Apartment Building Finance: Key Metrics and Structure

The four key figures on which each MFH financing depends

Practice tip: Assess the property as a bank would before approaching lenders. Conservatively calculating the target property’s DSCR and LTV puts you in a stronger negotiating position and helps identify an excessive purchase price before completion.

equity leverage: from the first apartment building to the portfolio

Normal market requires the financing of a apartment building 20–35 % equity plus ancillary costs. Those who want to grow quickly reach their limits – and use the levers of the professionals: The Additional borrowing existing properties transforms value increase and repayment into equity for the next purchase; Mezzanine capital replace own funds in special situations which: Bridge finance Secures time-critical purchases.

This creates the portfolio cycle: buy, optimize (rental, cost, energy), re-evaluate, activate reserve, buy again. Each round requires a sustainable financing structure – conservative enough for market fluctuations, flexible enough for the next step. Exactly this balance we structure with you, from the individual property to the Portfolio financing.

For the next purchase, we consider capital requirements, ongoing debt service and liquidity reserves in connection. And we support them in this. Build your real estate portfolio step by step.

Financing apartment building: Private person, GmbH or family pool?

The question in which legal structure a apartment building is financed and held affects the financing as well as the tax burden – and it should be decided before the purchase, not afterwards. Because a later change of structure often triggers real estate transfer tax and speculative tax and can break the existing financing.

Buying as a private person is the easiest way: after ten years of holding, the capital gain is tax-free, the financing is uncomplicated, and rental income is taxed at the personal tax rate. For individual properties and long-term holders, this is often optimal. The vermögensverwaltende GmbH (also “Immobilien-GmbH”) becomes interesting as soon as several properties and ongoing purchases come into play: rental income is then only charged with around 15 % corporate tax, as long as the GmbH operates exclusively in asset management – which significantly increases the reinvestment power. The price: no tax exemption after ten years and higher administrative expenses.

For financing, the structure has concrete consequences. Banks rate the GmbH differently than the private person – they check the company balance sheet, often demand personal guarantees from the shareholders and partly calculate other leverages. The family pool, in turn, in which relatives are involved, serves the anticipated succession, but complicates the financing by several borrowers. There is no overall best solution – it depends on the number of properties, investment horizon, family situation and growth plans. We structure the financing according to the chosen legal form and point out at an early stage the points that you should clarify with your tax consultant before the purchase contract is signed.