Buy-to-let apartment

Investment Property - An investment property (also known as a retirement property) is a condominium purchased exclusively for rental purposes and as an investment - in contrast to an owner-occupied condominium. It is typically used as part of a retirement plan or for tax optimization.

Tax Benefits

The key advantage of an investment property lies in its tax deductibility: interest on financing, building depreciation, administrative costs, maintenance, and non-apportionable operating costs are deductible as business expenses against income from renting and leasing. In the first few years after purchase, income-related expenses often exceed rental income, resulting in a tax loss that can be offset against other income.

Calculation example: Investment apartment in Nuremberg-Gostenhof, purchase price 280,000 euros (building portion 200,000 euros). Annual rent: 9,600 euros. Income-related expenses: Interest 4,200 euros + Depreciation 4,000 euros + Management 800 euros + Maintenance 1,200 euros = 10,200 euros. Tax loss: 600 euros, which can be offset against other income. With a marginal tax rate of 42%, this results in a tax savings of approximately 250 euros in addition to the normal cost efficiency.

A prerequisite for tax recognition is an intention to generate income: The tax office must be able to determine that the long-term goal is for rental income to exceed income-related expenses. However, if the apartment is rented out permanently below market rent or remains vacant for an excessively long period, the tax office may disallow the losses-this is then referred to as a hobby.

Risks and Pitfalls

Investment apartments are marketed by some sales agencies as “tax-saving models.” In doing so, the tax advantages are overemphasized and the financial risks are underestimated: inflated purchase price (especially in package sales of new construction by financial sales agencies), low rental yield, insufficient maintenance reserve in the homeowners’ association, and the loss of tax benefits if the property is classified as a hobby.

Typical warning signs of dubious marketing of investment apartments:

• Purchase price is far above the standard land value or comparable properties
• Promised returns are based solely on tax savings, not on rental yield
• Fully furnished apartments in expensive urban locations with unrealistic rental guarantees
• No proof of actual rental income generated in the portfolio

Comparison: Investment Apartment vs. Other Investment Forms

Criterion	Investment Apartment	Stocks/ETFs	Historic Property	Multi-Family Apartment Share (Fund)
Minimum capital	from approx. €50,000 equity	from €50	from approx. €80,000 equity	from approx. €10,000
Return (net)	2-4% p.a.	5-8% p.a. long-term	1-3% + tax savings	2-4% distribution
Tax optimization	Depreciation, interest, costs	Lowest tax rate 25%	Increased historic preservation depreciation	Limited
Leverage (debt financing)	Yes, standard bank terms	No / CFDs risky	Yes	No
Liquidity	Low (months until sale)	High (immediate)	Low	Medium
Administrative burden	Medium	Low	High	Low
Inflation protection	High (real asset + rent)	Medium	High	Medium

Selection Criteria for a Good Investment Property

We recommend the following minimum requirements:

1. Purchase Price Factor not exceeding 25 (corresponds to approx. 4% gross rental yield)
2. Location: Good transportation access, sought-after neighborhood, stable or growing rental market
3. Apartment size: 2-4 rooms, 50-90 m² are the most marketable
4. Condition: No excessive renovation needs or sufficient maintenance reserve fund from the homeowners’ association
5. Purchase price review by an independent appraiser, not by the seller

Practical Tip for Nuremberg and the Metropolitan Region

In the Nuremberg metropolitan region, investment apartments in neighborhoods such as Gostenhof, Maxfeld, Gleißhammer, or Fürth-Westend are popular with investors. We recommend evaluating the purchase price based on the net rental yield and paying no more than 25 times the annual net rent. Have the apartment inspected by an independent appraiser before purchasing-not by the sales agent selling it. We assist investors in the metropolitan region with the independent appraisal and inspection of potential investment properties.

Frequently Asked Questions

At what income level does an investment apartment become worthwhile?

The higher your personal tax rate, the greater the tax benefit. Starting at a marginal tax rate of about 35 percent (taxable income of approximately 65,000 euros in 2025), the tax savings from depreciation and interest deductions become noticeable. However, the after-tax total return remains the decisive factor-a poor property does not become a good investment simply because of a high tax rate. We recommend calculating the after-tax return realistically: Net income after taxes ÷ equity invested × 100.

Can I use the investment property myself later on?

Yes, switching from renting out to owner-occupancy is possible at any time. However, owner-occupancy eliminates all tax benefits (depreciation, interest deduction, income-related expenses). Additionally, if the property is sold within the ten-year capital gains tax period following the original purchase, income tax may be levied on the capital gain if the apartment was not occupied by the owner in the year of sale and the two preceding years.

What is the difference between an investment property and a historic building?

Both are capital investments, but historic buildings additionally offer the increased historic building depreciation under Sections 7h/7i of the Income Tax Act (EStG)-up to 100% of renovation costs over 12 years when rented out. In return, the renovation requirements (the historic preservation authority must approve all measures) are significantly stricter, and the purchase prices are often considerably higher than for standard investment properties due to the tax benefits. The investment property only utilizes the standard building depreciation (2-3% per year) and is better suited for beginners.

How do I find a reputable investment property in Nuremberg-and how do I spot unreliable offers?

In the Nuremberg metropolitan region, the market for investment properties is characterized by reputable regional providers on the one hand and nationwide financial sales agencies on the other. Reputable offers are distinguished by transparent information on the rent index, verifiable actual rents from existing leases, and a purchase price based on the actual income value. Unreliable financial brokers, on the other hand, rely on unrealistically high rental projections, inflated purchase prices (often 30-50% above market levels), and commissions that are factored into the price without being transparently disclosed. A simple test: Ask the provider for the current Nuremberg rent index and check whether the rent used in the yield calculation is realistic for the apartment’s specific location, size, and amenities. We also recommend verifying the purchase price against comparable properties on real estate portals-a significant upward deviation is always a red flag.

Investment Properties During the Low-Interest-Rate Period vs. Today

During the low-interest-rate years from 2012 to 2021, investment properties remained attractive even with low net rental yields: Financing costs were around 1-2%, meaning that even gross rental yields of 3-3.5% allowed for positive cash flow. Since the rise in interest rates in 2022/2023, the picture has changed: With financing costs of 3.5-5%, a net rental yield of at least 3.5-4% is necessary to achieve at least a balanced cash flow. In prime locations in Nuremberg (e.g., Altstadt, Maxvorstadt), these yields are currently difficult to achieve; however, they are attainable in neighborhoods with moderate price levels (Gleißhammer, Schweinau, Fürth-Südstadt) and when purchasing existing properties below market price. Market data from my-home.de shows: The decline in purchase prices from 2022 to 2024 has noticeably eased the yield situation and is once again creating real opportunities for investors with sufficient equity.

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