Inheritance Manager
Real Estate Legal Information
Inherited apartment building: sell or keep decision aid
Inheriting a multi-family house presents you with a financial turning point. Is it a blessing or a complex burden? This guide offers you rational, data-driven assistance for your decision.
With access to Google, BORIS, and Deep Research.
An objective property valuation is the essential foundation for any rational decision, whether you choose to sell or keep an inherited multi-family house.
The ongoing costs and administrative burden of renting are often underestimated by up to 30%; only the net yield counts.
Tax aspects such as the 10-year speculation period and inheritance tax allowances can have a decisive impact on the financial outcome.
The inheritance of a multi-family house is a profound event that poses significant financial uncertainties, alongside emotional aspects. Many heirs feel overwhelmed by the complexity of the decision: Should the property be sold for immediate liquidity or retained for long-term yields? This choice has financial implications that are felt over decades. This article provides a structured framework to objectively assess both options and consider all relevant factors, from rental yields to tax burdens and legal renovation obligations.
Summary
Objective evaluation is crucial: A neutral, data-driven valuation is the foundation for any rational decision and guards against emotional misjudgments.
Conduct a cost-benefit analysis: Compare the potential rental income and value appreciation with the ongoing costs, management efforts, and tax liabilities.
Observe tax deadlines: The ten-year speculation period and personal allowances in inheritance tax are often the key financial levers.
Check legal obligations: The Building Energy Act (GEG) may enforce renovations upon change of ownership, significantly reducing returns.
Step 1: Establish an objective data foundation
The decision to sell or keep an inherited multifamily house begins with a fundamental question: What is the real value of the property today? Emotional attachments to a family legacy can cloud judgement and lead to misestimations of over 20%. A professional, AI-supported valuation of your inherited property provides you with a neutral market value. This figure is the anchor point for all further calculations.
In addition to the pure market value, a technical assessment is essential. Examine the condition of the roof, facade, heating system, and pipelines. An undiscovered backlog of renovations can quickly incur costs exceeding 50,000 euros and nullify the profitability of renting. Gain clarity on the energetic condition, as this significantly determines future legal requirements. Only with these hard facts can you seriously weigh the two scenarios – selling or keeping – against each other.
Owning an apartment building promises steady rental income and protection against inflation through tangible assets. In many German cities, the gross rental yields for residential properties are between 3% and 5%. However, the gross yield alone is misleading. For a realistic calculation, you need to determine the net yield.
Calculate the Net Yield Accurately
The net yield takes into account all costs that cannot be passed on to the tenants. Many owners underestimate these non-recoverable costs by up to 40%. Therefore, an accurate calculation is crucial. You need to deduct the following items from the annual cold rents:
Maintenance reserve: Experts recommend setting aside at least 1% of the building's value annually or a flat rate of €11.50 per square metre for older buildings.
Administrative costs: Budget between €250 and €400 per residential unit per year for professional property management.
Rental loss risk: Conservatively estimate 2% to 4% of the annual cold rent to cushion against vacancies or payment defaults.
Costs for bank accounts and other fees.
You will only get a realistic picture of your potential income after deducting these items. To simplify, use an online rental yield calculator. This analysis shows whether renting actually generates the desired cash flow or becomes a subsidised business.
The sale of an inherited multi-family house offers clear advantages: you receive immediate high liquidity and free yourself from any responsibility for management and maintenance. You can then invest this capital in a diversified manner or use it for other life goals. Selling is often the preferred solution when an estate community needs to be dissolved quickly.
Understand the tax implications
Two types of taxes are crucial in the sale: inheritance tax and capital gains tax. Inheritance tax applies regardless of whether you keep or sell the property. The amount depends on your degree of kinship and the associated allowances. For children, the allowance is, for example, 400,000 euros per parent.
Capital gains tax is the most important factor in the decision to sell. It applies if less than ten years have passed between the acquisition by the deceased and the sale by you. The profit from the sale is then taxed at your personal income tax rate, which can significantly reduce the return. The ten-year period starts with the date of the deceased's purchase contract. Check this date carefully before you create a checklist for the sale.
If the community of heirs consists of several people, the decision regarding the multi-family house becomes more complex. Different life situations and financial goals often lead to conflicts. While one heir may rely on quick liquidity from the sale, another might wish to keep the property as a long-term retirement investment. Such deadlocks can block the value of the inheritance for years.
In a community of heirs, a neutral, fact-based basis for discussion is even more important. An appraisal of the property recognized by all parties prevents disputes over the value. It creates a common basis for negotiations. Often, selling is the only solution that meets all interests, as the proceeds are clearly quantifiable and easy to divide. A structured process, as described in a guide to selling from a community of heirs, is essential here. If one heir is to pay off the others, the value must also be undisputed to avoid future conflicts.
A key cost factor that is often overlooked are the statutory renovation obligations. The Building Energy Act (GEG) stipulates certain energy modernisations upon a change of ownership - this includes inheritance. These must be carried out within two years of registration in the land register. Failure to comply can result in fines of up to 50,000 euros.
The most common mandatory measures include:
Insulation of the top floor ceiling or the roof: The heat transfer coefficient (U-value) must not exceed 0.24 W/(m²·K).
Replacement of old boilers: Constant temperature boilers that are more than 30 years old must be replaced.
Insulation of heating and hot water pipes in unheated rooms.
These measures can incur costs ranging from 20,000 to over 60,000 euros depending on the scope, thereby negatively impacting the rental yield for years. A thorough assessment of the renovation needs is therefore a critical step in your decision-making process.
The question “Sell or retain inherited apartment building?” cannot be answered in a blanket manner. An emotional decision is almost always the wrong one. Consider the property for what it is: a significant asset that requires strategic planning. Conduct a cool, rational analysis that takes into account all the factors mentioned here.
Weigh the potential net return and value development against the risks such as renovation obligations, rental losses, and management effort. Compare this scenario with the immediate liquidity and opportunities that proceeds from a sale can offer. The first step towards a wise decision is always a neutral, data-driven assessment. If you are uncertain, our ImmoGPT Chat can provide initial guidance or you can directly request a free evaluation. Make the choice that secures your wealth for the future.
The Federal Statistical Office (Destatis) offers comprehensive information on construction prices and the property price index in Germany.
The Federal Ministry of Finance provides detailed information on inheritance and gift tax in Germany.
Further statistics and information on housing in Germany can be found at the Federal Statistical Office (Destatis).
The Deutsche Bundesbank publishes financial stability reports that provide insights into the stability of the financial system.
The KfW Banking Group (KfW Research) offers relevant information on residential construction.
An analysis of declining purchase prices in the housing market in 2024 can be found at the DIW (German Institute for Economic Research).
The Institute of the German Economy Cologne (IW Cologne) provides a dedicated page with comprehensive information on the real estate market.
The Association of German Pfandbrief Banks (vdp) provides information on the VDP Property Price Index, which reflects the development of property prices in Germany.
What is the first step if I have inherited a multi-family house?
The most important initial step is to obtain an impartial, professional property valuation. This provides an objective data basis for all subsequent decisions and is vital in communities of heirs to avoid conflicts.
What role does the Building Energy Act (GEG) play in my decision?
The GEG plays a crucial role. In the event of a change of ownership through inheritance, you may be obliged to carry out costly energy renovations (e.g., roof insulation, heating replacement) within two years. These costs must be included in the profitability calculation of the "keeping" scenario.
What happens if we, as co-heirs, cannot reach an agreement?
If the co-heirs cannot agree, selling is often the only solution to avoid a partition auction. The proceeds from the sale can be easily divided. A neutral valuation by a third party, such as Auctoa, can help find a solution acceptable to everyone.
How do I calculate the actual return if I keep the house?
You need to calculate the net return. Deduct all non-apportionable costs from the annual net cold rent. These include the maintenance reserve (approximately 1-1.5% of the property value p.a.), administrative costs, and a buffer for rental defaults (approximately 2-4% of the rent).
Can Auctoa assist me in the decision-making process?
Yes. Auctoa offers an AI-supported, neutral property valuation that provides you with an objective basis. Our ImmoGPT chat can also clarify initial queries and help you structure the advantages and disadvantages of both options – selling or keeping – for your specific situation.
Is selling always the easier solution?
Selling is often simpler to execute as it draws a clear line and provides immediate liquidity. However, it is not always the financially better option, especially if the speculation period has not yet expired or the long-term rental yield after deducting all costs is very attractive.
