Being a landlord in Germany isn’t easy. They have plenty of obligations and take on a risk when signing the contract – tenants are highly protected by German law. If you want to generate profits from your property and make the rental process less stressful, there is a lot to learn.
Germany is a very pro-tenant country which creates additional hurdles for landlords. In addition, there are many laws that one must observe as a landlord. Ultimately, a future landlord needs to know several things before renting out a home in Germany. All of them will be discussed in this article.
To protect your house or apartment in Germany, sign up for home insurance; it costs just 2 EUR per month and saves you thousands.
How to be a landlord in Germany
Out of 40 million German households, about 54% live in a rented home, and the rest is occupied by the owners. With that, around 60% of all rental properties are owned by about 3.9 million private landlords.
Renting out a place in Germany will bring you additional cash flow every month, but you also need to consider all costs involved.
How do you become a landlord in Germany?
You become a landlord in Germany in a similar way as anywhere else – by renting your property out. Foreigners have the same rights as Germans regarding purchasing and renting real estate. If you aren’t living in Germany but want to buy a home, you can easily do that.
The same goes for renting it out. However, managing rented property might be difficult from another country. For this purpose, there are plenty of agencies that could help with that.
The rental duration with agencies is often capped at 2 years.
Is buying an apartment a good investment in Germany?
Generally, buying real estate is a good investment in Germany, regardless of the location. As an investor, you certainly want to make profits from your newly purchased apartment or house in Germany.
If you are buying a home for your own use, it rarely will make financial sense. That’s why many Germans don’t own property. Because it’s cheaper to rent a place for the whole life than to buy an apartment and live there.
Yet, landlords can make great gains when renting their properties. Especially when furnishing, renovating, and keeping the rent in pace with the market (or slightly above).
Germany has plenty of homes to choose from in each location. Therefore, the analysis of the market is essential. You better connect to one of the agencies to help you to make a purchase.
Ultimately, to benefit from your investment in Germany to a larger extent, you need to learn about the local market a little bit.
To protect your house or apartment in Germany, sign up for home insurance; it costs just 2 EUR per month and saves you thousands.
Choosing your tenants
The first step in the rental process is finding the right tenants. You can simply post your ad on one of the advertising platforms such as:
Where ImmobilienScout24 is the biggest platform. It has the greatest reach – more visitors than any other site. Usually, owners pay a small fee to post their property on any real estate website.
See more on websites for rentals in Germany.
You could also post your apartment on Facebook; there are plenty of groups where people look for a place to live in Germany. If you want to rent it out to expats, look for a group in your city by typing “Expats in ..city..”.
Alternatively, there are daily newspapers, but you probably will have requests from older people, since it’s a very old-fashioned way to advertise.
When advertising your home in Germany, provide a brief description of the property, e.g., size and number of rooms, but also a summary of important aspects such as:
- details about the location
- proximity to supermarkets, public transport, schools, daycare centers, etc.
- existing furniture and other household items
- average utility bills, so prospects know what to expect
As a landlord, it’s your responsibility to prove the solvency and financial stability of the candidate. They must have worked for at least several months at their current job. A potential tenant should not rely on any social benefits but on earned income. So you can ensure they can pay the rent.
You can hedge yourself by asking recent payslips and bank account statements. You can also check their credit history by requesting a SCHUFA report. Serious candidates will do an extra step.
Renting to foreigners
As a foreigner, you might consider renting to foreigners with a temporary residence in Germany. The main disadvantage is that such tenants usually don’t stay long and move a lot. So they might relocate to another city within Germany or even leave the country.
Renting to Germans
Renting to a German national is the first that comes to mind, but there might be several cons to it. Germans by nature complain a lot; hence, they might be more difficult to deal with.
Besides, they know all their rights and your obligations, so they might take advantage of it.
In the end, it all comes to your personal preferences. For both cases, you need to assess the potential tenant well.
Renting out an apartment with the agency
You don’t necessary to do it all on your own. There are plenty of real estate agencies who help to rent out properties for a fee. The biggest advantage of using a broker is that they find suitable tenants. That saves a lot of time and stress for owners.
There are also completely hands-off agencies that will not only rent out but manage your home on your behalf. They handle the complete process, from the brokering and leasing of the apartments to overseeing them on behalf of owners.
This option is perfect for someone located in another country or another city in Germany. However, the duration of renting the apartment or house through a rental agency is usually limited.
Many offer their services for a period of between two and a maximum of 24 months. During that time, your property will be in good hands. They supervise the rental process.
However, this service also has its price. Usually, landlords pay between 1,5 to 2 rents plus VAT (19%) in a broker’s commission after the apartment was rented out. However, the brokerage costs can be deducted from the tax.
Fees of property managing agencies might be different and depend on the company. Probably, you will need to pay them a monthly rate.
Notice periods in Germany
The real estate market moves slowly in Germany, and so your tenants must give you at least 3 months’ notice when moving out. You, as a landlord, must inform them even earlier, sometimes 6 months in advance. Here is the notice period for landlords:
|Rental period||Minimum notice period|
|0 – 5 years||3 months|
|5 – 8 years||6 months|
|8+ years||9 months|
A shorter notice period or even immediate termination can apply when:
- The apartment was used in a way that goes against contract rules.
- Disturbance of domestic peace – this means serious insults and physical attacks on the landlord or other tenants, as well as intentional damage to property or theft of electricity.
Learn about termination of rental contracts in Germany.
Your rights and obligations as a landlord in Germany
When renting out a property, you, as the owner, have certain rights and responsibilities.
There are 12 official responsibilities that landlords in Germany have:
- Maintain the apartment
- Pay for repairs
- Deal with defects and damages in the property
- Deal with mold
- Ensure security
- Take care of bell and mailbox signs
- Take care of service charges
- Take care of heating
- Inform about the house rules
- Maintain the garden area
- Issuing a housing provider confirmation when you move in/out
- Accountability for services and charges
Some of the most relevant are:
1. Calculation of operating costs (Nebenkosten)
A landlord must calculate the operating costs correctly. Operating costs are usually paid by the tenants, but you need to keep track of them. These include charges for services like water, sewage and garbage collection, building maintenance, general housekeeping, etc.
2. Returning a security deposit
After a tenant moves out, a landlord must pay a security deposit back in full, assuming the tenant doesn’t have any debts. The legal deadline for returning the deposit is 6 months.
3. Maintenance and repairs
Landlords are obligated to repair and fix damages and defects in the apartment or pay for repairs. This applies only if the defect has happened on itself e.g., not because of the tenant’s fault. In the latter, tenants must pay caused damages.
1. Rental deposit
In Germany, you can charge up to 3 months’ rent as a security deposit. This money can be later used to cover damages, but only if tenants decide to move out. You can’t spend the deposit while the rental contract is still running.
2. If tenants don’t pay rent
In the event of non-payment of rent, you should send a reminder with the deadline as soon as possible. If the tenant hasn’t paid rent for two months, you can terminate the rental contract without notice.
If the rent is still not paid and the tenant doesn’t leave the apartment, you can initiate an eviction.
3. Rent increase
You can legally increase the rent every 15 months to adjust to the local rental price index. The first rent adjustment can be made only after 12 months from the moving-in date.
Furthermore, landlords must inform new tenants about the rent increase 3 months in advance. That means an actual rent increase will come into place only after 15 months.
Depending on the location, the price increase is capped at 15% or 20% within three years. In the large cities, it’s 15%.
4. Some damages are fixed by tenants
If tenants have caused damage, they must also pay for the repair bill.
5. Tenants must follow the house rules
Tenants must abide by the house rules and respect their neighbors. This applies to the noise level, for example. Moreover, tenants behaving in an inconsiderate manner towards neighbors risk termination without notice.
Landlords can terminate the rental agreement, but their options are limited. It can only be done if you have a justified reason to do so. These include:
- if the tenant has significantly violated his contractual obligations
- if a landlord needs the apartment for himself or his family (i.e., they want to sell the house or move in themselves)
- if the property is for sale or to be demolished
- if the tenant failed to pay rent for more than two months
- if a tenant disturbs the peace in the building, e.g., neighbors
Tenants enjoy more rights in Germany than in many other countries, and as a landlord, you will have to accommodate this. Something isn’t working, you better get it sorted fast. Besides, tenants have a right to withhold or deduct a proportion from the rent if you leave defects unfixed.
Keep in mind, that in Germany, tenants have full control of the apartment. Meaning, that you can’t even enter the house without their consent. Tenants can also change locks if they want to.
Moreover, tenants can redecorate the apartment, add the furniture, and much more.
Read more about tenant’s rights in this article.
Rental contracts in Germany
Rental contact is by far the most important document you ever will need to conduct as a landlord in Germany. It states rights, obligations, caution, and rent amount for both parties.
At a minimum, it must include:
- your and the tenant’s name
- the description of the house or apartment (address, floor, location)
- number rented rooms including basement, garden, garage, etc.
- the rent amount
- the start (and end if applicable) of the tenancy
Besides, the rental contract has to be signed by both parties. Also important to mention information about pets, rent increases, security deposits, and possible subletting.
Taxes on rental income in Germany
As soon as you receive your first rent, you need to consider whether this money is taxed or not in Germany. Generally, landlords do pay taxes on the rental income.
It’s categorized and added to your overall income, e.g., salary, and calculated at the income tax rate. That’s because German law requires every person to tax their income, no matter the type.
However, you don’t pay tax on the entire rental income but only on profits. Expenses can be deducted from the generated rent.
Therefore, as a landlord, you have an opportunity to exclude several items from your rental income, hence pay fewer taxes.
For example, ongoing repair and maintenance work in a rented property are deductible. If you have taken out a mortgage to buy a home, you can exclude interest payments from the tax bill.
Moreover, you start paying taxes only after reaching a certain amount. In 2022, the annual rental income under 520 EUR is tax-free. Furthermore, if your total income from all types of sources is less than 9,984 EUR per year as a single or 19,968 EUR (married), you are exempt from any income tax.
Example of the taxable rental income in Germany
If your annual rental income is 10,800 EUR and
- The interest of the real estate loan: 4,800 EUR
- Depreciation: 3,700 EUR
- Running costs (e.g., property management): 900 EUR
- Repair of the kitchen: 400 EUR
- Total taxable income from renting and leasing: 1,000 EUR
The rental income (profit) is subject to the standard progressive income tax rates (2022):
|Taxable income||Tax rate|
|Less than 9,984 EUR||0%|
|9,984 – 58.596 EUR||14% to 42%|
|58.596 – 277.825 EUR||42%|
|More than 277.825 EUR||45%|
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