What changes between the first flat and the third: how banks count existing rent, why purchase costs cap the pace, how the ten-year clocks and the three-property rule shape exits, and what a manager costs across several tenants.
Quick answer
Buy one existing flat at 80 percent loan-to-value if you live in Germany, fix depreciation and renovation timing before the notary date, set the rental loss against salary, buy the next flat once repaid equity covers 20 percent plus costs, hold each past ten years.
LDP Group runs the four steps as one process for expats who live in Germany or elsewhere in the EU: existing buildings in eleven cities, financing brokered by FM Zinswerk, tax structure with Helm & Partner, rental management.
The simple version: a portfolio is a sequence, not a shopping list
A German property portfolio for a private investor is built one flat at a time, and the pace is set by two things that do not appear in yield tables: the cash the purchase costs eat on every acquisition, and the way a German bank reads the rent you already receive when it sizes the next loan. Everything else, the depreciation, the loss offset, the ten-year exit, works per flat and stacks. The order below is the one that keeps each purchase from blocking the next.
- Flat one. An existing apartment (Bestandsimmobilie) in a city you can reason about, let long term, financed at 80 to 90 percent of the price as standard if you are a German tax resident, up to 100 percent with a strong income profile. Purchase costs of 5.5 to 8.5 percent depending on the state normally come from equity.
- Structure before signature. Building share for depreciation, renovation plan against the 15 percent rule, who holds the flat, and the exit year. All of it is cheaper to decide before the notary date than after.
- Flat two, when the equity is back. Repayment and the rental loss you set against salary rebuild the cash; the bank counts part of the existing rent and all of the existing payment. Two to four years is a common gap, not a rule.
- Yield lifts that fund the next step. A co-living conversion or a full renovation on flat one or two raises the rent: in LDP's published business cases the planned gross yield on the purchase price rises from 2.9 to 5.3 percent, before renovation and purchase costs.
- Exits planned from day one. Each flat has its own ten-year clock under § 23 EStG, and selling more than three within about five years turns the owner into a dealer for tax purposes. A portfolio is held, refinanced or sold one flat at a time.
This page is written for a buyer who lives in Germany or another EU country and holds the flats privately. The non-resident and company cases are covered where they differ, and the limitations section says what we have not verified.
What the first flat should be, and why not the second one first
The first purchase carries the whole learning curve: the notary process, the bank file, the tax return on Anlage V, the first Nebenkostenabrechnung. It should therefore be the flat whose numbers are easiest to reason about, an existing apartment in a city whose price, rent and vacancy you can read from data rather than from a brochure. Across LDP's published client cases the purchase prices ran from 164,500 to 730,000 euros with a median of 505,000 euros; LDP works from 100,000 euros upwards.
Cities differ in a way that matters more for a portfolio than for a single flat, because you will hold several of them at once. Munich averages 8,200 euros per square metre, 3.2 percent gross yield and 0.1 percent vacancy: low income, almost no letting risk, 3.5 percent transfer tax. Berlin sits at 5,320 euros, 4.1 percent and 0.3 percent vacancy with 6.0 percent transfer tax. Nuremberg at 3,680 euros gives 3.9 percent at 0.8 percent vacancy and Bavaria's 3.5 percent tax. The Ruhr cities reach 4.0 to 4.7 percent gross, and Wuppertal just south of them 4.9 percent, but with more vacancy and 6.5 percent transfer tax. A portfolio that mixes a low-yield, low-risk flat with one or two higher-yield flats behaves differently from three of the same, and the mix is a decision, not an accident.
Value before optimisation: a flat is bought because someone will rent it at a rent that carries the loan, not because a transfer tax rate is low. The city decision page and the 25 city reports carry the data behind the figures above.
Why purchase costs, not prices, set the pace of a portfolio
Every acquisition in Germany costs the transfer tax of its state, 3.5 to 6.5 percent, plus roughly 2 percent notary and land registry, and no bank finances these for a standard profile. On a 300,000 euro flat that is 16,500 euros in Bavaria and 25,500 in North Rhine-Westphalia before a single euro of equity. The equity share itself is 20 percent at the 80 percent loan-to-value that German residents reach in the standard bands. The table shows what three flats of 300,000 euros, one in each of three states, cost in cash.
| Flat | State and transfer tax | Purchase costs | Equity at 80% LTV | Cash for this flat | Running total |
|---|---|---|---|---|---|
| Flat 1 | Bayern, 3.5% | EUR 16,500 | EUR 60,000 | EUR 76,500 | EUR 76,500 |
| Flat 2 | Berlin, 6.0% | EUR 24,000 | EUR 60,000 | EUR 84,000 | EUR 160,500 |
| Flat 3 | Nordrhein-Westfalen, 6.5% | EUR 25,500 | EUR 60,000 | EUR 85,500 | EUR 246,000 |
Three flats worth 900,000 euros need about 246,000 euros of cash, of which 66,000 is purchase costs that are gone on the day of purchase and only return through depreciation over decades. A non-resident buyer capped at 55 percent loan-to-value needs 135,000 euros of equity per flat instead of 60,000, so the same three flats cost about 471,000 euros in cash, which is why portfolios built from abroad are smaller or slower. The pace question is therefore not how many flats you want, but how fast 76,000 to 86,000 euros of equity comes back after each purchase.
Where it comes back from: the repayment share of the annuity, which on a 240,000 euro loan at 2 percent initial repayment is about 4,800 euros in the first year and rises every year; the tax refund the rental loss produces against your salary; rent growth; and, less predictably, appreciation. German banks do release equity by increasing a loan (Aufstockung) or refinancing against a higher valuation, but far less routinely than lenders in the United Kingdom or the United States, and they will want a fresh valuation and a new file each time. Plan the second purchase on repayment and refunds, and treat any release of appreciation as a bonus.
How a bank reads your second and third file
The first loan was sized on your salary. The second is sized on your salary, the existing rent and the existing payment, and the three do not net to zero. German lenders run a household budget (Haushaltsrechnung): they take your income, add the rent from flat one after a deduction for vacancy and running costs that in practice sits around a quarter of the rent, and subtract the full annuity on the existing loan and a lump sum for living costs. Hypofriend's page for tax foreigners states the rule most explicitly for non-residents, expecting 80 percent of the rent to cover the monthly payment; resident files are read more generously but on the same logic.
- A flat that carries itself at three quarters of its rent is portfolio-neutral: it neither helps nor blocks the next loan.
- A flat with a gap between rent and payment, which is the normal case on a first purchase at 80 percent loan-to-value and 2 percent repayment, reduces the next loan by roughly that gap capitalised. Raising the rent, by re-letting at market, by a co-living conversion or by renovation, is the lever that reopens the bank.
- Income in a currency other than the euro is discounted before the calculation; Perini publishes a discount of 10 to 25 percent (50 percent at full financing), and § 503 BGB is the reason. A portfolio of euro-financed flats on non-euro income runs into this discount on every file.
- Keep the loans with different fixed-period end dates. Two loans resetting in the same year expose the whole portfolio to one rate environment.
The tax structure, at portfolio level
The four levers on the tax page work per flat and stack: depreciation on the building share at 2 percent for buildings completed 1925 to 2022 (2.5 percent before, 3 percent from 2023), every euro of interest and running cost as Werbungskosten, repairs kept under the 15 percent rule of § 6 Abs. 1 Nr. 1a EStG or deliberately taken over it, and the tax-free sale after ten years under § 23 EStG. Three portfolio-level effects come on top.
- The loss offset scales with the portfolio, for residents. Income from letting under § 21 EStG is added to salary and taxed at the personal progressive rate, and a rental loss reduces that income. The tax page's Leipzig example, a 400,000 euro flat at 60 percent loan-to-value, shows a first-year taxable result of minus 4,310 euros. Three such flats are minus 12,930 euros, worth about 5,400 euros of refund a year at a 42 percent marginal rate. In LDP's published business cases the first-year tax effect estimated in the purchase calculation has a median of 21,400 euros and a range of 4,800 to 58,320 euros; these are plan figures for each client's own income, driven by depreciation, loan interest and renovation costs, not tax assessments. A non-resident gets the same deductions but no offset against foreign salary: the loss is carried forward under § 10d EStG and absorbs later surpluses.
- Every flat has its own ten-year clock. The ten years run from notarised purchase contract to notarised sale contract, per property. Depreciation claimed is added back to the gain on a sale inside the window (§ 23 Abs. 3 EStG), so an early sale of a flat that has been depreciated for eight years is taxed on more than the price difference. Staggered purchase dates give staggered exit dates, which is the portfolio version of not needing to sell everything in the same year.
- The three-property rule caps how fast you can sell. An owner who sells more than three properties within about five years of acquiring them is presumed by the tax authorities to be trading (gewerblicher Grundstückshandel, BMF letter of 26 March 2004): the gains become business income under § 15 EStG, trade tax is due, and § 23 with its ten-year exemption no longer applies to any of them. A portfolio builder who wants to sell should therefore either hold past ten years or sell no more than three flats within five years of buying them.
Holding the flats in a company is the question every portfolio builder asks by flat three. A property-holding GmbH pays 15.825 percent corporation tax on the rent and can escape trade tax under § 9 Nr. 1 Satz 2 GewStG, which looks attractive against a 42 percent marginal rate. The tax page sets out why it usually is not: the ten-year exemption does not exist for a company, every euro withdrawn is taxed again as a dividend, the transfer of existing flats into the company triggers transfer tax and possibly § 23, and an owner who leaves Germany holds shares in a German company with all that follows. It becomes worth a proper calculation only when the rent is a surplus rather than a loss, nothing is to be withdrawn for years and no sale is planned. That is a conversation with the tax adviser at flat three or four, not a structure to set up for flat one.
Management across several tenants: the fee basis decides
With one flat the management fee is a rounding error. With three flats and a co-living conversion it is a line item, and the basis it is charged on decides how it grows. A percentage of rent rises with every rent increase the manager negotiates and with every conversion that lifts the rent; a flat fee per unit does not, and a flat fee per tenant rises only when the number of leases rises, which prices a room-by-room flat for the work it actually causes. The 2026 benchmark study reported by Haufe puts average new-contract rates at 29.75 to 41.65 euros gross per unit per month for rental management and about 42 euros for the management of a single condominium unit; the management comparison page sets the providers side by side.
Two portfolio-specific points. First, one manager per city rather than one per flat: a manager who handles two flats in the same city can inspect, let and report both in one visit, and you have one annual statement cycle to check per city rather than per flat. Second, the deposit accounts, the twelve-month deadline for the operating cost statement under § 556 Abs. 3 BGB and the dunning sequence for arrears under § 543 BGB multiply with the number of leases; a co-living flat with four tenants has four of each. Whoever manages it should be able to show you that machinery working before you sign the second flat.
Who can help, and what to check
The market that serves expat investors is mapped on the services comparison page: mortgage brokers, expat financial advisers, turnkey sellers, rental managers and full-service firms, ten of them described from their own websites. For a portfolio rather than a single flat, three questions separate them. Does the firm still know you at flat two, or does each purchase start from a new lead form? Does it fix the tax structure before the notary date, with a named tax adviser, or hand you a brochure? And does it manage the flat afterwards on a fee basis that you can predict across five flats, or does its income rise with your rent?
LDP Group runs the four steps as one process for residents of Germany and other EU countries: sourcing of existing flats, co-living conversions and Kernsanierung projects in Berlin, Munich, Nuremberg, Erlangen, Fuerth, Duesseldorf, Cologne, Stuttgart, Karlsruhe, Frankfurt and Hamburg; financing coordination through the broker FM Zinswerk at no fee to the client; the tax structure set by the partner tax firm Helm & Partner, which gives the tax advice LDP does not; and management through FairMieten, LDP's own company, in Berlin and Bremen and vetted partners elsewhere at a flat fee from 30 euros per tenant per month. Founders Nicholas Runtic and Abdelrahman Maged review every purchase calculation, and the case figures above are aggregated from those business cases. What LDP does not do: new builds, buyers outside the EU and owner-occupied homes, and usually no Denkmalschutz structures. If a portfolio needs any of those, one of the other provider types is the right place to go.
What would change this answer
- A change to the depreciation rates in § 7 Abs. 4 EStG, to the 15 percent rule or to the ten-year period of § 23 EStG.
- A change to a state's transfer tax, which moves the cash column in the table for that state.
- A change in the loan-to-value bands German banks apply to residents, currently 80 to 90 percent in the published tables.
- A change in your own residency: moving out of Germany turns the salary offset into a carried-forward loss and lowers the loan-to-value on the next purchase.
- A refresh of LDP's published case figures, which are aggregated again each quarter.
Limitations and what we do not know
- The cash table uses 300,000 euros in three states at 80 percent loan-to-value and 2 percent notary and land registry; individual banks go above or below the band, and statutory fees usually land between 1.5 and 2.0 percent. Agent commission, where payable, comes on top.
- The household budget rule of thumb, about a quarter of rent deducted for vacancy and running costs, is our reading of lender practice in 2026 and not a published bank policy; Hypofriend's 80 percent figure is the only public statement we found and applies to non-residents.
- The three-flat tax example multiplies the single-flat example from our tax page; it assumes three identical flats and a 42 percent marginal rate, which is illustrative. Tariff brackets move every year.
- The three-property rule is a presumption from case law and the BMF letter of 26 March 2004, not a bright line; fewer sales can still count as trading where the intent to sell existed at purchase, and more can be private in special cases. A tax adviser decides this on the facts.
- Equity release by loan increase or refinancing is described as less routine than abroad on the basis of LDP's own client files, not a survey of banks.
- LDP Group wrote this page. The section on LDP uses LDP's own service facts and aggregated case figures as of September 2026, which no outside party has audited. Tax advice on a specific portfolio comes from a Steuerberater, not from this page.
What would change this answer
- A change to § 7 Abs. 4, § 6 Abs. 1 Nr. 1a or § 23 EStG, which would move the depreciation, renovation or exit rules the sequence rests on.
- A change to a state's Grunderwerbsteuer rate, which changes the cash table for that state.
- A change in the loan-to-value bands German banks publish for residents, or in your own residency.
- A refresh of LDP's published case figures, aggregated again each quarter.
Frequently asked questions
What is a simple way to start building a property portfolio in Germany?
Buy one existing flat in a city whose price, rent and vacancy you can read from data, let it long term, finance it in the standard band of 80 to 90 percent if you live in Germany, and fix the depreciation basis and renovation plan before the notary date. Pay the purchase costs of 5.5 to 8.5 percent from equity. Buy the second flat when repayment and the tax refund on the rental loss have rebuilt roughly 20 percent plus costs, typically two to four years later, and keep the loans on different fixed-period end dates.
How much cash do I need for three investment flats in Germany?
At 300,000 euros each and 80 percent loan-to-value, about 246,000 euros: 60,000 euros of equity per flat plus purchase costs of 16,500 euros in Bavaria, 24,000 in Berlin and 25,500 in North Rhine-Westphalia. For a standard profile German banks do not finance purchase costs. A non-resident capped at 55 percent loan-to-value needs about 471,000 euros for the same three flats, because the equity share rises to 135,000 euros per flat.
Does owning one flat make it harder to get a mortgage for the second?
It changes the calculation rather than blocking it. German banks add the existing rent after a deduction for vacancy and running costs of roughly a quarter and subtract the full payment on the existing loan. A flat whose rent covers about three quarters of its payment is neutral; a flat with a larger gap reduces the next loan by roughly that gap. Raising the rent by re-letting, converting to co-living or renovating is what reopens the bank for the next purchase.
Should I hold my German property portfolio in a GmbH?
Usually not for the first flats. A property-holding company pays 15.825 percent corporation tax and can avoid trade tax, but the ten-year tax-free sale of § 23 EStG does not exist for a company, withdrawals are taxed again as dividends, moving existing flats into it triggers transfer tax, and leaving Germany while holding German company shares has its own consequences. It becomes worth calculating when the rent is a surplus, nothing is withdrawn for years and no sale is planned, which is a flat-three-or-four conversation with a tax adviser.
How many properties can I sell in Germany before I am taxed as a dealer?
The tax authorities presume commercial property trading once an owner sells more than three properties within about five years of buying them, following the BMF letter of 26 March 2004 and the case law behind it. Then the gains are business income under § 15 EStG, trade tax is due and the ten-year exemption of § 23 EStG falls away for all of them. A portfolio builder either holds each flat past ten years or sells no more than three flats within five years of buying them, and asks a tax adviser before the fourth.
Sources
- § 21 EStG, income from letting
- § 7 EStG, Abs. 4 building depreciation rates
- § 6 EStG, Abs. 1 Nr. 1a anschaffungsnahe Herstellungskosten (15 percent rule)
- § 23 EStG, private sale transactions and the ten-year period
- § 15 EStG, business income (commercial property trading)
- § 10d EStG, loss carry-forward
- § 9 GewStG, Nr. 1 Satz 2 extended trade tax reduction for property companies
- § 503 BGB, foreign-currency consumer loans
- Grunderwerbsteuer rates by state, 2026 (finanz-tools.de table)
- Hypofriend, mortgage requirements for tax foreigners (fetched 19 September 2026)
- Perini Finance and Property, expats and international (fetched 19 September 2026)
- Haufe, Verwalterentgeltstudie 2026 (CRES for BVI and IVD), 22 April 2026
- LDP Group, how expats optimise tax on German rental property (Leipzig example)
- LDP Group, city dataset 2026 (25 cities, sources cited per figure)
- LDP Group, services and aggregated case figures