Many financial and real estate experts are promoting tax savings by investing in new buildings. The tax savings result from a new rule called 5% degreesive depreciation.
Degressive depreciation allows investors to depreciate their property degressively by 5% instead of 2%. This results in big tax benefits for the investor in the initial years. This makes investing in new properties interesting.
We wanted to check if investing in new properties with 5% degressive depreciation is really worth it.
We tested three different scenarios.
Buying two well-maintained old 2-room apartments for €250k each vs one new build 2-room apartment for €500k.
Buying one modernized old 2-room apartment for €300k (€250k + €50k renovation) vs one new build 2-room apartment for €500k.
Buying two modernized 2-room apartments for €300k vs one new build 2-room apartment for €500k.
NOTE: You can try out even more scenarios. Our goal is to share the thought process.
We made the following assumptions while performing the calculations.
You get 100% mortgage with 4% interest + 1% repayment
Depreciation for old properties: 2%
Degressive depreciation for newly built property: 5%
Rent for the old well-maintained property: 1000€ per month
Rent for the newly built property: 1900€ per month.
Rent for the old modernized property: 1400€ per month
The buyer's gross annual income: €100k.
The buyer is married with no kids and falls under tax class 3.
Property appreciation: 2% annually
Rent increase: 5% every 3 years
To keep things simple, we assumed the following:
Maintenance costs are the same for both new and old apartments (which is clearly not the case)
You manage the property yourself
The mortgage structure stays the same for 20 years.
100% occupancy (which never happens)
No renovation costs in the first 20 years (In reality, you'll have to invest in the old property's renovation. However, you can then also increase the rent of the old property.)
Results
Scenarios 1 and 2: Investing in a new build makes more sense mathematically. The higher tax savings for high earners contributed to the win of "new build".
Scenario 3: Investing in two modernized properties makes more sense mathematically. Higher combined rent led to the win of "two modernized properties".
You can check the detailed calculations here. We used Claude to do these calculations.
Investing in a new build is a big investment (at least €500k). This increases your profit but also the risk.
Here are the main risks:
High monthly installments: If you took a €500,000 loan on 4% interest and 1% repayment, your monthly installment will be €2,080. If your property remains empty, you must be able to pay this monthly installment out of pocket.
High rent makes it difficult to find tenants: Think about the following
Who is your target customer?
Would your target customer be willing to pay €1900-€2100 per month for a 2-room apartment?
Would it be easier to find a good tenant?
How many people can afford such high rents?
Your property is the product that you want to sell (rent) to your customer (tenant). If someone offers a better or similar product at a lower price, will your customers stay with you?
Lack of diversification: Investing in one asset vs. two assets. Suppose you bought two properties. If the tenant of one property stops paying the rent, you'll still get the rent from the second property. Of course, both tenants can also stop paying rent. But the probability of it happening simultaneously is lower.
Which approach is better?
Both options, buying a new build and two modernized apartments, are good. It depends on you and how much time you are willing to invest.
We find the following approach to be the best.
Buy a well-maintained two-room apartment and modernize it. Keep your total budget at €300,000.
Rent out the property.
After a couple of years (2 to 3 years), buy another two-room apartment and modernize. Keep the budget of €300k.
It has the following benefits:
When you bought your first apartment, your monthly instalment will be around €1,150. It's more manageable than €2,100 if you can't find a tenant.
Buying a property after three years gives you time to build up your reserves, learn from your mistakes, and build on top of your existing asset.
However, taking this approach requires a lot of work and effort on your part. Not everyone has the time and motivation to do that.
Moreover, it has the following risks:
You must be able to judge the renovation costs before buying the property.
Renovations usually exceed your planned budget.
When buying an apartment, there are certain renovations (such as windows and roof insulation) that you have no control over. This may add another risk for high costs down the line.
This is when opting for the other option (new build) makes sense.
The reason is that if you consult a good real estate expert, they will vet the properties and hand-hold you through the buying process. Some even help you find tenants and apply for tax benefits.
Fun scenario: 5% + 5% rule
In this scenario, you can apply 5% depressive depreciation plus 5% special depreciation in the first 4 years. This means you can depreciate your property by 10% in the first 4 years.
This results in huge tax benefits.
However, buying two modernized properties still wins in the long run.
You can check the complete calculations here.
Scenario 4.1: Rent for modernized properties is €1,400 per month.
Scenario 4.2: Rent for modernized properties is €1,200 per month.
Side note: We know it's a lot of calculations and assumptions. However, investing in real estate means working with large sums and extensive calculations.
Currently, the EU and India trade over €180 billion in goods and services each year.
The EU exported 75 billion euros in goods (€48.8bn) and services (€26bn) in 2024.
It supports around 800,000 jobs in the EU.
The EU expects this agreement to increase its annual goods exports to India by 107.6% by 2032. This means the trade between the two partners will more than double within six years.
Experts project €4 billion in annual savings in customs duties for the EU goods exports.
The deal will eliminate or reduce the tariffs on 96.6% of EU goods exports.
Summary of tariff cuts
EU spirits: Up to 150% to 40%
Wine: From 150% to 20% (premium range) and 30% (medium range).
EU fruit juices and non‑alcoholic beer: Up to 55% to 0%
Olive oil, margarine, and other vegetable oils: Up to 45% to 0%
Processed foods (breads, pastries, biscuits, pasta, chocolate, pet food): Up to 50% to 0%
Machinery and electrical equipment: Up to 44% to 0% for almost all products (exports €16.3 billion in 2024).
Aircraft and spacecraft: Up to 11% to 0% for almost all products (exports €6.4 billion in 2024).
Optical, medical, and surgical equipment: Up to 27.5% to 0% for 90% of products (exports €3.4 billion in 2024).
Plastics: Up to 16.5% to 0% for almost all products (exports €2.2 billion in 2024).
Chemicals: Up to 22% to 0% for almost all products (exports €3.2 billion in 2024).
Motor vehicles: From 110% to 10% within a tariff rate quota of 250,000 vehicles (exports €1.6 billion in 2024)
The deal didn't happen overnight.
The trade negotiations initially began in 2007. But they were suspended in 2013. The new negotiations began in 2022 and concluded successfully in January 2026.
Do you think this deal will benefit the EU in the long term?
Buy a 400g Alpro yogurt alternative by March 31 and upload your receipt here by April 17 to get a refund of up to €2.29.
Buy one pack of Bahlsen Hazelnut Cream & Choc biscuits and upload your receipt + a photo of the product here by March 29 to get your money back.
Quick overview of important things
Crypto exchanges to report user data and transactions
As per the EU directive DAC8, Cryptocurrency exchanges are required to report user data and transactions to the tax authorities.
The following information will be shared: your personal details, deposits, withdrawals, and all your buys, sells, and swaps.
You must provide your tax ID number and the country where you are liable for tax to your cryptocurrency exchange. Failing to do so will result in trading restrictions and fines of up to €50,000.
Suppose a tenant pays €460 net cold rent, but demands €962 from the subtenant. This is not allowed anymore. Here are the implications of the new ruling (Az. VIII ZR 228/23, January 28, 2026).
Normally you have the right to sublet your property. We have explained your rights here. However, you have no right to sublet for profit. This means, your landlord can refuse consent.
Landlord can now terminate your contract if you continue the unauthorized subletting for profit. In some cases, eviction without notice is also permissible.
No more Airbnb-style subletting. Repeated short-term rentals for profit is cosidered commercial and not standard residential use.
You can still sublet. However, the subrent must not exceed the main tenant's rent plus allowable pass-through costs.
55% of Germany’s total GRDP comes from 3 federal states?
Gross Regional Domestic Product (GRDP) measures the total economic output generated within a specific region over a given period, usually one year. It is the regional equivalent of Gross Domestic Product (GDP) at the national level.
Reviews mean everything for online platforms, and GermanPedia is no different.
You can help us compete in Google search by leaving reviews on Google. These really (yes, really) help and are a vital part of Google's discovery and recommendation algorithms.
So, if you find what we are doing helpful, please leave a simple star rating or a short review on Google. This will help more users discover GermanPedia.
Panama’s Supreme Court has annulled long-standing port concessions held by Hong Kong-based CK Hutchison on both ends of the Panama Canal. It declared them unconstitutional. [1]
Rewe is recalling its Ja! brand salami because E. coli bacteria were detected. You can return the product for a refund.[2]
Community Shoutouts! 📣
LegalWeg* offers to file an Untätigkeitsklag for FREE if your case qualifies.
KS/Auxilia* legal insurance is offering a 15€ Amazon Voucher.
Perplexity is offering a 12-month Pro subscription for free. You can sign up here.
Google Gemini is offering a 12-month free Pro subscription to students. You can get it here.
Join our Facebook community. Ask questions, share experiences, join webinars, and stay updated about your rights, laws, and latest changes in real time.
Highlights explained
Official government sources.
Independent sources that don't earn from advertisements
Trusted sources that earn via advertisements or affiliate marketing.
The information provided here is based on our own experience and in-depth research. The content might be inaccurate. It should not be considered financial, insurance, tax, legal, or any kind of advice.
We are not certified brokers or consultants. Always do your research and contact certified professionals before making any decision. GermanPedia disclaims any and all liability for damages or losses arising from the use of this document.
We finance our extensive work via affiliate links. Thus, some or all of the links in the post might be affiliate links.
We get money if you click on such a link or conclude a contract with the provider without costing you a cent extra.
Investment involves risk of losing money.
All links marked with the "*" are affiliate links.
New here? Check out GermanPediaDid someone forward you this? Subscribe to this newsletter. Important changes Several dog snacks from Dog’s Nature GmbH are being recalled due to Salmonella contamination. Kaufland and Norma sell these dog snacks. If you bought one recently, you can return it even without a receipt. [1] Germany reintroduced the EV subsidy. If your family income is less than 90,000€ and you have children, you are eligible for a subsidy of up to €6,000. You can learn more about EV...
New here? Check out GermanPediaDid someone forward you this? Subscribe to this newsletter. Important changes European wholesale gas prices jumped about 20% within a week. This is due to cold weather, rapidly declining storage levels, and new geopolitical risks around Iran and global LNG flows. You may expect a big heating bill if the prices continue to rise. [1] Public health insurance companies announced the premium increases on 23 Dec 2025. We have updated our guide and listed the premiums...
New here? Check out GermanPediaDid someone forward you this? Subscribe to this newsletter. Important changes Public health insurance companies announced the premium increases on 23 Dec 2025. We have updated our guide and listed the premiums each public insurer will charge in 2026 here. You can also use our calculator to check your 2026 costs and the savings potential by switching to a more affordable provider. More on it later. We summarized all changes that will affect you from Jan 2026 in...
