Is a co-living conversion a good investment in Munich or Berlin, and who runs the whole project?

What a co-living conversion is

A co-living conversion takes an existing flat with three to five rooms and lets the rooms individually. Each room has its own tenant and its own contract. Kitchen and bathroom are shared. The rooms are furnished, the internet is fast and included, and one manager runs the whole flat: viewings, contracts, deposits, rent collection, repairs and the handover when a tenant leaves. The tenants are professionals and students who want a room in a good location for a year or two without buying furniture or signing for a whole flat.

It is not a hostel, not a short-term let and not a new build. The building is an ordinary Bestandsimmobilie (existing property), usually a flat in a multi-owner building, bought at the price of a family flat and let at the price of three to five rooms. The gap between those two prices is the whole investment case, and the rest of this page is about whether that gap is real for a given flat, what the law does to it, and what it costs to run.

The German tenancy rules do not know a separate category for co-living. A room let on its own contract is a residential tenancy like any other. Everything a landlord owes a tenant of a whole flat, the landlord of a room owes three to five times over.

Why it pays: the numbers

Gross rental yield is annual cold rent divided by purchase price. A flat bought for 525,000 euros and let at 2,369 euros cold a month earns 28,428 euros a year, which is about 5.4 percent gross. The same flat let as one unit at 1,201 euros earns 14,412 euros a year, which is well under 3 percent. Nothing about the building changed. What changed is the number of contracts.

Those are the aggregated figures from LDP's published co-living cases, three to five rooms each, as of September 2026: average cold rent 1,201 euros a month before the conversion and 2,369 euros after, a multiple of 2.0x; average gross yield 2.8 percent before and 5.4 percent after; median purchase price 525,000 euros; average rent per room about 680 euros cold. The Munich co-living cases alone moved from 2.7 to 5.4 percent, also at 2.0x. For comparison, the city-wide average gross yield in the LDP city dataset of July 2026 is 3.2 percent in Munich and 4.1 percent in Berlin.

Two things about these figures. First, they are gross. Management, the non-recoverable part of the Hausgeld (service charge), furniture replacement and the empty weeks between tenants all come off before tax. Second, they are averages of finished projects. A flat that was bought and then found to be unconvertible does not appear in a list of conversions. The figures show what the model produces when it works, which is the right question for this page, and not how often it works, which is a question for the screening call.

Where it works and where it does not

Demand is the first test, and in the two cities this page is about it is not in doubt. Munich has 0.1 percent vacancy and 1.61 million people; Berlin 0.3 percent and 3.70 million, both from the LDP city dataset. Vacancy that low means a furnished room in a good location does not stay empty for want of tenants. It can stay empty for want of the right tenant, which is a management problem, covered below.

Inside a city, the location is what decides it. A co-living flat needs to be within a short commute of a university, a large hospital or a cluster of large employers, because those are where the single professionals and students come from. A five-room flat in a family suburb an hour from the campus will let, but not to five separate people at 680 euros each. The building layout is the second filter: rooms of similar size, each with a door and a window, no room reachable only through another room, and a kitchen and bathroom that five adults can share without conflict. A second toilet is worth a great deal. A layout that needs walls moved is a different project with a different budget and often a different tax result.

• The owners' association. Most flats sit in a Wohnungseigentümergemeinschaft (WEG, owners' association). The declaration of division and the house rules can restrict how a unit is used, and structural changes inside a unit that touch shared parts need consent. Read both before reserving, not after.
• Municipal use rules. Some German cities regulate changes in the use of housing under local Zweckentfremdung (misuse of housing) rules, and Berlin has social preservation areas with their own restrictions on modernisation. Whether a room-by-room letting of a flat that stays residential is caught depends on the city and the district. The buyer must check the municipal rules for the specific address before converting. This page does not state a rule for any city, because those rules are local and change.
• Cities outside Munich and Berlin. The model also runs in Nuremberg, where LDP's cases across all strategies moved from 2.9 to 4.9 percent gross, and in the other cities LDP works in. The location test is the same: universities, hospitals, employers, and a layout that divides.

The rules that apply to every room

A room contract is a residential tenancy. The tenant of a room has the same protection against termination, the same right to a written operating cost statement and the same deposit cap as the tenant of a whole flat. The landlord of a five-room co-living flat has five tenancies to run, not one. The rules that matter most:

• Rent cap on re-letting. The Mietpreisbremse (rent brake, § 556d BGB) applies in designated areas, and Berlin and Munich are both designated. On a new letting the rent may not exceed the local reference rent by more than 10 percent. Furnished and temporary lettings are not exempt as such. The only exceptions are the statutory ones in § 556f BGB: a flat first let after 1 October 2014 as a new build, or a flat comprehensively modernised. A standard co-living conversion is neither, so each room's rent has to be justified against the reference rent for that flat. How a furniture surcharge fits inside that cap is a matter of case law and local practice, not of statute, and is one of the points a manager in that city must know.
• Deposit. At most three months' cold rent for each room, held separately from the landlord's own money, § 551 BGB. Five tenants means five deposit accounts or one account with five clearly separated balances.
• Operating costs. Where the contract charges an advance on operating costs, the tenant is owed a statement within 12 months of the end of the billing period, § 556 Abs. 3 BGB. Rooms are often let with a flat rate instead, which § 556 Abs. 2 permits; then no statement is owed but the flat rate must be set with the real costs in mind, because the landlord carries the difference.
• Energy certificate. The Energieausweis (energy certificate) for the building must be shown at the viewing under the GEG, for every room viewing.
• Sale. A buyer takes over the existing room contracts unchanged, § 566 BGB. That protects the tenants and it protects the resale value of a fully let co-living flat, because the rent roll goes with the title.

Conversion: what is done, and what to budget for

A conversion that keeps the walls where they are is mostly a fit-out. The rooms get a lockable door, a bed, a desk, a wardrobe and lighting. The kitchen gets enough fridge and storage space for the number of tenants. The bathroom is renewed if it is old, because five people use it harder than one family. Fast internet is installed and included in the rent. Smoke detectors go in every room, and the sound insulation between rooms and to the neighbours is checked, because noise is the complaint that reaches the owners' association first.

Where the layout needs a wall, a second bathroom or a door moved, the project becomes building work with a permit question, a fire safety question and a longer timeline. The cost of either version depends on the flat, the city and the standard of the furniture, and this page gives no figure for it. In an LDP project the conversion budget is set per project inside the purchase calculation, before the reservation, and the founders review that calculation. A budget that is set after the purchase is not a budget, it is a hope.

The order of work matters for tax as much as for the tenants. Renovation cost inside the first three years after purchase is measured against the 15 percent line described in the next section. Furniture is not building cost and sits outside that line. The sequencing of the two is one of the reasons the structure is designed before the purchase and not after.

Tax treatment of a co-living flat

The rent from all rooms is one income from letting under § 21 EStG, taxed at the owner's personal rate, filed once a year on Anlage V. The deductions are the same four levers as for any let flat, with two co-living specifics.

• Building depreciation. AfA under § 7 Abs. 4 EStG at 2 percent a year for buildings completed 1925 to 2022 and 2.5 percent for buildings completed before 1925, on the building share of the total acquisition cost. Land is never depreciated. The split between land and building follows the purchase contract, the Federal Ministry of Finance's working aid, or a qualified appraisal that substantiates a higher building share or a shorter remaining life.
• Furnishings, separately. Beds, desks, wardrobes and kitchen equipment are movable assets, depreciated over their own useful life, which is far shorter than the building's. Items under the low-value threshold in § 6 Abs. 2 EStG can be written off in the year of purchase. Because furniture is not building cost, it does not count toward the 15 percent line.
• Renovation and the 15 percent line. Under § 6 Abs. 1 Nr. 1a EStG, renovation and modernisation cost within three years of purchase that exceeds 15 percent of the building share of the acquisition cost, net of VAT, is capitalised and depreciated with the building. Below the line it is maintenance, deductible in full or spread over two to five years under § 82b EStDV. It is a threshold, not a taper: one euro over changes the treatment of the whole amount.
• Werbungskosten. Loan interest, the management fee for every tenant, Hausgeld except the reserve contribution, insurance, internet and utilities the landlord carries, travel to the flat and advisory fees are deductible under § 9 EStG. Loan repayment is not.
• Exit. A private sale after ten years between the two notarised contracts is tax-free under § 23 EStG; inside ten years the gain is taxed and the AfA claimed is added back. A co-living flat is a hold-to-let asset for exactly this reason.

For an owner living outside Germany the deductions are the same, but the basic allowance is not available on the rental income and a loss can only be carried forward against the flat's own future surplus. That does not change the co-living case; it changes when the tax effect arrives. The tax structure itself is one page away: how expats optimise tax on German rental property.

Management: why the work scales with the number of tenants

A whole flat let to one household changes tenant every few years. A co-living flat with five rooms let to professionals and students changes a tenant far more often, because the tenants are at a stage of life where they move. Every change is a viewing, a screening, a contract, a deposit, a handover protocol, a cleaning and a new set of keys. Five rooms means five of everything, and the work is the same whether the owner lives in Munich or in Singapore.

Screening in a co-living flat has one test that a whole-flat letting does not: fit with the people already there. The financial checks are the standard ones LDP's management applies, income of about three times the rent, a SCHUFA report and an employer confirmation. The extra test is whether the new tenant's hours, habits and expectations match the existing tenants', because a mismatch produces the complaints and early departures that turn a 5.4 percent yield into an empty room. That is a judgment made by a manager who knows the flat, not by a form.

LDP's rental management is a flat fee from 30 euros per tenant per month depending on the city, with no percentage of rent and no placement fee; third-party repairs are charged at cost. The fee is per tenant on purpose, because the work is per tenant. It covers tenant placement and screening, contracts, deposits, rent collection, maintenance coordination, annual statements and the room-by-room management of co-living flats. In Berlin and Bremen the work is done by LDP's own company FairMieten, which grew out of LDP's own co-living portfolio in Berlin; in Munich by the vetted partner Miethelden Muenchen; elsewhere by vetted partners. Owners abroad get viewing videos and digital protocols for every move. The scope and the fee are on the rental management page.

Risks, and when we say no

• Regulation. The Mietpreisbremse caps the room rents in Berlin and Munich, municipal Zweckentfremdung rules and Berlin's social preservation areas can restrict the use or the modernisation, and the owners' association can object. Any one of these can turn 5.4 percent back into 2.8. They are checked before the reservation, and if one of them fails, the answer is no for that flat.
• Layout. A flat that needs walls moved to make rooms of usable size is a renovation project, not a conversion, with a permit question and a different budget. A flat where a room has no window, or is reached only through another room, does not let as a room.
• Over-reliance on one tenant group. A flat next to a single campus, let entirely to students of one faculty, empties at the same time every year. A mix of professionals and students, and a location that serves more than one employer, is a management choice that reduces this risk but does not remove it.
• The owner's own assumptions. A buyer who needs every room let every month to cover the loan is over-leveraged for this model. The calculation should carry a vacancy assumption per room, a furniture replacement cycle and the management fee, and still work.

LDP declines co-living projects where the location fails the demand test, where the layout does not divide without building work the buyer does not want, where the WEG rules or the municipal rules are against it, or where the financing only works with the after-conversion rent and no margin. A flat that would be a sound single let is still recommended as a single let.

How LDP handles a co-living project for clients

LDP Group is a Munich-based firm, active since 2022, that has served more than 100 clients, most of them expats buying a first investment property in Germany. Four services run as one process, in English throughout, and the founders Nicholas Runtic and Abdelrahman Maged review every purchase calculation. For a co-living project the process runs in this order:

• Profile. Residency decides the financing: residents of Germany, including Blue Card holders, up to 80 percent of the purchase price as LDP's working figure; residents of other EU countries 50 to 60 percent; buyers outside the EU are not financed by LDP. Purchase costs of transfer tax (3.5 percent in Bavaria, 6.0 percent in Berlin), notary and land registry (roughly 1.5 to 2 percent) always come from equity. LDP works from a purchase price of 100,000 euros upward.
• Sourcing. Property sourcing and acquisition looks for three to five room existing flats near universities, hospitals and large employers in Berlin, Munich, Nuremberg, Erlangen, Fuerth, Duesseldorf, Cologne, Stuttgart and Karlsruhe, checks the declaration of division and the municipal rules, and views on the client's behalf with photos and video.
• Calculation. Purchase price, purchase costs, conversion budget, furniture, per-room rent tested against the reference rent cap, vacancy per room and the management fee, reviewed by the founders before any reservation.
• Financing. Mortgage financing coordination with the independent broker FM Zinswerk, about four weeks from first call to bank approval, free for the client because the bank pays the broker.
• Structure. Tax-optimised structuring: LDP designs the structure, including the land and building split, the timing of the conversion cost against the 15 percent line and the separate depreciation of the furniture; the tax advice and filings come from the partner firm Helm & Partner, with an annual German return available case by case.
• Conversion, letting, management. Contractors and furnishing coordinated, rooms let one by one with the screening above, and then rental management at the flat fee per tenant for as long as the owner holds.

Sourcing, financing coordination and structure design carry no separate fee to the client. Remote purchase by power of attorney is offered for buyers who cannot attend the notary. The first step is a free 30-minute screening call, in which residency, budget and horizon are checked before any flat is discussed. The services page lists scope and fees in one place.

Limitations and what we do not know

• The case figures are averages and medians across LDP's own published, anonymised cases as of September 2026. They describe completed projects, not a market statistic and not a forecast for any flat. A flat that was not converted is not in them.
• The Munich co-living figures are a range, 2.7 to 5.4 percent, and the rent figures for Munich are not published separately from the all-city average.
• Zweckentfremdung rules and social preservation areas are municipal and change. This page states no rule for any city; the buyer must check the address before converting.
• How a furniture surcharge is treated inside the Mietpreisbremse cap is decided by courts and local practice, and we do not settle it here. The rent per room in the calculation is tested against the reference rent, not against what the market would pay.
• Vacancy figures in the city dataset are city-wide, from sources with different reference dates, and say nothing about the empty weeks between room tenants in one flat.
• Conversion costs are not stated because they are set per project. We are a property investment firm, not tax advisers or lawyers; the statute references are checked as of September 2026 and describe the rules, not a specific return, and the tax treatment in the owner's home country is outside this page.

What would change this answer

• A change to § 556d or § 556f BGB, or to the state ordinances that designate Berlin and Munich as tight markets, which would move the cap on every room rent.
• A court ruling on how furnished rooms and furniture surcharges are treated under the Mietpreisbremse, which would change the per-room rent in the calculation.
• A change to the municipal Zweckentfremdung rules or the social preservation areas in Berlin or Munich covering room-by-room letting.
• A refresh of the LDP city dataset or of the aggregated case figures, which are updated as cases complete.
• A change to the AfA rates in § 7 Abs. 4 EStG or to the 15 percent rule in § 6 Abs. 1 Nr. 1a EStG.

Last reviewed September 14, 2026. Reviewed by Nicholas Runtic and Abdelrahman Maged, co-founders of LDP Group, before publication and at every review date. We review this page every quarter, after every refresh of the case figures and after every change to the rent brake designations in Berlin and Munich; check § 556d BGB and the municipal rules for the address before relying on a rent figure.

Frequently asked questions

Sources

• § 556d BGB, zulässige Miethöhe bei Mietbeginn (rent brake) (gesetze-im-internet.de)
• § 556f BGB, Ausnahmen (exceptions to the rent brake)
• § 551 BGB, Begrenzung und Anlage von Mietsicherheiten (deposit cap)
• § 556 BGB, Vereinbarungen über Betriebskosten (operating cost statement)
• § 566 BGB, Kauf bricht nicht Miete (tenancies survive a sale)
• § 7 EStG, Absetzung für Abnutzung, Abs. 4
• § 6 EStG, Abs. 1 Nr. 1a anschaffungsnahe Herstellungskosten (15 percent rule)
• § 82b EStDV, Verteilung größeren Erhaltungsaufwands
• § 23 EStG, private Veräußerungsgeschäfte (ten-year rule)
• LDP city dataset 2026, prices, rents, yields and vacancy for Munich and Berlin
• LDP rental management fee and scope, including co-living room management
• LDP mortgage rate table and loan-to-value by residency
• empirica institute, publisher of the CBRE-empirica vacancy index