One of the simplest and most reliable types of investment, the popularity of which is growing in many European countries during the Covid-19 pandemic, are serviced apartments, which combine the advantages of apartments in residential buildings and hotel rooms. In Germany they are becoming increasingly popular for both investors and clients for a variety of reasons.
In accordance with local legislation, service apartments in Germany have the status of commercial real estate, so the owner can also rent them out for short-term rent. This is relevant for tourists and business people, as well as “digital nomads” working remotely. The owner himself cannot live in them, and usually transfers them under the management of the operator, and he himself receives passive income in the amount of 3.5-4% per annum.
As a rule, German serviced apartments are fully furnished apartments with a kitchen and bathroom, which come with additional services: cleaning, change of bed linen and 24-hour service at the reception desk. Typically, guests stay in them for a period of one to three months, since accommodation costs on average 1.5-2.5 times cheaper than in the same hotel rooms, but without a kitchen.
You can also save significantly on food, since incomparably less money will be spent on purchasing food in the supermarket and at the market per day than on a one-time trip to a cafe or restaurant. Customers are also attracted by the fact that serviced apartments are great for families and groups traveling as the same amount is charged for different numbers of guests. Unlike renting a regular apartment, when you move in, you do not need to make a deposit or collect many documents to confirm your financial solvency.
The benefit for investors is that buying serviced apartments in Germany allows you to earn more than in the case of hotels, with less investment, costs and expenses. The cost of such apartments is quite comparable to ordinary apartments (for example, in Berlin the price tag starts from 300 thousand euros with an average area of 50 sq.m.), and you can purchase not the entire building, but rooms separately.
An agreement with the official operator, who will directly handle the rental of apartments, is signed for a period of 15 years with the possibility of subsequent extension. The owner is responsible for paying for insurance and property taxes, while the owner pays for maintenance of the plumbing, heating, roof and supporting structures. Personnel costs do not exceed 15%, while in hotels this figure reaches 30%.
Most often, the agreement specifies a fixed amount of income, although options for paying a percentage of the proceeds are possible. The increased profitability of serviced apartments is ensured by renting out part of the apartments for short-term rent, which costs on average one and a half times more than medium-term rent. In developing areas, profitability is maximum, since with high demand, sales prices practically do not increase, but rental prices rise at a rapid pace.
You can also make money on the rise in price of apartments, which in Berlin, for example, rose in price by 20% in 2020 alone (in the case of new buildings), and in 10 years – by almost 150%. Nearly half of global operators report that average revenue and length of stay increased in 2021 compared to last year and will continue to grow. And of the more than 20 thousand serviced apartments that are planned to open in Europe by 2025, 22% will be in Germany.