As a private person with high enough income you can borrow up to 80% (even 90% in some case with additional pledged securities). Not possible as a company, I think you can only borrow max 50-60% or so? So there’s your big disadvantage, it’s too cash intensive to buy RE via a company.
1 Like
Good point. I have heard rumours that banks are somewhat more lenient for real estate companies compared to just financing a companies own office and especially factory/production buildings. So maybe 70% is possible…?
Also: Consider at the moment we still have the “Eigenmietwert” taxation, which might mitigate that disadvantage (amongst many other aspects)
if you are buying the place as your primary residence it does not make much sense to put it in a Holding (if this RE and the ETF is the only thing in the holding). This is our conclusion after analysing it back and forth…
However, if the RE is as investment to generate cashflow then we have a different scenario. For example, no “Eigenmietwert” on this property but rather you need to declare the actual rent you receive.
On any buy-to-let deal you need 40% equity, no matter if you hold it as private person or as a juridical person. Truth be said, depending on your situation 33% may be also accepted by the financing institution…
1 Like
No, you can loan 80% even as a private person for a buy-to-let deal. The bank will consider your income+rent in affordability calculation. But buying for a company, your personal income is out of the question, just rent, hence you need a lot more equity to borrow.
In the praxis it is very difficult to get that…
Not really, it’s just a question of whether you have high enough income. I personally know of a couple of cases where people did get 80% for a buy to let. Small properties of course: even to buy say a 1M property you need to demonstrate to bank a yearly income(+rent) of roughly 1M * 5% * 3 = 150k +/- something (affordability criteria slightly vary by bank and there’s some more details in equation like maitenance). Multi-million MFH thus would need 300k+ income and so is out of the question for almost anyone or the bank would demand much higher initial payment until affordability criteria is met.
So…
- Buy real estate for own use = generally a holding does not make sense (I would agree)
- Buy real estate as investment property = a holding might or does make sense?
Did you come to a similarly general conclusion with buy-to-let properties? (I myself have not yet formed an opinion on this, especially as I struggle with different exit scenarios, and if I should consider them at all anyway).
Regarding the financing discussion with @pandas: I don’t think it really matters if the bank will require 20%, 30% or 40% for your buy-to-let. If they accept 20% based on your income instead of expected rent/return, it will jeopardize your possibility to buy another real estate, be it another buy-to-let or your own dream home. Therefore, even if bank would accept 20% downpayment, I would still consider it a bad idea. And I believe we all agree that 20% for a buy-to-let in a holding is no possibility, right?
Hi @1742,
if it “might or does” make sense depends on the calculations for your business case.
I totally agree that even if the Bank goes with and finance you 80% based on your salary this is a very risky business going forward.
My point since the beginning is: a Holding is good to transfer the risk of taking debt from your private person to the juridical person. So, it is even worse if you take the loan for a Buy-to-let project based on your salary… you have cashflow risk and debt risk on your private person…
That’s what i said right in the beginning
There’s also another possible legal form to hold real estate: (Bau-) Genossenschaft. It seems like they only require 5-10% equity in this form - at least that’s typical amounts of Anteilkapital that I’ve seen them to require from members. But it is not for making a profit (at least not directly, but you can still profit e.g. from management fees, top management folks from big ones like ABZ are swimming in cash)