Sell or rent out a condominium: Which brings you more?

You own a condominium but do not use it yourself? At the moment it is rented out, but you doubt whether this is the most lucrative solution. You keep hearing about the constantly rising price of real estate. That selling your flat could be the deal of a lifetime. The thought creeps into your head: "Wouldn't it be better to sell my flat instead of renting it out?

This question is justified. In recent years, flat prices have risen steadily and selling a flat will certainly bring you a nice sum. So should you decide to sell the flat in your situation?

If you want answers to your questions, read on. In this blog post, I contrast flat selling and flat renting. A specific set of questions will help you make a good decision.

Advantage #1 Selling a condominium = profiting from low interest rates

The low-interest phase describes a period in which the interest rates for a loan are very low. For people who want to buy a flat, this is an enticing offer. The real estate market reacts to the low interest rates and the resulting increase in demand with higher purchase prices. As a potential seller, you can benefit from this low-interest phase!

You think that flat prices will continue to rise in the coming years and therefore prefer to wait before selling? After all, you want to get the maximum price. The question to ask yourself: Will the low-interest phase last for the next few years or will interest rates shoot up and purchase prices go down? If the latter occurs, delaying the sale will cost you a lot of money.

Advantage #2 Selling a condominium = no more obligations towards tenants

Perhaps you know it: When the tenant calls, it usually doesn't mean anything good:

"There's mould in the bathroom again. It has to be removed urgently!
"The windows are not tight, there is a draught in the flat. They need to be replaced!"

Just an excerpt of the complaints that you as a landlord have to listen to. You are also obliged to take action. As the landlord and owner of the flat, you are responsible for maintenance. An obligation that costs you a lot of time and, above all, nerves.

If you decide to sell your flat, not only the flat is gone, but also the tenant and the responsibility. If you would like to take a closer look at this topic, I recommend this article: "What happens to the tenant when I sell the flat" (published by 31.3.2022 at the latest).

Advantage #3 Selling a condominium = no lengthy tenant search

Your tenants moved out months ago. Like many landlords, you have preferences about who should live in your flat. One of the most important points for you is that the tenant should be able to afford the flat in the long term and pay his or her rent on time. Therefore, you will not rent your flat to the first person who comes along, but invest a lot of time in the selection process.

Viewing appointments, credit checks & Co - all things that take up your time. All this for the fact that the tenants only stay for a few years, the search starts all over again and your flat stands empty again for a few months in the meantime.

The consequence of these vacancies: you have no rental income during this time, the monthly operating and maintenance costs remain with you. As most flat owners know: an expensive undertaking.

Disadvantage #1 Sell condominium = real estate income tax reduces profit

The decision to sell the flat has been made. Your expectation? That the sale will bring you a high profit. The catch with the sale: the state usually charges 30% real estate income tax on the sale of the flat. I would like to briefly explain to you what this means in concrete figures using a simple example:

2005: You buy a flat for 150,000 euros.
2022: You sell the flat for 400,000 euros

In this case, the gain on sale is taxed at 30%. Profit is the difference between acquisition cost and selling price.

Profit on sale: €400,000 -150,000 = €250,000
ImmoEST: 30% of €250,000 = €75,000

75,000€ - the value of a sports car - a chunk of money you lose just like that.... How to save taxes? Read this blog post: Selling a flat and taxes (published by 31.3.2022 at the latest)

Or you can avoid taxes from the sale by renting out your condo instead of selling it....

Advantage 1# Renting out a condominium = regular income & future opportunities

Once you have found an impeccable tenant, renting out your flat naturally has a great advantage: a monthly additional income. The rental yield provides a stable source of income. At the same time, you also have the option of bequeathing your flat to your children in later years, who in turn can benefit financially from it by selling or renting it out, or even use it as their own home.

Disadvantage #1: Renting out a condominium = income is taxed

Wer durch eine Vermietung Einkommen erzielt, muss dieses bei der jährlichen Einkommensteuer auch angeben (§ 2 (3) EstG). Mit welchem Steuersatz die Einnahmen versteuert werden? Das hängt von Ihrem individuellen Einkommensteuersatz ab.

Income tax in Austria is progressively divided into several tax brackets:

Income per year = income tax
0 to 11,000 euros = tax-free
over 11.000 Euro to 18.000 Euro = 20 percent
over 18,000 Euro to 31,000 Euro = 35 percent
over 31,000 Euro to 60,000 Euro = 42 percent
over 60,000 Euro to 90,000 Euro =48 percent
over 90,000 euros up to 1 million euros = 50 percent
over 1 million euros = 55 percent

Important: In this calculation, not only the income from your rental counts, but all your income (e.g.: your salary) is added up.

Would you like to know what is left of your rental income after you have paid your taxes? Click here and calculate the amount.

Disadvantage #2 Renting out a condominium: Danger of rental nomads

Rent nomads are tenants who move into a flat with the intention of never paying the rent. If you as a landlord find yourself with such tenants, the only option is a lengthy eviction action.

The financial consequences: As a landlord, you not only have to cope with the loss of rent, but also with

• the costs incurred by eviction
• the legal costs and lawyers' fees
• the costs for the necessary renovation and clearing out

Selling or renting out a condominium: Simple decision-making aid with professional questionnaire

From my many years of experience as an estate agent, I know that many flat owners struggle with whether it is better to sell or rent. I therefore always ask my clients the following questions to help them make a decision:

Question 1: Do you need high capital quickly for a new investment?

Question 2: You do not want to spend time and money on the maintenance of a flat that you do not live in yourself?

Question 3: You do not want to have an obligation towards tenants?

Question 4: You don't want to take the risk of a loss of rent?

Question 5: You do not wish to move into the flat yourself or bequeath it to your heirs?

Have you answered all the questions with a resounding yes? Then everything speaks in favour of selling the flat.

If, on the other hand, you would rather

• A continuous, monthly source of income
• keep the flat in order to move into it themselves in the future
• bequeath the flat to their children later

Then they should rather keep their flat in their property and rent it out.

Still not sure whether renting or selling is the better solution? My advice: Consult an expert for advice.

In such a consultation, you have the opportunity to describe your individual situation to an expert. A reputable real estate agent will analyse your situation in detail and work with you to find the most profitable and suitable solution. Be it sale or rental.

At Arealita, we take time for your concerns and questions in a free initial consultation. Do not hesitate and make an appointment with us. You can reach us by e-mail(immobilien@arealita.at), by phone(+ 43 512 580 242) or via the contact form (click here!).

Yours sincerely,

Bernhard Großruck, M.D.

P.S.: Would you like to know what you will have left over from your rental income after you have paid your taxes? Simply calculate the amount here!

Photo: goodluz-stock.adobe.com