Rent or sell a house? How to make your decision!
The decision whether to let or sell a house is not easy for many owners. Anyone who has lived in a house for a long time or inherited their parents’ house is often emotionally attached to the house and finds it difficult to sell their own home or their parents’ house. Even if it is possible to let a single-family home, most owners decide to sell it – mainly for economic reasons.
Although rental income can be generated on a regular basis, the capital tied up in the house could be used more economically. For good reason, investors in the real estate market invest primarily in apartment buildings, condominiums or commercial properties for rent – but not in individual houses.
Thus, the rental income per square meter for a single-family house is lower than for an apartment. Example: A house with 200 square meters of living space can generate less rent than 4 apartments of 50 square meters.
The costs of maintaining a house are also higher than with other real estate investments. Example: If a single-family house requires a major repair (e.g. repairing a roof truss), the owner usually remains on the biggest cost block, while in the case of an apartment or an apartment building he can share the costs with other owners.
If you want to rent out your house, you should be aware that a rented house is worth less than a vacant house in the event of a later sale. This is because rented single-family houses are also sold in 95% of cases to owner-occupiers who first have to “buy out” a tenant or have to claim a termination of tenancy in order to move into the house.
Potential prospective buyers are reluctant to accept these problems or demand a price reduction for the existing tenancy. A house rental can be very useful, if one does not need the own house only temporarily or the children are to move in e.g. in 2 years, etc.. In these or similar cases the lease should be limited accordingly.
House on time rent – the safe variant
Who wants to postpone his decision, whether he wants to rent the house or sell the house, can first make a temporary letting. The time limit can be useful, for example, if you want to go abroad for a while or if the proceeds from the house sale would not be sufficient to fully repay the house loan.
However, a fixed-term rental agreement must comply with the law. It must already be in the lease, why this is limited. The desire to sell the house only in a few years is not one of the recognised reasons for drawing up a temporary lease.
According to § 575 BGB (German Civil Code), limited rental contracts are only admissible as reasons for a time limit:
Operating requirements for company rental apartments
Most frequently, a later “own use” is cited as a reason for a time limit. It should be noted here that the tenant has a right to information 4 months before the expiry of the tenancy as to whether the reason for the time limit still exists. The burden of proof lies with the landlord.
A time limit with reference to later modernisation and construction measures is also limited by law. Thus, the reason for the time limit is only permissible if the leased object would be so fundamentally changed (e.g. complete refurbishment, relocating walls, etc.) that a continuation of the lease would make the refurbishment considerably more difficult.
You can obtain more detailed advice on a legally secure, temporary, landlord-friendly rental agreement from a lawyer or real estate agent for rentals, for example.
When to rent the house furnished
It makes sense to rent a furnished house if the owner does not live in the house temporarily and does not need the furniture in the other place. Furniture can also generate higher rental income, especially if the furniture is of high quality and contemporary.
It should be noted that unfortunately, foreign property is often not handled very carefully and the furniture can therefore be affected. When handing over the property to the tenant, make a detailed record of the condition of the property and the inventory and have this countersigned. As a precaution, you can remove particularly valuable items from the house and store them. Inventory insurance can also be a valuable safeguard here.
Renting a house – what you should regulate in the tenancy agreement
When renting out a house, as with any other rental, the lease agreement should be carefully worked out. Among other things, the landlord must calculate the living space correctly in order not to be held liable by the tenant later. Please note the instructions for calculating the living space, e.g. to correctly include cellars, pitched ceilings, etc. In contrast to renting out a flat, the payment of the most important ancillary costs should be borne by the tenants when renting out a house. They can conclude the contracts directly with the utilities for electricity, gas and water. Some items on the service charge statement are therefore omitted and there is less risk of default in the case of additional service charge claims.
Since houses usually have green areas or gardens, the tenancy agreement must ensure that the tenants are responsible for maintaining the areas. The exact work to be carried out by the tenant must be specified in detail. If a care of the garden is not agreed upon, then the tenant does not stand in the obligation. Also for the sweeping and clearing obligation of the sidewalks bordering the property a regulation must be met. As the landlord, you either commission a company with this and pass on the costs to the tenant or you transfer the obligations in the lease to the tenant.
When renting houses, the rent index does not have to be used as the basis for the local comparative rent. In many cases, this is also not possible, since no data is available for single-family houses. Here applies: The landlord selects three comparison houses, which serve for the calculation of the local comparative rent or he lets provide an appraisal. The agreed rent may then be up to 50% higher than the local comparative rent in areas where there is no rent brake. For landlords, it is worth thinking about agreeing a graduated rent or index rent.
An important clause in every landlord-friendly rental agreement regulates the handling of minor repairs. The landlord is responsible for ensuring that the rental object is kept in a contractual condition. Only if it has been explicitly agreed that the tenant is responsible for small repairs up to a certain amount per repair (75 – 100 € maximum) and year (a maximum of 6 – 10 % of the annual rent) does the landlord not have to worry about this.
Further information on avoidable landlord errors can be found under “Tips for landlords“.
Rent out houses – with or without a real estate agent?
If you want to rent out houses, you should consider whether to entrust the task to a real estate agent or rent them out privately. The advantages of an estate agent are manifold: In addition to saving a lot of time by taking over the letting tasks, the estate agent has a lot of experience with letting and offers a professional handling of the letting project. Numerous mistakes and problems can be prevented by hiring a broker. The landlord needs less time to find a tenant and has better possibilities to check the solvency of the tenant. Also the determination of the rent is an everyday task for the real estate agent and is done quickly and professionally. The real estate agent also takes care of the legally secure tenancy agreement and the handover of the apartment.
With large houses, the creation of the visual elements of the exposé takes a lot of time. In the case of high-quality real estate, it is worth preparing a 360° view or a real estate video. Drawings of the floor plans and good photos are also important. For the layman, these tasks are not easy to implement. Who pays the broker with the letting is regulated by the orderer principle. Up to 2 net cold rents plus value added tax can be called up. immoverkauf24 recommends you an excellent real estate agent for letting.
Rental house – you should remember this when choosing a tenant!
When renting a house, you should make sure that the tenant you choose is not a tenant who would like to buy a house, but would not get a loan due to lack of creditworthiness. Those who cannot realize their dream of owning their own home at the current low interest rates represent a risk for a landlord. Furthermore, it is important to ensure that the payment of the rent is not dependent on an income. If the family earner becomes unemployed or the relationship is terminated, the rent can usually no longer be paid. It is advantageous if the tenants know how to live in a house and take care of the garden and small repairs in a natural and responsible manner.
At best, you will find tenants who are solvent and do not want to buy a property due to a lack of flexibility. These could be, for example, experts who are needed for a limited period in another branch of their company, diplomats or politicians.
Dispute with the house tenant – in such a way one gets it out again
A dispute with the tenant can quickly lead to you wanting to get the tenant out of your house. This often involves rent arrears, rent cuts or disputes over (alleged) defects in the leased property. Regardless of which party is legally on the safe side in the dispute: the relationship is tense and the trust is usually no longer there.
As a landlord your possibilities to get a tenant out of the house are limited. Tenant protection plays an important role in German tenancy law and only in a few cases do you have the option of giving notice to the tenant:
Temporary tenancy agreement
If a fixed-term lease has been agreed with the tenant and the reason for the fixed-term lease (extensive renovation of the house, own requirements) formulated in the lease is also the reason for termination, you can terminate the tenant in due time to the end of the fixed-term lease.