Co-investment

Co-investment - A co-investment is a joint capital investment by multiple investors in a real estate project or property. The participants share equity, risk, and returns according to a contractually agreed formula. Co-investments are structured in various legal forms-such as a GbR, GmbH & Co. KG, closed-end funds, or joint ventures. They provide access to larger properties and better risk diversification than individual investments.

Forms of Co-Investment

• Joint Venture: Two or more partners establish a special-purpose vehicle for a specific project - typical for project developments and larger existing portfolios
• Club Deal: A small group (3-10) of qualified investors jointly invests in a property-less regulated than a fund, with more say and transparency
• Closed-End Real Estate Fund: Professionally managed vehicle with many investors-regulated under the KAGB, minimum investment often 10,000-50,000 euros
• GbR / GmbH & Co. KG: Corporate structures for private co-investments-often among family or friends

Opportunities and Risks

Opportunities: Access to larger and more diversified properties, risk diversification across multiple units or locations, leveraging the lead investor’s expertise, economies of scale in management and financing.

Risks: Limited decision-making freedom, dependence on the lead partner’s expertise, conflicts of interest among co-investors (e.g., differing return expectations or time horizons), limited liquidity (shares not freely tradable), liability risks depending on the legal form.

The Partnership Agreement as a Key Document

The partnership agreement is the most important document in any co-investment. It governs capital contribution obligations, profit distribution, decision-making rights (majority requirements for strategic and operational decisions), additional capital contribution obligations in the event of a loss, and exit provisions. Exit provisions, in particular, are often neglected: What happens if a partner wishes to sell their stake? Do the other partners have a right of first refusal? Can the sale to a third party be enforced? Missing or unclear exit provisions are the most common source of disputes in co-investments and can result in partners being stuck in an unwanted investment for years.

Comparison of Co-Investment Structures

Structure	Minimum Equity	Liability	Tax Transparency	Regulation	Typical Use
GbR	€10,000	Unlimited joint and several	Yes (income tax)	None	Family investment, 2-3 partners
GmbH & Co. KG	€100,000	Limited liability for limited partners	Yes	Low (HGB)	Private co-investments €500K-€5M
Club Deal	€250,000	Depends on structure	Depends on structure	Low (< 10 investors)	Institutional and HNWI partners
Closed-end fund (KAGB)	€10,000-50,000	Limited to capital contributions	No (fund level)	BaFin regulation	Many retail investors
Joint Venture GmbH	€50,000	Limited to share capital	No (corporate income tax)	Low	Project development, 2 partners

Tax Transparency

A key advantage of co-investments via partnerships (GbR, KG) is tax transparency: income and losses are directly attributed to the partners and are subject to their personal tax rates. Losses from rental income can be offset against other positive income (subject to loss carryforward rules). A GmbH & Co. KG combines limited liability with tax transparency-this is the preferred structure for larger private co-investments starting at two to three million euros in total investment.

Practical Tip for Property Owners in Nuremberg and Franconia

We recommend that private investors in the Nuremberg metropolitan region pay particular attention to the partnership agreement when making co-investments: decision-making powers, profit distribution, obligation to make additional contributions, exit provisions, and dispute resolution mechanisms must be clearly defined-before the project begins, not after a dispute has arisen. Have the agreement reviewed by an attorney specializing in corporate law, ideally one with real estate experience. A co-investment within a close-knit family circle (siblings jointly purchasing an apartment building in Nuremberg) can make sense from a tax and economic perspective-but despite family ties, it requires clear written provisions in case of a dispute.

Frequently Asked Questions

At what amount does a co-investment become worthwhile?

In the private sector, co-investments typically make sense starting at 50,000-100,000 euros in equity per person, as the costs of incorporating a company and drafting contracts would otherwise not be recouped. In the professional sector (club deals, joint ventures with institutional partners), minimum investments of 500,000-5,000,000 euros are common. Ultimately, the viability depends less on the amount than on the quality of the investment, the level of trust between the partners, and the quality of the partnership agreement.

Which legal form is best suited?

For small co-investments with two to three partners, the GbR is suitable due to its simple formation process, although the joint and several external liability of the partners must be taken into account. The GmbH & Co. KG offers limited liability for limited partners and tax transparency-ideal for larger investments starting at 500,000 euros. For professional structures with five or more investors and complex decision-making processes, a regulated capital management company should be engaged.

How do I exit a co-investment?

The exit must be regulated in the partnership agreement. Typical options include selling the share to another partner (with a right of first refusal for the remaining partners), selling to a third party (with or without the consent of the other partners), or selling the entire asset followed by the liquidation of the company. If there is no exit provision, a partner may terminate the partnership in the event of a dispute-with significant economic consequences for all parties involved.

Due Diligence in Co-Investments: What Beginners Need to Check

Before entering into a co-investment, we recommend a structured due diligence process on three levels: first, the property itself (condition, location, lease agreements, income value, environmental liabilities); second, the corporate structure (existing liabilities, the company’s tax situation, ongoing proceedings); and third, the co-investors (creditworthiness, investment objectives, time horizon, capital reserves for additional contributions). In particular, the vetting of co-investors is often neglected-yet the quality of the partners is just as crucial as the quality of the property.

In the Nuremberg metropolitan region, we frequently see co-investments in multi-family homes within the context of family investments (siblings or parent-child arrangements) or among investor friends. The my-home.de editorial team recommends insisting on a comprehensive partnership agreement even in the case of close personal relationships-because in practice, it is not personal differences but rather changing life circumstances (divorce, inheritance, job loss) that lead a partner to want to or have to exit the investment. A clear exit clause in the agreement protects all parties involved from unwanted predicaments.

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