstellen. Sie müssten hierbei nur beachten, dass Sie eine geringere Rendite erhalten, dafür aber ein höheres Risiko in Kauf nehmen. Aktien hängen sehr stark von der wirtschaftlichen Entwicklung ab. Leidet die Wirtschaft, leidet Ihr Depot. Gerade in der jetzigen Zeit erleben wir das wieder. 

If you still want to build up passive income with shares, you should focus on dividend stocks that bring you recurring profits. With growth stocks, it is the case that the profits are put back into the company. Shareholders may then benefit from high selling prices in the future. But only possibly. This is pure speculation and should not be considered as a safe retirement provision. 

Other options: 

Retirement provision - real estate, farmland, precious metals

Arable land could be a lucrative alternative. However, smaller investors hardly have access to this type of investment. Precious metals would also be conceivable. However, these do not yield any current income. 

The best alternative is still real estate. Even a small condominium can significantly significantly improve your pensiononce the tenant has paid off the flat for you.

Does real estate as an investment suit you?

Real estate as retirement provision: Suitable for whom? 

As a general rule: The earlier you start, the better. But we also have clients who were well over 50 when they bought their first property.

The decisive factor is not the age, but the investor's goal. Paying off a property within a few years is only possible with very high repayment instalments. If you are already a little older, you should therefore spend more equity and repay the real estate loan quickly. This way you can benefit from a full Cash flow and have no more costs for repaying the loan. Conclusion: A good investment for pensioners.

As a young investor, you have significantly more options, but at what point is real estate worthwhile as a retirement provision? 

Wer mit Mitte 20 oder Anfang 30 bereits in seine erste Immobilie investiert, hat die besten Voraussetzungen. Um eine Immobilienfinanzierung zu bekommen, wird von der Bank lediglich ein Mindestgehalt von ca. 2.500 Euro gefordert und ein geringer Eigenkapitalanteil. Die Mieteinnahmen, die durch die Immobilie erzielt werden, sollten die Finanzierungskosten decken. In den meisten Fällen ergibt sich dann ein neutraler Cashflow von +/- 0 Euro. Junge Anleger, die eigene Cashflow Immobilien erwerben, haben dabei gleich zwei große Vorteile: 

  1. They create the foundation for a prosperous futurein which they earn passive income from their property(ies).
  2. You do not feel the financial burden, as the financing instalments are taken over by the tenant. 

This makes real estate suitable as a retirement provision for all ages, although it is even easier for younger investors due to the long term. 

Real estate for retirement: pros and cons

Per Contra
Positive cash flow in old age  A certain amount of equity capital is required, i.e. at least the ancillary purchase costs should be covered by equity capital.
Financial burden hardly noticeable, as tenant bears the repayment and costs of the loan  Creditworthiness is a prerequisite
Aktuell immer noch relativ niedriges Zinsniveau  Monatliches Einkommen von mind. 2.500 Euro erforderlich
Statutory pension is too low - through real estate, pensioners can afford significantly more
In the event of death: bequeathing real estate to children, grandchildren, etc. 

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Riester pension for property purchase 

The The state also supports real estate as old-age provision. The Riester pension is a state subsidy that can be claimed by anyone who pays into the statutory pension scheme. This subsidy has been expanded to the effect that it is now also granted for owner-occupied real estate. The underlying purpose is to live rent-free in one's own property at retirement age.

This procedure could be interesting for you if you have not yet accumulated any capital but would like to buy a property in a few years. Financing a property would like to. However, the Riester subsidy is only available if you actually use the property yourself. The decisive factor is the time when your pension begins. This means that you may rent out the property (for a limited period) at least in the meantime. Then you can finance a property with your Riester pension.

State funding may sound advantageous at first. However, there are two major disadvantages. An owner-occupied property - even if it is already paid off - does not generate regular income. In addition, you would have to decide early on where you would like to live in old age and take location, accessibility, etc. into account. 

To be on the safe side, you should consider using several properties as retirement provisions, using one of them yourself and renting out the other properties, so that you are not "just" living rent-free, but can really enjoy your retirement. We help you with the search for suitable properties and also support you with the financing.

<a href="">Ferdinand Guggenberger M.Sc.</a>

Ferdinand Guggenberger M.Sc.

About the author of this article:
  • Real estate specialist and investment expert
  • Formerly with Boston Consulting Group (BCG) and maihiro GmbH (now part of Accenture)

Perpetual annuity with an investment property

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