How to Build Wealth Successfully with Real Estate
This guide refers to German law and the German tax system. It is a translation of our German original and does not replace individual tax or legal advice.
For high-earning employees and self-employed people, building wealth often only begins once they have reached a desired savings rate. What most investors forget, however, is that potential has already been lost along the way in the form of missed tax refunds. In this article, we show you how to accelerate your wealth building with real estate and draw equity from tax refunds. We also explain the impact the current legal situation has on investors and how you can benefit from it.
Neo Capital specialises in optimising the tax burden of high-earning employees and self-employed people. We advise our clients holistically and individually on their current situation and their options for building wealth. Explore our wide range of content online or opt for a no-obligation introductory meeting. Our experts evaluate your situation and accompany you on your path to long-term wealth building and protection.
The importance of real estate as an asset class
Alongside securities and classic forms of investment, building wealth with real estate in particular has moved into the focus of many investors in recent years. The reasons for this are the attractive tax treatment of your expenses and the stability and security of the investment. What is often described as passive income in reality offers an opportunity for sustainable growth in value with little management effort. The growing housing shortage reinforces this effect for investors across Germany. Anyone who already earns money with real estate can therefore look forward to attractive growth in value in top locations in addition to regular income.
Compared with classic financial products, investments in real estate are characterised by a further feature: the variety of possible returns, which are offset only by the repayment of borrowed capital. Rental income, surpluses and, in some cases, tax-free sales after the 10-year holding period has expired therefore provide unparalleled flexibility in structuring your portfolio. We have explained how rental income develops in line with inflation when building wealth with real estate in our article on a rented flat as an investment.
How to benefit from a property in the long term
While your own home, as privately used residential property, is a liability with no prospect of income, a property used for retirement provision behaves differently. The intention to generate profits through tenants qualifies a large part of the associated costs as deductible expenses. What has to be paid privately in your own four walls can be conveniently deducted from tax by owners of a property held for retirement provision. Since banks have also recognised the security of recurring rental income, investment properties are financed considerably more cheaply.
A look at how a property is financed reveals why many people rely on more than one property for their own retirement. Banks finance this type of property with little equity, which means that only part of the total purchase price is needed to buy further properties. This is particularly important for building a property portfolio with little equity, tax refunds or severance payments. For this reason, once the purchase of one property is complete, many investors are already moving on to the next one.
Neo Capital: converting your tax burden into private wealth through real estate
As you can see, despite higher interest rates, property investments are a first-class opportunity to protect and grow your wealth. If you have a high income and consequently a high tax burden, building wealth with real estate allows you to convert money that seems to be lost into private wealth. We will answer the question of who should use their capital for real estate and how this decision affects the investor's personal situation in an initial introductory phone call. Based on your starting position, our experts will explain the effect that buying a property and the tax advantages from its depreciation will have on your wealth building.
Are you interested in real estate as an investment and would like to benefit from tax advantages and first-class off-market properties? We will advise you comprehensively on your plans. Benefit from our independent advice and our network of tax, finance and real estate experts. Together we protect your capital against inflation and reduce your tax burden through wealth-building investments.