Tailor-made financing for listed houses

You are interested in buying a listed property? Especially in times when the supply of existing properties is limited, properties with an increased need for renovation are becoming a focus of interest. On the other hand, listed houses are also a pure affair of the heart. And less a purely rational decision based on asset accumulation. One can count on some tax advantages, on the other hand one knows also around the impassibilities with a general reorganization. You have to calculate coolly and inform yourself comprehensively before deciding to buy a listed house. Elaborate refurbishments, constant consultations with the Office for the Protection of Historical Monuments, strict requirements and financing costs that are difficult to plan in advance. This makes the purchase and renovation of a listed property exciting.

The allure of listed homes.

In the run-up to the outbreak, it is imperative to obtain comprehensive information. This already begins with the financing, since at the beginning the actual costs of the reorganization cannot be foreseen in spite of experts exactly. On the one hand, because one may encounter further construction defects during the refurbishment or because construction stages – and thus the disbursement dates of the total loan amount – may be postponed. In addition, the Office for the Protection of Historical Monuments can impose conditions that can only be carried out by specialist companies.

In addition, the jungle of subsidies has to be sifted through. Although there are many offers for monument protection subsidies from the public sector or the German Foundation for the Protection of Monuments, these are complicated and only formulated in a way that can be understood by experts, and are also difficult to find. In addition, owners are offered tax incentives with special depreciation options, which in turn, however, are linked to specifications. All in all: a longer-term planning phase awaits you.

Usually at the beginning there is a special attraction of an object. It is difficult to escape the charm of old houses with history.Despite all the love: the current building substance is the measure that decides the costs. Up to four-meter-high rooms or 1.5-meter-wide masonry, large staircases and custom window boxes. Or half-timbering filled with a mixture of straw and clay, which creates a special room atmosphere. Facades, gables and oriels that would hardly be compatible with today's development plans of the municipalities, but which are possible as listed buildings. Or the location: due to age often in prime locations – surrounded by similarly old stock. Others located off the beaten track on sometimes large plots of land that would not be allowed to be built on today.

And last but not least of course the individuality. Living in an old factory, a historic half-timbered house, a former elementary school or a disused lighthouse is unique. Nevertheless, listed houses still leave enough leeway, for example, to design interiors entirely according to one's own ideas – even if the building authority imposes tight specifications for facade design and building substance renovation that must be adhered to exactly.

Subsidies for listed houses.

The subsidies are always based on the type of renovation. If you want to renovate the property to make it more energy efficient, the KfW subsidy programs are a good option, offering subsidized loans and repayment subsidies that do not have to be repaid.

For the preservation of listed buildings, interesting subsidies can be found at the Stiftung Denkmalschutz and the Bund-Lander-Programm Stadtebaulicher Denkmalschutz. These grants do not have to be repaid. Unlike KfW's historic preservation grants, these are not clearly defined programs, but are decided individually for each building project. Interesting is always also the combinability of several promotions.

It is not possible to give a blanket answer to the amount of subsidies that will be granted. This is how the funding options differ from state to state. In addition, the type of measures planned as well as the historical value of the property determine the funding amount. Properties that are particularly worthy of protection receive a higher subsidy than those that are less worthy of protection. Finally, the owner's financial means also played a role.

Also important: the purchase must have taken place before a first step of construction. If you buy a building that has already been partially renovated, you may lose the government subsidies, or you may have to pay for the renovation. not be granted. That's why it's important to take a close look at the deadlines and conditions for subsidies. And that before signing a purchase contract.

Tax advantages for listed houses.

Tax depreciation options also depend on whether the listed building is then owner-occupied or rented after renovation. For example, landlords can write off up to 9% of the costs annually for tax purposes over 8 years. After that, another 4 years at 7% annually is possible. So landlords can actually deduct 100% of the total costs over that time period.

Owner-occupiers can deduct 90% of the total costs over a period of 10 years. Or to put it another way: over 10 years, owner-occupiers can claim 9% per year in each case for tax purposes. In both cases, you use depreciation, Absetzung fur Abnutzung (AfA), as it's called in "tax German". This initially sets 70 percent of the total purchase price, including remediation costs, as the basis for calculation.

For investors, the tax benefits are staggering. Depending on the renovation effort, depreciation of up to 70% over 12 years is possible. Of course, all historic preservation requirements and regulations must be met in the process.

Beware of black sheep

Unfortunately, there are always cases where a developer also wants to get something out of the tax benefits. As a result, some listed houses are not sold at the actual market price, but are considerably more expensive. Due to the tax advantages, this is not so noticeable to the buyer. It has happened that a developer has added 50% of the benefits to the market price and thus earned a lot of money.

It is therefore highly advisable to search the market extensively and always consult an expert who can assess both the asking price and the renovation requirements. If one buys an overpriced property, this can have various consequences, for example:

• The bank requires higher collateral than expected, since banks always calculate with the actual market value and not with the purchase price.
• In the event of a later sale, there is always a risk with listed properties that the full amount of the renovation costs plus the purchase price cannot be recovered.

Serious and flexible financing planning is particularly important

Not only that one knows at the time of the purchase the actual credit expenditure only rarely exactly. The duration of the renovation is also difficult to calculate. Required special trades are difficult to find and therefore difficult to plan in terms of scheduling. Financial planning must therefore be flexible, z. B.

• the interest-free disbursement period for the loan must be particularly long and flexible
• The combination of subsidies, equity and real estate financing building blocks must be coordinated
• Flexibility and adaptability of the financing concept are particularly important

So there is a lot of homework to do before signing the purchase agreement. And you need specialists to advise you. From the question of the condition of the building fabric to the estimation of the actual value of the listed property, via the researched specifications of the Office for the Protection of Historical Monuments for the renovation and the certainty of which trades and expenses will be incurred, to a – mostly combined and above all – particularly flexible construction financing plan – whoever has largely clarified these questions before signing the purchase agreement can make the right financing decisions together with an experienced construction financing advisor.

Seek professional support

If you are considering the purchase of a listed house, you should consult a professional adviser or consultant. Search for an expert. Especially with such properties, it is extremely important to plan well in advance. If, for example, government subsidies are included in the financing, you should be largely debt-free as soon as the subsidies stop flowing. A consultation with a reputable loan broker can quickly show you your financial framework.

In addition, knowledgeable construction financing advisors can help you determine the best financing plan – which can include subsidized loans, repayment subsidies, federal and state unsubsidized loans, and traditional construction financing loans. And you should also contact your tax advisor in any case, in order to be well informed about depreciation possibilities and tax advantages. Binding statements on tax models can only give the tax advisor – a construction financing expert but not. This mix of tax considerations and combined financing and subsidy programs ultimately determines how securely you can finance your listed home.

Financing of listed houses is complex. But in the end there is often the safe realization of a life's dream.