When it comes to buying a property for the first time, many practical aspects come to the fore. In particular, there are three ways to track down properties for sale. On the one hand, these are the classic online offers as well as real estate agents. On the other hand, you should also take advantage of the opportunities to receive information about interesting sales objects via private contacts. A basic evaluation of potential purchase targets is of course also useful, but also requires experience and expertise. The question of funding should also be looked at more closely. Many banks today agree to finance up to 110% of the property value. Then you also have to consider the evaluation of the different types of returns. Finally, negotiation skills, the purchase contract and the payment arrangements after conclusion of the real estate purchase contract are also important.

A property is generally considered a solid investment. Prices in the real estate market have been rising for years and demand is still high. Residential properties in larger cities in particular are highly sought after by tenants. So anyone who wants to dare the adventure of buying a first property will easily find good reasons that speak for it.

But it is often a long way from the first thought until the time you buy the first own property. First you have to find a suitable property. Is it also worth the price? Are there significant shortcomings that may significantly increase costs afterwards? How do the price negotiations with the sellers take place? All this and many other questions must be clarified in advance as well as in the ongoing process of property acquisition.

This post is less about the tax aspects that should be considered when buying the first property. Rather, we offer a first impression of the scope of various practical aspects that should be considered in order to avoid unwanted surprises.

First you have to go in search of a real estate object. However, the prerequisite for this is that you have a clear picture of what kind of property you actually want to buy. Should it be a house? Or rather a commercially rentable object? How much can the purchase cost? In which city and in which location should it be preferred?

To answer these questions, you also have to think about the question of the return you want to achieve. You can distinguish between two types of returns. Either you choose a property that yields high profits from the current rental or lease. Or you opt for a property where you only get the return on its sale. Of course, a property should ideally have both forms of return, although it can sometimes come vice versa. In reality, however, it is usually the case that one of the two types of return is particularly in the foreground. And this can be estimated quite reliably in advance.

In addition, you should also consider how you want to use the return. If it is to serve private retirement provision, then a long-term return may be a good choice. If, on the other hand, you want to reinvest the return as quickly as possible, the current return could prove to be the better alternative. Because a high current return can build up new capital within a relatively short time. With this, you can either repay the repayment of a previously used loan to finance the purchase of the first property. Or you use the current income to purchase another property as quickly as possible in addition to a debt financing. Of course, both advantages can also come into effect one after the other.

The question of the nature of the return and its use leads to another implication. This depends on the choice of the legal form in which you want to buy the first property. Because with a high current return, Immobilien-GmbH in combination with a holding company is the most advantageous choice. With a long-term targeted return, on the other hand, you should buy the first property from private and keep it at least for the duration of the ten-year speculative period. However, if you live at least temporarily in this property, then shorter holding periods can lead to a tax-free sale. Under certain circumstances, however, a Immobilien-GmbH & Co. KG may also come into question.

The question of debt financing must also be dealt with when buying a first property. Nowadays, the interest rates for loans are very cheap, so that banks willingly grant a very high proportion of the purchase price as a loan. Depending on the purchase object, the financial strength of the potential borrower and his credit rating, an amount of up to 110% of the purchase price can be realistic. This should also cover all ancillary costs that are also incurred when buying the first property, such as the notary's fees or the real estate acquisition tax. However, the share of debt financing is usually within the range of 80 to 90 % of the purchase price. In such a case, one must also expect an interest rate of about 0.6 to 0.8%, which can quickly go above the 1% mark if the debt financing share is higher.

But a debt financing of 110% is also interesting, as long as at least the current return can show a significantly higher percentage compared to the interest rate that the lenders demand. In relation to the equity raised for the purchase of the first property, the return is particularly favorable if the share of external financing is correspondingly high. The return on equity, in turn, is an effective measure for assessing the capital structure.

Now we come to the point where we are looking for the first property to buy. So how do you find the desired property?

In principle, three possibilities are considered. On the one hand, you can usually turn to real estate agents who know the market quite well. However, if you want to save the courtage, then basically only the search on the relevant online portals or private contacts remain. The latter can then be asked for support to find out whether perhaps in their acquaintance or relatives the sale of a property is pending. At the very least, they could help to find out whether they perhaps have knowledge of their own contacts about a sales object.

Anyone who wants to buy a first property usually does so without practical experience. But it often comes down to a trained, expert look when it comes to the evaluation of a property. Therefore, the recommendation at this point is that you first deal intensively with the matter and look at many objects that are for sale, before you seriously go in search of the first own property. So you get a good overview, learn to separate the chaff from the wheat and get the experience required to buy a first property.

Once you have found an interesting object, you should subject it to a critical examination. Because even if the price may sometimes seem temptingly cheap, in the end the reality with considerable renovation costs can be sobering. It is therefore advisable to use expert advice, especially if you are unsure.

You can consult either external experts or real estate agents. But even an architect or engineer in the circle of acquaintances may contribute a helpful second opinion when evaluating a property. In addition, sellers can be asked for insight into past maintenance and related costs as well as other longer-term renewal costs. This can also give a fairly accurate picture of the structural condition of the properties. A serious seller should always grant such a request.

For new buildings, however, the risk of consequential costs caused by maintenance backlogs may be relatively low. Nevertheless, one should also look for structural weaknesses in such cases in particular. Indications of this can be, for example, delays in the acceptance of a new building. Expert advice can also be useful here. But ultimately, you always bear the financial risk yourself.

In addition, there is also another factor that should be consciously considered. Although you are only dependent on your own judgment, at least the purchase of a first own property is always an emotional matter. In any case, you have to be sure that the first property chosen for purchase also fits you. The purchase has to feel good, you have to be convinced of it. If one has intuitive doubts about such a purchase, one should perhaps refrain from it, but at least reflect on what the unconscious reservation may be. After all, the purchase means that you are likely to deal with the property for the foreseeable future. This is how you attach yourself emotionally to them. So the question of whether one is prepared to do so must also be clarified. Only when these questions are answered positively should action be taken.

In this context, the effect of a property and its location on the buyer is also important. For example, what about the connection to the necessary infrastructure? What kind of neighborhood do you get into? What potential environmental influences might have to be expected? Can a violent storm or a flood, as it occurred in 2021 in West Germany, lead to significant damage? What insurance sums do you have to expect in the future? And, what many potential first-time buyers might underestimate: do I also like the property from an aesthetic point of view? After all, it is often the case that one identifies with such an object. Therefore, such an assessment is also part of the purchase of a first property. Otherwise, there may be an early sale. The whole effort would have been in vain. Perhaps then the hoped-for returns would also be lost.

The next point on our roadmap, which leads us to the purchase of a first property, concerns the purchase negotiations. If you can show the financing commitment of a bank, then you have already left a good first impression on the seller. And the first impression, as with so many other circumstances in life, can open the door. Therefore, it is also important that you find a credit institution in advance that knows how to act very flexibly and immediately with regard to a financing commitment.

But you should also know that there are now more and more bidding procedures in which the sellers put the determination of the purchase price in the hands of the potential buyers. This has the advantage that you can achieve a fairly high sales revenue, which is often higher than if you set a fixed price. However, this can also lead to those buyers who make the highest bid possibly later withdraw from their offer to see if the seller then meets them in terms of price. This is a good chance in which you can hook in to reaffirm your own buying interest. Perhaps then you can convince the sellers that their own offer is a fair price.

If there is an agreement on the purchase of the first property, then you should also actively shape the design of the purchase contract. For example, a distinction should be made between the proportions of the selling price of land, the building and the other objects or objects sold together with these units. Examples of the latter point may be built-in cabinets, built-in kitchens, alarms, and trees and other objects in a possibly existing garden. This has the advantage that based on the tax office you can later prove how high the depreciation is on the usable objects. In addition, the amount of depreciation volume can also be actively co-determined, while remaining within a realistic framework in order to prevent any disputes with the tax office.

Suppose the purchase negotiations have been successfully concluded, then a number of formalities remain to be clarified for the purchase of the first property. So usually the buyer determines the notary, where you draw up the purchase contract. However, should the seller insist on determining the notary, skepticism may be appropriate. Although notaries are obliged to be neutral in their business, there is usually a good reason for a seller to submit his own proposal. Ultimately, however, the buyer usually pays the notary, so that it should be at his discretion which notary you use. But if you want to show a certain neutrality towards the seller, then you can submit the proposal that the lending bank recommends a notary.

In addition, the purchase costs associated with the purchase of the first property should be paid with outside capital if possible. These include in particular the notary costs and the real estate transfer tax. This has the tax advantage that the associated interest expenses can also be taken into account as financing costs when taxing future income. However, if these expenses are disputed through equity, there is no reason from the point of view of the financial administration to associate these payments with debt financing. Ergo, part of the interest expenses could be disregarded.