Only those who have never rented out before imagine that the work of a landlord is easy. In practice, landlords are confronted with many tasks, regulations, and unforeseen problems. Starting with the selection of a reliable tenant, bookkeeping, property maintenance, and a multitude of legal regulations up to a lot of conflict potential between different parties, landlords have to take care of a lot with large investments involved. That’s why we’ve written this landlord guide with tips and tricks to help you better navigate through the pitfalls and opportunities as a landlord.
How to prepare the flat for a new tenant?
If you want to rent out an apartment, you have to prepare it accordingly. Although landlords usually have no difficulty finding new tenants in the current market situation, if the apartment does not look attractive in the advertisement and during the viewing, you may not be able to get your desired amount of rent or potential tenants may jump off and look for another apartment that makes a better impression. The apartment should be swept clean and the floor free of dirt. The same applies to kitchen fixtures and the bathroom. By the way, if you hand over a renovated apartment to the tenant and agree in the lease that the tenant will renovate when he moves out, you will always have a freshly renovated apartment to hand over. This way you can increase the attractiveness of your apartment with a one-time investment or effort. In general, the tenant has to hand over the apartment to the landlord after the end of the tenancy in a comparable condition as when he received it, as far as this is regulated in the tenancy agreement. If the tenant demands renovation from the landlord, the costs should be shared equally.
Is a Real Estate Agent worth it for renting?
The next question is how to find a tenant. Can you easily rent out the apartment yourself? Or should you get a professional real estate agent? First of all, a broker should save you time. He or she will handle all the tasks, from marketing to finding a suitable shortlist of tenants, and, if necessary, checking creditworthiness or preparing an energy certificate. The agent will probably create a professional advertisement and an attractive listing, which are well suited for marketing purposes. As another argument for hiring an agent, one often hears that an agent helps to avoid mistakes, especially in the communication with the tenant as well as in the preparation of the lease agreement and the compliance to legal requirements. Errors in communication could cause disputes to arise early on, which can strain the relationship between tenant and landlord. Mistakes in the lease agreement can cause relevant passages to become invalid, misunderstandings to arise, and you to have to deal with situations that were not on your radar. Considering the duration of a tenancy, this can result in considerable extra work that you had not planned for. In addition, experienced agents have a good understanding of current rental rates and may also be able to assist you in dealing with relevant regulations such as rent caps. As a result, you can leverage an agent’s subject matter expertise to help you determine the perfect rental amount. More on the perfect rent level later.
On the other hand, the professional title of a real estate agent is not protected. This means that anyone can call himself a real estate agent, regardless of training or experience. Pay attention to reviews, references, and memberships, e.g. with the IVD, to avoid unpleasant surprises. In addition, even hiring a real estate agent is no guarantee that you won’t run into problems with your tenant. And of course, costs also play a role in deciding whether an agent makes sense for you. In Germany, the so-called “Bestellerprinzip” applies, which means that the person who hires the agent must also pay him. This means that if you, as a landlord, commission an agent to find a tenant, you must also pay the agent’s commission and may not charge it to the tenant. If this is violated, hefty fines can become accrued. The agent’s commission is not capped by law for landlords as it is for tenants. By the way, landlords can deduct agent fees from their taxes. Classically, the agent’s commission is only due in the case of success. However, pay close attention to the real estate agent contract. In it, the remuneration is exactly specified, among other things also whether inspections accomplished by the agent or other services are additionally recompensed.
Here you can see the advantages and disadvantages of real estate agents at a glance:
- It Saves Time and Money
- Professional Marketing
- Advisory on rental prices and regulations
- Advisory on the rental contract
- Find a trustworthy real estate agent
- No guarantee of a trustworthy tenant
What is the optimal amount of rent?
Before you market your property, you need to be clear about the rent you want to charge. Let’s start with the rent cap, the so-called “Mietpreisbremse”. By the way, the rent cap does not apply everywhere in Germany, but only in tight housing markets, which is the case in many cities and municipalities. You can find a good overview of the validity of the rent cap here on Finanztip. According to the rent cap, the maximum rent may not be more than 10% above the local comparable rent (BGB §556d). The comparative rent is usually determined on the basis of rent rolls. Since the informative value of rent, rolls has sometimes been doubted and they are not always subject to uniform standards, a law was introduced requiring every municipality with more than 50,000 inhabitants to maintain a rent roll as of January 1, 2023, and a qualified rent roll as of 2024. Check with your city or municipality to see if a qualified rent index exists. If it is less than 2 years old, landlords must refer to it when setting the rents. The following cases are exempt from the rent break:
- The previous rent was already above the upper limit. Then the rent may be set up to the amount of the previous rent
- Modernization of the apartment, without a previous modernization rent increase
- Apartments that were used for the first time after 1.10.2014
- It is the first rent after comprehensive modernization
Regardless of legal requirements, there are other factors you should consider when determining the rent. First of all, to whom do you want to rent? Do you want to maximize rental income or do you value other points as well? For example, it is important to many landlords that the landlords make a reliable impression, that you also get along with the tenant on a human level, as well as social aspects. In order to get a good impression of the usual market prices, you can also consult a rent index or research comparable apartments and their rent levels.
Should I rent a flat as a shared flat (WG)?
Another decision you need to make is about who you want to rent to and if you are considering shared flats, in German called “WGs”. While most WGs are still student-run, in the face of high real estate and rent prices, the shared flat model is also being used by other groups of people. There are some prejudices regarding student-shared flats, such as noise pollution or high fluctuation, but ultimately this always depends on the individual composition and lifestyle of the residents. So why should you as a landlord still consider allowing a shared flat? Do the math. You may be able to achieve a higher overall rent for an apartment with a shared flat. Whether a WG makes sense, of course, also depends on the nature of your apartment. The prerequisite is that the individual rooms are well separated from each other and insulated. You cannot rent out passage rooms as shared rooms.
How to increase the rent?
In addition to setting the current rent, it is also important to consider future rent increases. Now, a landlord cannot increase the rent arbitrarily. Instead, certain conditions must be met. The rent can be increased if
- the current rent is below the local comparative rent (§ 558 BGB)
- or an index-linked or graduated rental agreement has been agreed upon
- or rental property has been modernized.
There are a number of things to consider here and we cannot provide a complete overview. In general, the landlord must prove to the tenant that the rent increase up to the comparative rent is appropriate. For this purpose, the local rent index, a rent database, an expert opinion, or the cases of at least three comparable apartments in the municipality can be used. In addition, the landlord may not increase the rent by more than 20% within 3 years when adjusting to the local comparable rent (BGB § 558 (3)). Many cities and municipalities have lowered this so-called cap to 15%. The rent increase becomes effective at the end of the second month after the month when the tenant got notified. The tenant has to agree to the rent increase. If he doesn’t do so even if the landlord’s claim is justified, the landlord has to take legal action to enforce the rent increase.
With the index rent, regulated in BGB § 557b, the landlord can adjust the rent by the change in the price index determined by the Federal Statistical Office (Statistisches Bundesamt). The tenant must be notified of the change in text form. If the price index falls, the tenant can demand a corresponding reduction in the rent from the landlord. No cap applies here. With the agreement of a graduated rent, regulated in BGB § 557a, the rent is increased at regular intervals by fixed amounts. Here, the tenant does not have to be informed in advance and no cap applies. In the case of both index-linked and graduated rent, the rent may not be increased more than once a year.
How to find the perfect tenant?
You can start by thinking about who you would most like to rent to. However, you do not have to make this decision in advance; instead, you can let the tenant applications come to you and then decide. When making your choice, be aware that some groups have a particularly hard time finding housing and are sometimes disadvantaged. These include families, people with foreign-sounding names, LGTBQ, people with disabilities, young applicants, or people of older age. This list does not claim to be exhaustive.
How to market your flat with rental platforms
If you have decided against using a real estate agent, you will have to take care of marketing your property yourself. In many cities in Germany, landlords have no difficulty finding tenants. You can achieve the greatest reach by using digital platforms. Advertise your apartment on Hominext.com, for example. The process is simple and intuitive. Describe the apartment to be rented, upload a few attractive and representative pictures and enter the relevant key data. Thousands of users can then find your apartment using the search function. In addition, Hominext suggests rental requests from suitable rent seekers to you. You can contact interesting rent seekers immediately. Likewise, Hominext actively recommends your apartment to suitable rent seekers. Subsequently, you will receive a large number of inquiries from potential tenants from which you can select those you would like to get to know better. After all basic conditions have been clarified, a viewing usually follows, during which you can meet the candidate in person and he can get an exact picture of the apartment. Depending on the circumstances, this process can also take place virtually and digitally, for example, if the applicant is located far away. If possible, however, this process should take place in person. If you have found a candidate to whom you would like to rent the apartment, but for whatever reason, you are not completely convinced of his financial capabilities of paying the rent, ask if he can provide a rental guarantor to avoid possible defaults on your side. Once you have found a tenant candidate who meets your expectations, the next step is to check his financial reliability. Usually, the following documents are used for this purpose:
- Proof of income for the last 3 months
- If applicable, self-disclosure
- If applicable, a guarantee of rent from a third person
Your tenant can easily get the Schufa credit check digitally using Hominext. In it, you will find information on whether the candidate has always met his financial obligations in the past. Usually, landlords require a Schufa report that is not older than 3 months. For proof of income, request all documents to prove the whole income. The rent should not exceed 40% of the total net income of the household. If a guarantor is included in the contract, you will also need the documents for him/her to make sure that he/she can take over the payments in case of need.
How to set up a Rental Contract
A rental agreement should be documented in written form to clarify all agreements clearly and verifiably. A rental agreement typically contains
- A description of the leased property
- The amount of rent
- Any rent increases (see above)
- The deposit amount
- Operating costs
- Validity of the house rules
- Renovation obligations when moving out
In addition, there are various other things that are regulated in the rental agreement. Further information and provisions regarding the amount of rent have already been described in advance. The rent deposit may not exceed 3 cold rents. By the way, you will soon find digital rental agreements on Hominext. These were set up by a lawyer, help you avoid mistakes and can be quickly and intuitively adapted to your needs.
Ancillary Rental Costs/ Rental Utility Payments
There are a few things to consider when it comes to ancillary or utility costs. Some of the ancillary and utility costs can be handed over to the tenant. Costs are regulated in the legal operating cost regulation BetrKV § 2. The operating costs may only be passed on to the tenant if this is regulated in the rental agreement. Non-allocable ancillary costs can usually be recognized as income-related expenses for tax purposes.
Apportionable ancillary costs
- Property tax
- Water supply
- Warm water supply
- Passenger or freight elevators
- Building cleaning and vermin control
- Garden maintenance
- Chimney cleaning
- Property and liability insurance
- The costs fort he janitor
- Laundry costs
Non-apportionable ancillary costs
- Administration costs
- Costs for maintenance and repair
- Landlord’s bank fees
- Depreciation and reserves
- Other insurance costs
- Vacancy costs
- Real estate transfer tax
There are usually 2 options for the ancillary costs settlement. Either the service charges are calculated in the service charge advance payment or in a service charge flat rate.
Ancillary costs prepayment
With the prepayment of the ancillary cost, the costs of the previous year are simply distributed over 12 months. If the property has several tenants, the respective costs can be divided according to various methods, e.g. according to living space, consumption, residential unit, or the number of persons. If significant deviations are to be expected, the landlord can also adjust the amount of the prepayments. No later than 12 months after the end of the billing period, the landlord must prepare an ancillary costs statement and settle any differences by making an additional payment or by repaying the tenant. After the deadline, the landlord is no longer entitled to charge additional payments. A truism says that there is no ancillary costs statement that is free of errors. For this reason, and in order to save administrative effort, some tenants and landlords agree on an ancillary costs flat rate.
Ancillary costs flat rate
If tenant and landlord agree on a flat rate for ancillary costs, the tenant has compensated the landlord his share by paying the fixed flat rate. The landlord does not prepare an ancillary cost statement in which any discrepancies between lump-sum payments and actual service charges are offset. If the lump sum payments are not sufficient, this is the risk of the landlord. Conversely, the tenant cannot demand a refund if the lump sum paid exceeds the service charges. The lump sum payments can be adjusted in the future, provided this has been expressly agreed in the agreement. The amount of the lump sum for ancillary costs must be within reasonable limits and must not represent a rent overcharge.
What rights and duties have the tenant and landlord?
Tenancy law can be complex. We present you here a small overview of general rights and obligations of the tenant and the landlord. Often the rights of the tenant represent the obligations of the landlord and vice versa.
- Rent reduction for defects
- Reasonable keeping of pets
- Receiving visitors
- Maintenance of the building and pipes by the landlord
- Ask the landlord in case of conversion
- Ask the landlord in case of subletting
- Sufficient heating against mold or frost
- Report defects promptly
- Right of inspection
- The tenant must carry out minor repairs himself
- If applicable, hand over the apartment upon moving out in a comparable condition as when received
- Timely payment of rent
As described before, a tenant is only obliged to renovate if he/she received the apartment in renovated condition and if the renovation obligations were agreed upon in the rental agreement.
What to do if the tenant doesn’t pay the rent?
First of all, a conversation with the tenant should be sought. Perhaps a problem has arisen that can be solved quickly and easily. If this does not lead to a satisfactory result, write the first reminder in a friendly but legally binding manner. If this does not work, write the second reminder and send it by registered mail to make sure that the message arrives. If this measure also fails, the only remaining option is termination due to culpable, not insignificant breach of contractual obligations. Incidentally, in the event of termination without notice, a tenant can save himself up to 2 months after the legal validity of the eviction claim by making a grace period payment, whereby termination without notice by the landlord becomes invalid. In the case of an ordinary termination with the statutory 3-month notice period, a grace period payment is not possible. There are rent loss insurances you can consider to compensate for possible rent losses.
Termination by the Landlord
The choice of a reliable tenant is so important because it is very difficult for you as a landlord to terminate the housing relationship with a tenant. German law actually provides only 3 cases in which termination by the landlord is possible and legal:
- culpable and serious violation of the lease, for example, if the rent is regularly paid unpunctually, a significant rent loss has built up, harassment or insult to the landlord or other tenants, or the apartment is used for purposes not intended.
- the landlord declares the personal need for himself, family members, or members of his household. However, the personal need must actually exist and may not be pretextual. The notice of termination for personal use must be clearly described and the personal need must be comprehensible and permanent.
- the landlord is prevented from making reasonable economic use of the property, e.g. if a building in need of major renovation is more sensibly to be rebuilt and not core renovated. This exception does not include terminations for the purpose of increasing rent.
The times when you had to take care of the entire management manually are over. Instead, there are a variety of software solutions that support you in the management of rental properties. This can save you time and stress for possibly low costs. If you want to learn more about Digital Management with Hominext, click here