Mobile Menu Icon

House sale with a twist: Selling property to an investor

Selling a house in a different way: Selling a property to a real estate investment company instead of to private individuals is an interesting option for houses and apartments that are easy to rent. Selling to professionals promises a quick and uncomplicated process. Commercial investors usually don’t have to finance at all and can make a firm offer during the initial viewing, which they can quickly implement if the seller decides. In addition, when selling to professional investors, there is often no broker involved, which reduces the additional purchase costs.

Benefits of selling property to professional buyers

Private buyers occasionally have problems obtaining a financing commitment from their bank in a timely manner. There are also often special requests, such as being allowed to enter the property and begin the renovation, even though the purchase price has not yet been paid. With a professional buyer, the potential for surprises is lower. They often pay the purchase price from their own funds without having to wait for a financing commitment from third parties.

Is a broker involved when selling to a real estate investor?

Whether an agent is involved in the sale depends on the seller, as the seller usually determines whether the property is sold through an agent or privately. In principle, from the seller’s perspective, it makes sense to get professional help in the form of a real estate agent for a transaction as important as a real estate sale. However, this is less necessary when selling to a real estate company. In a private sale, the seller often has to communicate and negotiate with numerous interested parties, and an agent can be very helpful here. However, if the property is offered to a company, the overall amount of communication and negotiations is less and an agent can be dispensed with.

Reinvest sales proceeds, also in real estate

If the money raised through the sale of real estate is not planned, the question arises as to how it should be invested. Buying another property with the income from selling the house may seem counterproductive at first glance, true to the motto: Why sell a property and then immediately buy another one, this time a different one? However, such an approach can be very useful. Buying property again has nothing to do with the previous sale. The new property is a capital investment and is no different from other investments.

Buy a new property from the buyer of the first property

Now it’s getting even more absurd, you might think. Are there circumstances that make it sensible to purchase an investment property from the same company to which you previously sold a property? Yes, that makes perfect sense because, firstly, there is already contact with the company and a deal has already been concluded. The seller was able to get to know the company. It therefore stands to reason that if the cooperation in a previous sale was convincing, it would be wise to work with the same company again when purchasing as an investment.

Sell or rent out a property?

But is selling generally recommended? What makes more sense, selling or renting a property? It depends, is the answer, which is as unpopular as it is accurate. Advantages and disadvantages at a glance:

Advantages of selling real estate

  • Large inflow of liquidity
  • No more responsibility for tenants, buildings, authorities, insurance companies

Advantages of renting

  • Long-term, stable source of income
  • The option to sell at a later date remains unaffected

Circumstances that speak for a sale

  • The owner has no immediate need for money, but someone is offering a very high purchase price
  • Owner needs the money and an acceptable selling price can be achieved
  • Owner no longer wants to deal with tenants and property management is not suitable due to the type, size or location of the property.
  • Financing interest rates are low for buyers, which means higher sales prices

Circumstances that speak for a rental

  • Seller wants to give away or bequeath assets to family members
  • The property generates good rental income
  • Construction interest rates are high, which means potential buyers have less money for the purchase price

Sell property tax-free

When selling apartments and houses, the tax on private sales transactions, known colloquially as “speculation tax,” is due. The amount of this tax is neither fixed as a percentage nor as an absolute sum, but is based on the personal tax rate based on other income, such as employment income. Roughly speaking, the income from the sale of real estate increases the total income, and accordingly both the percentage tax rate and the absolute tax liability in euros increase. For example, if the seller earns 50,000 per year and sells a house for 350,000 EUR, then this will be treated for tax purposes as if he had earned 400,000 EUR that year. Of course, various expenses can be deducted and reduce the tax liability somewhat, but overall it is as described.

Avoid speculation tax when selling real estate

In addition to the famous 10-year period when selling real estate, there is also the 3-year period. Both have an influence on the speculation tax.

10-year period

The 10-year period between the purchase and sale of real estate, which, if adhered to, eliminates the speculation tax, applies to private real estate sales between any person and regardless of whether the seller previously lived in the property himself.

3-year period

The period of just 3 years between purchase and sale in order to achieve exemption from speculation tax applies if the seller lived in the property to be sold in the year of sale and the two previous years.

Does selling a house count as income?

Selling a house is a private sale transaction like any other and is therefore considered additional employment income that must be taxed at the personal tax rate. As a special feature, especially with real estate, there is the possibility of avoiding the income tax known as “speculation tax”, which is due on the difference between the purchase and sales price. There must either be 10 years between purchase and sale, or the seller must have lived in the property himself in the year of sale and the two previous years.

House sale with right of residence

Selling an apartment or house and staying in it – is that possible and recommended? Isn’t that like having the cake and eating it, too? Well, selling and staying is definitely possible. After all, there is demand for such constructs from sellers. However, from the buyer’s perspective, the purchase is a bit tricky, as the right of residence is supposed to last until the end of life, which naturally cannot be predicted. And from the seller’s perspective, the constellation that arises from such a sale also takes some getting used to. Logically, the buyer would not be averse to the resident seller meeting his maker. Therefore, such a contract design is probably more suitable for family circles, where the seller can hope that the new owners are always happy about the robust health of the seller and current tenant.

Who pays the agent when selling a house?

In the past, the buyer usually paid the agent. With the “buyer principle” now in effect, brokers are obliged to charge at least half of their commission to the seller and a maximum of the other half to the buyer. As a rule, the buyer and seller each pay half of the broker’s commission.

When selling to a real estate company, there is usually no real estate agent involved, so the question doesn’t even arise there.

Sell property below value – to strangers or family

Whether to strangers or family members – the tax office takes a close look if the sales price is suspiciously low. If that weren’t the case, you could sell real estate for 1 euro and the whole issue of taxes would be irrelevant. The same principle applies not only to sales, but also to rentals: the tax office does not recognize rental prices below market value and treats them as a kind of hidden payment.

Therefore, it is only possible to sell a property at the lower end of what can still be considered market value. If necessary, the supposedly low value would be substantiated with reports. In general, the idea of ​​selling a property for less than its value is not a good approach to saving taxes. The chances of success are low, and there are a number of tax planning options when it comes to real estate that – in contrast to selling below value – can actually be implemented.