Utility costs

Additional Costs - Additional costs refer to all expenses incurred when purchasing, owning, or renting a property, in addition to the purchase price or base rent. Depending on the context, a distinction is made between one-time purchase costs, which are incurred only once at the time of acquisition, and ongoing additional costs, which owners or tenants bear on a regular basis. This topic is equally relevant for buyers, investors, and tenants-and is regularly underestimated in financial planning.

Additional Costs When Purchasing Real Estate

Anyone buying a property must expect significant additional costs on top of the actual purchase price. The real estate transfer tax in Bavaria is 3.5 percent of the purchase price, which is moderate by national standards - in other states such as Brandenburg or Schleswig-Holstein, rates of up to 6.5 percent apply. Added to this are notary and land registry fees of around 1.5 to 2 percent for the notarization of the purchase agreement, the registration of the new owner in the land registry, and, if applicable, the creation of a land charge for the financing bank.

If the property is sold through a real estate agent, a brokerage commission applies, which, since December 2020, must be split equally between the buyer and seller for residential properties. In the Nuremberg metropolitan region, the total commission is typically 3.57 percent of the purchase price including VAT-1.785 percent for each party. Overall, buyers should budget for a contingency of 8 to 12 percent on top of the purchase price.

For a single-family home with a purchase price of 500,000 euros, this means: approximately 17,500 euros in real estate transfer tax, approximately 8,000 to 10,000 euros in notary and land registry fees, and just under 9,000 euros in buyer’s commission-totaling 34,500 to 36,500 euros, which must be covered entirely by equity, as banks generally do not finance incidental purchase costs.

Ongoing ancillary costs for owners and tenants

In a lease agreement, ongoing ancillary costs are billed as operating costs in accordance with the Operating Costs Ordinance (BetrKV). Items that can be passed on to tenants include property tax, water supply and drainage, heating, hot water, elevator costs, street cleaning, garbage collection, building cleaning, garden maintenance, building electricity, chimney sweeping, property and liability insurance, janitorial services, and the costs of utility metering.

However, maintenance and administrative costs, reserves, and repairs to the building structure are not apportionable. Landlords may only pass on those items that are expressly agreed upon in the lease agreement. In the absence of a valid agreement, the cost burden remains with the landlord.

For condominium owners, monthly maintenance fees are added, which include not only operating costs but also contributions to the maintenance reserve and the property manager’s fee. Maintenance fees therefore regularly exceed the apportionable operating costs. Anyone purchasing a condominium as an investment should factor the maintenance fee into their return calculations as a genuine ongoing expense-it reduces the net profit from renting.

Additional Costs in Mortgage Financing

Additional costs also play an important role in the context of financing. Anyone who underestimates their equity investment because they have not factored in the incidental purchase costs will quickly find themselves facing a shortfall between the amount financed by the bank and the actual total cost.

Banks typically finance 80 to 90 percent of the purchase price-the incidental purchase costs must be covered entirely from one’s own funds. For a household with 80,000 euros in equity and a target purchase price of 450,000 euros, the calculation looks like this: 45,000 euros in closing costs (10%) leaves only 35,000 euros in equity for financing-significantly less than the rule of thumb of 20 percent of the purchase price in personal funds. This leads to less favorable terms or a rejection by the bank.

Realistic financing planning must therefore include the incidental purchase costs from the outset and treat them as part of the equity investment.

Incidental Costs for New Construction and Renovations

With new construction, additional costs arise alongside the pure construction costs, which are often underestimated: architect’s fees according to HOAI, costs for structural analysis and soil surveys, fees for building permits and construction site inspections, development costs, as well as insurance during the construction phase (builder’s liability, fire insurance). These costs can account for 15 to 20 percent of the pure construction costs.

In the renovation of existing properties, unforeseen defects (mold, hazardous substances, dilapidated pipes) are a particularly common cost driver. We recommend obtaining an independent building inspection report before purchasing a property in need of renovation to estimate hidden ancillary costs early on.

Practical Tip for Nuremberg and the Metropolitan Region

In Nuremberg, the average operating costs for rental apartments range from approximately 2.50 to 3.50 euros per square meter per month, depending on the building’s year of construction, amenities, and energy efficiency. Particularly in older neighborhoods such as Südstadt or St. Johannis, heating costs can be higher than average due to outdated heating systems and a lack of insulation.

We recommend that buyers request the property management statements for the past three years as well as the current budget plan before purchasing a condominium. This will help determine whether the maintenance reserve is sufficiently funded or if special assessments are likely. For rented properties, the operating cost statement should be reviewed to realistically assess the risk of additional payments.

For investors purchasing multi-family homes, the following applies: A professional analysis of actual operating costs is just as important as reviewing the rent index. Advance payments set too high can irritate tenants; advance payments set too low lead to high annual back payments, which strain the tenancy.

Frequently Asked Questions

What is the difference between utility costs and operating costs?

In common parlance, the terms are often used interchangeably, but legally there is a distinction. Operating costs are exhaustively defined in the Operating Costs Ordinance and include only the ongoing, apportionable costs. “Additional costs” is the broader term and may also include administrative, maintenance, and financing costs that may not be passed on to tenants.

How high are the additional purchase costs in Bavaria?

In Bavaria, additional purchase costs typically range between 8 and 10 percent of the purchase price. This figure consists of 3.5 percent real estate transfer tax, approximately 1.5 to 2 percent in notary and land registry fees, and, if applicable, half of the real estate agent’s commission of 1.785 percent. Bavaria thus has the lowest real estate transfer tax of all German states, making it an attractive location for buyers.

Can a landlord pass on all ancillary costs to the tenant?

No, only the cost categories specified in the Operating Costs Ordinance may be passed on, provided they were agreed upon in the lease agreement. The landlord may not pass on administrative costs, maintenance reserves, repairs, and bank fees to the tenant. If the lease agreement does not contain a valid agreement on ancillary costs, the operating costs are covered by the base rent.

Are ancillary costs co-financed by the bank?

Generally, no. Most banks finance only the purchase price of the property-sometimes up to 100 percent of the market value-but rarely the ancillary purchase costs. Notary and land registry fees, real estate transfer tax, and the real estate agent’s commission must therefore be covered entirely by equity. This is the main reason why financial advisors recommend at least 20 to 30 percent equity of the total requirement (purchase price plus ancillary costs).

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