Selling a rented flat. Properly calculated.

A vacant flat is bought by someone who wants to move in. A rented flat is bought by someone who wants to run the numbers. Those are two different markets with two different prices – and the gap in Berlin is larger than almost anywhere else in Germany.

The reason is tenant protection: whoever buys a rented flat takes on the tenancy with all its terms (“sale does not break tenancy”). Notice for owner occupation is possible, but for converted flats in Berlin only after a ten-year lock-up, and rent can be adjusted only within the rent index and the cap. An investor therefore does not pay for the flat, but for the cash flow it produces.

In practice the price of a rented flat in Prenzlauer Berg is 20 to 35% below a comparable vacant one – the lower the rent and the older the contract, the larger the discount. With rent close to market and a recent, well-drafted tenancy it shrinks to 10 to 15%.

Investors think in multiples: purchase price divided by annual net cold rent. A multiple of 30 is about 3.3% gross rental yield. In good parts of Prenzlauer Berg multiples between 25 and 35 are currently paid, depending on:

• Passing rent versus the rent index. If rent is well below the locally comparable rent, there is room to increase – investors pay for that. If it is above (for example from before the rent brake), it is a risk for the buyer.
• The tenancy. Stepped or index-linked rent, waiver of notice, decorating clauses, deposit – a clean, current contract is money. Old contracts with invalid clauses cost a discount.
• The tenant. Payment history, length of occupation, the tenant’s age. No investor asks officially; every one factors it in unofficially.
• Service charge and reserve. A high service charge squeezes net yield; a well-filled maintenance reserve and agreed works reassure.
• Milieu protection. Large parts of Prenzlauer Berg have preservation ordinances. They make alterations and luxury modernisation harder, and converting rented into owner-occupied flats generally needs a permit in Berlin. For flats already split this changes little; for blocks of flats, a great deal.

Capital gains tax. Anyone who sells a rented flat at a profit within ten years of buying it pays tax on the gain at their personal income-tax rate – with Berlin’s value growth of recent years often a six-figure sum. The owner-occupation exception does not apply to rented flats. Check the purchase date in the contract, not the land register: the day of notarisation counts.

The three-property rule. Anyone who within five years sells more than three properties held for less than ten years is treated by the tax office as a commercial property dealer – with trade tax and tax on all gains. Anyone wanting to dispose of several flats therefore plans the sequence with their tax adviser.

Depreciation as a selling point. For the buyer a rented flat is attractive for tax: 2% (2.5% if built before 1925) of the building value each year as depreciation, plus interest and costs as income-related expenses. A good set of particulars runs those numbers – we do.

For you as seller after ten years: tax-free. The entire rise in value is yours. That is one reason many investors sell at exactly that point – and the date matters more than any market forecast.

The tenant does not have to consent to the sale, and does not have to be told in advance. We still recommend involving them early and openly – for two reasons: viewings only run smoothly with their co-operation, and they are sometimes the best buyer.

Viewings

The tenant must tolerate viewings to a reasonable extent – usual are appointments after a few days’ notice, at reasonable times, not daily. We agree fixed windows with the tenant (say two slots a week) and group interested parties there. Photos for the particulars need their consent; floor plan and building photos do not.

Right of first refusal

The tenant has a statutory right of first refusal only if the flat was first converted into ownership after they moved in and is now being sold for the first time. Flats already split before they moved in have none. If the right applies, the tenant receives the finished purchase contract and has two months to step in on the same terms. We clarify this on the land register in advance.

The tenant as buyer

For the tenant your flat is “vacant” – they do not have to move out. They can therefore pay the price of an unoccupied flat, often more than any investor. Before we market a rented flat we ask the tenant discreetly. In about one case in five that becomes a sale – at the best price, with no viewings and no portals.

Give notice in order to sell vacant? Owner occupation needs genuine owner occupation – a sham is a criminal offence and costs damages. A surrender agreement with a pay-off is legal, but in Berlin it only pays if the extra proceeds clearly exceed the pay-off. We will run the numbers honestly; often it does not pay.

Anyone selling a whole building or several flats has a different buyer pool: family offices, foundations, housing companies, wealthy private investors. These buyers do not want particulars, they want a data room – tenant list with contracts, service-charge accounts for the last three years, maintenance history, land-register and building-encumbrance extracts, energy certificates, as-built plans.

The process runs off market: we approach a limited number of vetted buyers directly, after a confidentiality agreement. Tenants and neighbours learn nothing until the contract is done. That protects the peace of the house and usually the price as well, because buyers are not waiting for a bidding process on a portal.

Berlin peculiarities include milieu protection and the conversion ban: in preservation areas splitting into flats is almost ruled out; buyers therefore underwrite purely on income. That knocks the price versus buildings outside those areas by several multiple points. The municipal right of first refusal, with which districts used to step into sales, has barely played a role since 2021 – the district can now only exercise it in cases of actual mismanagement.

We have placed residential and mixed-use buildings of up to 4,500 m² in Prenzlauer Berg with institutional investors. References we are happy to give on request, including contacts.

1. Analysis. Tenancy, rent, service charge, reserve, land register, declaration of division. From that come the multiple, the price range and possible levers before sale – for example a rent increase or cleaning up old clauses.
2. Strategy. Ask the tenant first? Approach investors from our files discreetly? Or go public? We agree it together and stick to it.
3. Paperwork. Investors check more than owner-occupiers. We assemble a complete data set before the first conversation – that shortens every sale by weeks.
4. Marketing. Targeted approach, grouped viewings agreed with the tenant, negotiation on the numbers.
5. Completion and handover. With transfer of the tenancy, transfer of the deposit and notice to tenant and managing agent. All documented.

The first step is an honest figure: what your flat brings rented, what it would bring vacant, what the path between costs. The estimate is free of charge.