Investing into rental apartments in Europe

Investment into purchasing real estate with the aim of further rental is a well-known investment strategy. Apart from investing into local property, investors can also make these types of investors abroad.

At present, Rellox clients often purchase property with an income from rent primarily in popular recreational destinations abroad. They partly use the real estate themselves, and for the rest of the year it is rented based on short-term rentals to tourists. Properties by the sea and in the Alps are most commonly purchased for this purpose. An alternative is to invest into real estate in major cities and metropolises in Europe, such as London, Berlin, Paris and others.

First of all, it is important to remember that the purchase of real estate abroad is governed by the laws and tax system applicable in the country where the real estate is located, which means the investment conditions can differ. However, most countries do not pose obstacles to the purchase of real estate by foreign investors. Nevertheless, it is necessary to know the detailed conditions not only of the purchase, but also the manner of using the real estate. For example, so real estate cannot be rented out.

Why a metropolis

Large cities and metropolises like Berlin, Paris and London, but even regional capitals, have a crucial advantage in their economic, political and demographic role. They are generally strong economic agglomerations, which attract investments into services, industry, infrastructure, etc. Large cities attract money and money attracts people. They move to large cities not only from the given country, but also from abroad. Moreover, they are often a tourist destination. This all creates conditions for a high demand for housing, naturally on a rental basis. Hence, an investor into real estate can choose from several options: purchase property with a tenant, purchase an empty property and arrange its further long-term rental or short-term rental to tourists.

Jan Rejcha from the Rellox company, which specialises in the sale of foreign real estate, says: “In general a greater yield is achieved from smaller standard apartments than luxury properties, where the overall revenue is high but the return is influenced by the higher initial investment. On the other hand, return through appreciation of the real estate (speculation on price growth) can be interesting for luxury real estate.”

Calculating return

When calculating the final return on investment, it is necessary to take into account secondary costs related to purchasing the real estate, as well as the actual yields from rent. These costs are different in every country. It is common that the buyer pays all the transfer costs, including real estate transfer tax.

It is important to remember that in income is generated from rent, this income is subject to tax at the place where it is generated, i.e. abroad. Our country has an agreement on limiting double-taxation with most countries where our citizens generally invest into real estate, so this income is not taxed twice. At present, most European countries are inclined towards raising taxes, so it is necessary to check the current valid rates.

In the next parts of this article, we will focus on selected locations that are attractive for those interested in investing into residential property in major European cities such as London, Paris or Berlin.

» Visit the offer of rental properties in cities and metropolises.

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