6 steps to becoming a successful landlord

Anyone who owns a property and wants to rent it out faces a mountain of challenges. Renting out a property requires a lot of time and comprehensive know-how. Newcomers, in particular, often underestimate the effort involved. Our 6 tips will help you get started.

1. Know the market, prices, and rules thoroughly

Before posting your rental listing online, you should thoroughly research the local rental market and determine the key factors for setting the rent. Is there a rent control law in the area? Also, consult the regional rent index, which takes into account location, amenities, age of construction, and size. The next step is drafting the lease agreement – ​​here, too, you should exercise the utmost care, as any omissions or errors will be interpreted to the tenant's advantage.

2. Should you hire a real estate agent to find tenants?

When a landlord hires a real estate agent to find tenants, they pay a commission upon successful placement. This typically amounts to up to two months' net rent plus VAT. However, the advantages of using an agent outweigh these costs: the landlord saves time, and the property is rented more quickly at a market-rate rent. It's also good to know that these costs are tax-deductible.

3. Market, inspect, hand over without errors

To find a tenant for a property, it needs to be advertised. A professional property listing provides all the essential information at a glance, ideally leaving no questions unanswered. To show the property to potential tenants, group viewings or individual appointments are suitable – the option you choose depends on the number of interested parties. A handover protocol should always be drawn up during the apartment handover. This helps prevent disputes from arising in the first place.

4. Is the tenant solvent?

To avoid stress and financial losses, you shouldn't base your decision on a tenant solely on personal preference. Their financial situation is just as crucial. Therefore, you should definitely check their creditworthiness. This can be done using a SCHUFA credit check, a tenant self-disclosure form, and by reviewing their income statements.

5. If it doesn't work out: can you terminate the tenancy?

Terminating a lease is not straightforward in Germany due to strong tenant protection laws. A lease can only be terminated for personal use if the landlord or a close family member will be moving in. If the tenant fails to pay rent, a formal warning must be issued before termination is possible. This often results in eviction proceedings. If the property is sold, it is possible to pay the tenant a certain sum. This is usually more financially advantageous than selling the property while it is still occupied.

6. Taxing rental income

When filing your tax return, rental income is considered income and is therefore subject to taxation. However, rental income is not taxable if it does not exceed the general tax threshold.

Are you looking to purchase a property for rental purposes and have questions about the process? Contact us – we'd be happy to advise you.

Note:
For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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