Looking for a stable capital investment away from volatile financial markets? An investment in land offers long-term security and significant opportunities for appreciation. Discover how you can achieve solid returns with the right strategy and informed data.
Chat with ImmoGPT for free now.
With access to Google, BORIS, and Deep Research.
The topic briefly and concisely
An investment property offers long-term value stability and return opportunities, which can be maximised through strategic site selection and utilisation planning.
Property prices in Germany vary greatly by region (e.g., Munich >€2,900/m², rural <€100/m²), so a thorough market analysis is crucial.
Risk management, accurate valuation, and considering tax aspects (e.g., the 10-year period for tax-free sales) are keys to success.
An investment property offers an attractive alternative to traditional forms of investment, especially in times of economic uncertainty. Land is considered a stable asset that is less susceptible to price fluctuations compared to stocks. With a well-thought-out strategy, you can not only benefit from potential increases in value but also generate ongoing income, for example, by leasing or renting out sections for advertising installations. This article explores how to make optimal use of the opportunities presented by land investment and what factors are crucial for a successful investment.
Quantifying the return potential of properties
The yield expectations for an investment property are diverse and heavily dependent on location and type of use. While single-family homes often achieve returns of only 2 to 3.5%, investments in yield properties and land can reach 5 to 6%. Although undeveloped land does not generate immediate income, it offers long-term security due to the scarcity of land. A significant advantage is the absence of maintenance costs, which can quickly amount to 1% of the market value per year in developed properties. Careful selection, for example, in proximity to metropolitan areas, can significantly influence the value appreciation potential. A thorough market analysis is therefore essential. Considering the standard land value, which reflects the average purchase prices of a region, serves as an initial guide here. For example, the average price per square metre for land in Germany in the second quarter of 2023 was approximately 262.49 euros. The long-term perspective and potential for value appreciation are key aspects that make an investment property attractive.
Site Analysis: Identifying the Number 1 Value Driver
The location is the decisive factor for the success of your investment property; it significantly influences the price and the potential for appreciation. In metropolitan areas like Munich, the prices for building land can exceed €2,900/m², while in rural areas of Saxony, they can be below €100/m². Good infrastructure connections, proximity to educational institutions, and the purchasing power of the residents are important value drivers. Even within cities, prices vary greatly; Hamburg has some of the highest land prices, with an average of €1,099.91/m², followed by Bavaria with €344.39/m². It is therefore important to analyse not only the macro location (region, city) but also the micro location (immediate surroundings) carefully. A professional valuation report can provide clarity here. Forecasts for 2025 indicate a possible stabilisation of prices; however, in the long term, an annual price increase of 1-2% is expected until 2035. This price dynamic underscores the necessity of careful site selection.
Optimising Usage Strategies for Your Investment Property
Once you have found the suitable investment property, various utilisation strategies for generating income become available. One option is renting or leasing the land, which can ensure steady income, especially in attractive locations. Companies often pay higher prices for office spaces close to the city. Another possibility is dividing larger plots (from around 2,000 m²) into smaller parcels (from around 500 m²) for sale, as smaller units often achieve higher square metre prices. Even renting out areas for advertising installations can generate additional income, with advertising companies often covering the construction costs. For a detailed plan of your investment strategies, you should consider the following points:
Examination of buildability and the land use plan.
Analysis of demand for rental or purchase properties in the area.
Calculation of potential rental income or sales proceeds.
Consideration of development costs, which can range between €7,000 and €10,000.
Long-term development prospects of the location.
The flexibility in usage allows you to adjust your investment strategy according to market changes. A well-thought-out utilisation plan is key to maximising the return on your property's investment.
Risk Management: Avoiding Potential Pitfalls in Property Investments
Every investment property comes with both opportunities and risks that need to be managed. An underestimated risk with undeveloped land is the duty of care; owners are liable for dangers emanating from their land, such as rotten trees or unsecured pits. A homeowners' and landowners' liability insurance is essential here. Other risks include a declining market demand, unfavourable environmental development or legal obstacles. With land slated for development, there is uncertainty whether it will actually be designated as building land; this is often a speculative investment. Development costs can also pose a risk if not precisely calculated in advance. Therefore, a comprehensive due diligence assessment and a risk minimisation strategy are crucial. This includes:
Obtaining a geotechnical report to examine the soil condition and potential contamination.
Checking the land register for registered encumbrances or third-party rights.
Analysing the development plan and clarifying building possibilities with the local council.
Gathering information about planned infrastructure projects in the vicinity.
Hedging against interest rate fluctuations in external financing through long-term interest rate ties.
A careful risk analysis protects your capital and ensures the long-term success of your investment. The complexity of sales decisions often requires data-driven recommendations, like those provided by Auctoa with ImmoGPT.
Valuation: Determining the fair price for your investment property
The correct valuation is a crucial step before buying or selling an investment property. The standard land value, determined by appraisal committees and indicating average location values per square metre, serves as an initial guide. However, for precise evaluation, specific methods like the comparative value method, which uses actual selling prices of similar properties, are applied. The formula Land Value = Standard Land Value (€/m²) x Property Area (m²) is an important calculation factor. Factors such as location, size, layout, degree of development, and buildability significantly influence the value. A developed property is generally more expensive but offers more security regarding buildability. Our valuation tools for investors can help you gain an initial assessment. For a detailed and impartial evaluation that goes beyond general market data, the expertise of Auctoa and our ImmoGPT chat is a valuable resource. This is particularly important, as the seller ultimately sets the price themselves, and the standard land value is not binding. An accurate valuation protects you from excessive purchase prices and forms the basis for successful negotiations.
Tax aspects: Optimising the tax burden on property investments
The tax treatment plays a significant role in a property investment and can greatly influence the net return. When purchasing, land transfer tax is incurred, with the rate varying by federal state – for example, between 3.5% in Bavaria and 6.5% in North Rhine-Westphalia. Profits from the sale of properties can be tax-free for private individuals after a holding period of ten years. This is a significant advantage over other investment classes. Ongoing costs such as property tax must be paid annually. Income from renting and leasing is subject to income tax, with deductible expenses such as loan interest or depreciation. It is advisable to inform oneself about tax optimisation options at an early stage. The following tax aspects are particularly relevant:
Land transfer tax: A one-time tax upon purchase, with the amount depending on the federal state (e.g. 3.5% - 6.5% of the purchase price).
Property tax: A municipal tax due annually.
Income tax: On income from renting and leasing, minus deductible expenses.
Speculation tax: Generally does not apply to sales after a 10-year holding period for private individuals.
VAT: May become relevant in commercial property transactions; sales are usually exempt, but an option to apply VAT (19%) is sometimes possible. [-2--]
Professional tax advice is essential to utilise all advantages and avoid disadvantages. The complexity of the matter requires an individual assessment of each investment.
investment-grundstuck
The long-term value development is a key reason for investing in property land. Historically, land prices in Germany have risen significantly; from an average of €134/m² in 2013 to over €254/m² approximately 10 years later, representing an increase of almost 90%. Although stabilization is expected for 2025, experts forecast annual price increases of 1-2% up to 2035 in the long term. This trend is driven by factors such as the high demand for housing, historically low building interest rates, and Germany's attractiveness to international investors. To optimally benefit from this future value development, a strategic approach is important. This includes selecting plots in regions with growth potential, such as the outskirts of metropolises. Converting farmland into building land can also bring significant value increases but involves uncertainties and effort. An Auctoa evaluation can help you accurately assess the value increase potential of your property. The limited availability of land supports the assumption of generally increasing value development. This makes properties a solid pillar in wealth building.
Conclusion: Your Path to Successful Investment Property with Auctoa
Is a plot of land a good investment?
Yes, a plot of land can be a very good investment. It offers protection against inflation, potential for value appreciation, and the opportunity to generate income through leasing or renting. The limited availability of land contributes to its value stability.
What should I consider when selecting an investment plot?
Pay special attention to the location, the development plan, the infrastructure, the soil quality, and the development potential of the region. Thorough due diligence is essential.
Can I make money with undeveloped land?
Yes, you can make money even with undeveloped land. Long-term through appreciation and sale, or more quickly by leasing (e.g., for agriculture, parking lots) or renting partial areas for advertising installations.
How is the value of a plot determined?
The value of a plot is determined by various factors, including location, size, shape, buildability, and level of development. Common methods include the comparative value method and orientation towards the standard land value.
What tax advantages exist with an investment plot?
A significant advantage is the potential tax exemption of capital gains after a holding period of ten years for private individuals. Additionally, expenses related to leasing and renting can be deducted to reduce taxes.
How can Auctoa assist me with my investment plot?
Auctoa offers you AI-supported property evaluations and strategic advice as a digital companion. Our ImmoGPT-Chat provides you with quick, data-driven answers to make informed decisions about your plot investment.
Additional useful links
The Federal Statistical Office (Destatis) offers publications on purchase values and building land, providing important insights into price developments.
Current tables on house and building land prices can also be found at the Federal Statistical Office (Destatis).
The German Bundestag provides a report on land policy instruments that highlights the legal framework.
The official land value information system BORIS offers official land values for the whole of Germany for initial orientation.
The Deutsche Bundesbank provides an indicator system for the residential real estate market, summarising key market data.
A similar indicator system for the commercial real estate market can also be found at the Deutsche Bundesbank.
The Leibniz Institute for Ecological Urban and Regional Development (IOER) publishes survey results on building land, offering valuable insights into market dynamics.
The German Real Estate Association (IVD) provides a real estate price index that sheds light on current market trends and influencing factors.
FAQ
Is a property a good investment?
Yes, a property can be a very good investment. It offers protection against inflation, potential for value appreciation, and the opportunity to generate income through renting or leasing. The limited availability of land contributes to value stability.
What should I consider when choosing an investment property?
Pay special attention to the location, the development plan, the infrastructure, the soil quality, and the development potential of the region. Thorough due diligence is essential.
Can I make money with an undeveloped property?
Yes, you can also make money with an undeveloped plot of land. In the long term through appreciation and sale, or in the short term through leasing (e.g. for agriculture, parking spaces) or renting out sections for advertising installations.
How is the value of a property determined?
The value of a property is determined by various factors, including location, size, layout, buildability, and development status. Common methods are the comparative value method and orientation based on the standard land value.
What tax advantages are there for investing in a property?
A significant advantage is the potential tax exemption on capital gains after a holding period of ten years for private individuals. Additionally, when renting and leasing, advertising expenses can be claimed to reduce taxes.
How can Auctoa assist me with my investment property?
Auctoa offers you AI-supported property valuations and strategic consultancy as your digital companion. Our ImmoGPT-Chat provides you with quick, data-driven answers to make informed decisions for your property investment.
