Vacation homes, especially on the North Sea or Baltic Sea coast, are currently in high demand among investors. And this must be taken literally, because prices have risen significantly in recent years due to high demand. Financing a vacation home is a topic in itself, because not all banks play along with it.
The acquisition and financing of vacation apartments or vacation homes is not rocket science, but there are a few peculiarities that should be considered in the process.
Many vacation homes on the North Sea and Baltic Sea are not real vacation homes!
Many apartments and houses that are rented out as vacation properties are located in a normal residential area. This basically rules out renting out the property as a vacation home. In the past, many offices and authorities have not looked so closely and have tacitly tolerated vacation rentals. But in times of scarce supply of regular rental housing this has changed. In the meantime the letting of "normal" Apartments as vacation homes are no longer accepted by municipalities and action is taken against them. By the way, there is no grandfathering.
A look at the development plan shows whether your desired property can be used as a vacation home. But you can also get information directly from the municipalities and building authorities on site.
The thing with the value added tax!
The renting of vacation apartments is in principle value-added or. subject to VAT (reduced tax rate of 7%; as of 06/2021). However, the regulations for small businesses apply. If the turnover is below a certain limit, the sales tax does not apply (in 2021 the limit for small businesses is 22.000 euros).
It can be worthwhile, however, to become liable to sales tax, because under certain conditions you can then "pull" the sales tax for the building portion when buying the vacation home (i.e. have the sales tax refunded by the tax office). It sounds tempting, but it also has some disadvantages (u.a. Mandatory advance sales tax reporting and owner-occupancy restrictions).
Tip: discuss the whole issue of "renting a vacation home" be sure to consult with an experienced tax advisor or. Tax consultant. This is how you can find out with legal certainty which of the various options is right for you. Researching on the internet does not help too much, because much of the information you find there is hopelessly outdated!
Do not overstate income from vacation rentals!
Already "before Corona we have recommended to our customers to calculate very conservatively with the possible rental income. Only very few vacation homes are rented out all year round and the running costs for administration, renting, maintenance and cleaning of the vacation home should not be underestimated. Consider also that your vacation home is fully furnished and just the inventory must be replaced more frequently.
Generally, when financing a vacation property, you should calculate in such a way that you do not have to rely on income from rentals. Also, most banks apply the income from the vacation rental only limited and assume that the financing burden is bearable even without rental income.
Which options there are for financing depends above all on the exact location and type of the vacation property. We cooperate with many regional and national credit institutions in this area. This allows us u.a. to achieve a reasonable valuation of the property and if necessary. Also (in the case of new buildings) to prefinance the sales tax.
We are happy to support you in financing your vacation property. If you would like us to advise you or if you would like a personal financing offer, simply contact us at. Feel free to use our online form for a funding request.