Sell equipment (built-in kitchen, photovoltaic system) separately when selling real estate
Is it sensible to sell the equipment of a property separately instead of in a package? In any case, any separation should be included in the purchase agreement for the property rather than drafting a separate purchase agreement for it. This ensures that issues with implementing one of the two agreements do not jeopardize the entire purchase.
Separate equipment to save real estate transfer tax
If equipment like a built-in kitchen, sauna, or photovoltaic system is listed separately, no real estate transfer tax is due for it.
This is the main motivation for many property buyers to request separate pricing for the property on the one hand and the equipment on the other.
Faster depreciation of equipment
Properties are typically depreciated over 33 to 50 years.
Movable inventory, on the other hand, can be depreciated more quickly. Built-in kitchens, saunas, and solar systems usually have a lifespan of 10 years, while photovoltaic systems are generally set at 20 years.
Potential disadvantages with loan-to-value ratio and borrowing capacity
Less real estate transfer tax and faster depreciation — separating equipment from the building in the purchase agreement seems thoroughly advisable. However, there are also possible disadvantages in terms of financing.
For most banks, the loan-to-value of the property decreases since they view the property purchase price separately from the equipment and calculate the lower purchase price as the base value for the loan-to-value ratio.
An increasing loan-to-value ratio leads to lower feasibility and, very likely, more expensive terms (interest rate surcharge).
Discuss equipment separation individually with the bank
Banks have different approaches regarding the separate listing of equipment in the purchase agreement. This point should therefore be discussed during a financing request and individually calculated to determine whether and to what extent splitting the building and equipment is worthwhile overall.
Due to the impact on loan-to-value ratio and borrowing capacity, many banks do not allow a split, or only under worse conditions.
Beneficial if the bank does not lower the loan-to-value
If you find a bank that does not lower the loan-to-value when equipment is listed separately, then listing the equipment is economically sensible.
Otherwise, you would need to calculate individually, weighing the savings on one side against the potentially higher financing costs.