Retirement Planning 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.
Anyone who looks after their future early and takes their pension into their own hands is ahead of a great many people in Germany: whether you are an employee or an entrepreneur, retirement planning is a topic for every person and every stage of life. This article explains the concept of retirement provision through real estate and sets out the advantages of a let property for old age. We also show why buying a house becomes a trap for many people and how you can instead benefit from cleverly used real estate in any market situation.
Neo Capital supports high-earning employees and entrepreneurs in structuring their retirement investments in a tax-optimised way. Together with our network of experts, we advise you comprehensively on the options available for tax-optimised provision for old age. We take your current situation into account individually and also help you convert your tax burden into private wealth through investments. Choose a financially secure future and maintain your standard of living even after your working life: we advise you individually and digitally throughout Germany.
Why real estate is necessary for financial security
The purchasing power of the euro has been declining for decades: consumer goods and investments are equally affected by this effect. A property counteracts this development through two factors: appreciation in value and rents that rise in absolute terms. As a result, the same property used as retirement provision generates higher rental income after some years than it did at the outset. With rising inflation and an increasing housing shortage, investors can expect that, unlike the returns on classic financial products, this development will not decline. The rent generates monthly income that is set against the deductible expenses of repayment and maintenance. In contrast to an owner-occupied home, renovation, maintenance and development of a property are therefore tax-privileged expenses that keep the effective tax burden low. Especially at the beginning, acquisition and maintenance costs can exceed rental income, which leads to further tax savings.
How to benefit from a property over the long term
While an owner-occupied home, as privately used residential property, is a liability with no prospect of income, a property used as retirement provision behaves differently. The intention to generate profits from tenants qualifies a large part of the associated costs as deductible expenses. What has to be paid privately within your own four walls, owners of a property held for retirement can conveniently deduct from their taxes. Since banks have also recognised the security of recurring rental income, investment properties are financed at significantly lower cost. A look at the financing of a property reveals why many people rely on more than one property for their own pension. Banks finance this type of property even 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 has been completed, many investors are already moving on to the next one.
Neo Capital: building wealth through a property as retirement provision
The classic buy-to-let property is clearly superior to an owner-occupied home even during your working life. Anyone who puts their capital into buying a property to let has made a clever investment and arguably the most tax-attractive investment available to private individuals. With a view to old age, you can choose in the long term between a tax-free sale or a permanent source of income in the form of rent. Which route makes most sense for you in the long term always depends on your individual situation and your goals for the future.
Are you interested in a property for tax-optimised retirement provision and would you like to take your pension into your own hands? Our financing and tax experts advise you on choosing the right strategy and help you acquire high-yield off-market properties from our portfolio. With us, you get everything from a single source, from holistic advice on your personal wealth planning to the property itself: this is how we ensure that our clients are optimally prepared for old age and have made the most of their scope for tax planning.