What additional costs are incurred when finalising a property purchase?

We answer these and many other questions in our video blog episodes.

Here is the transcript of episode 30 to read:

When purchasing an investment property, additional costs are incurred. These are the one-off incidental acquisition costs during the purchasing phase. In Germany, the first of these is property transfer tax – the biggest chunk. Property transfer tax is calculated as a percentage of the purchase price. There are federal states with very little property transfer tax: those whose economies are strong, with low levels of debt, positive income trends and strong population growth.

On the other hand, there are federal states that tend to have economic difficulties and therefore levy a high property transfer tax. That is why it is important that a professional also pays attention to the framework data, such as purchase-related incidental costs, when selecting products and creates a sensible calculation in which these incidental costs are taken into account. In addition, in Germany, the purchase of an investment property is not settled by a handshake or personal meetings, but via a neutral notary.

The notary is state-approved and regulated by the state to ensure that they act on behalf of the state. The task of a notary is to ensure that the buyer safely receives the property and the seller safely receives the money. The notary receives a fee for this, which is also part of the ancillary purchase costs. These fees are officially fixed in the notary fee schedule and are monitored by the chambers of notaries. They are therefore non-negotiable.

Just like the property transfer tax, the ancillary purchase costs cannot be negotiated either. These are standard costs that are incurred with every property purchase. We have already mentioned the property transfer tax and the notary fees. In addition, the purchase is processed through a local court, for which a fee is also charged. These are the general ancillary costs when purchasing property.

By the way, since you are interested in rented properties, I should point out that the state covers a large part of these additional purchase costs we were just talking about. With a rented property, you can deduct the additional purchase costs from your tax. Unlike with an owner-occupied property, the property transfer tax, as well as the notary and court fees, are part of the tax-deductible costs, and the tax office will help ensure that these costs are kept as low as possible.

Keywords:
Investment property, additional costs, purchase costs, land transfer tax, federal states, notary, tax deduction