Renting out your apartment: well arranged from day one

Compile your documents

Before you advertise, put the basic documents together: a floor plan, the living space figure and the energy performance certificate. The energy performance certificate is more than a formality: its mandatory details already belong in the listing, and you present it to applicants unprompted at the viewing at the latest. What to look out for is explained in our guide to the energy performance certificate.

If you are letting a condominium, information on the Hausgeld and the house rules also belongs in your file. Experience shows that applicants ask about these early on, and a complete folder looks professional from the first contact.

Set the rent and check the rent cap

The first point of reference for the rent level is the local reference rent. You will find it in the rent index (Mietspiegel) of your municipality. Set the price realistically: a rent in line with the market tends to bring more serious applications and a suitable tenant more quickly.

In many cities the rent cap (Mietpreisbremse) applies on top. There, the rent on re-letting may exceed the local reference rent by no more than 10 percent. Exempt are new builds first let after October 1, 2014, comprehensively modernized apartments and a lawfully higher previous rent, which enjoys grandfathering. Whether the rent cap applies to your apartment depends on the regulation your federal state has issued for the municipality in question. The rule has been extended until the end of 2029, so it remains relevant for the foreseeable future.

Publish the listing and hold viewings

A good listing is honest and complete: a realistic description, good photos and the mandatory details from the energy performance certificate. State the key facts in full, that is, net rent and service charges, living space, number of rooms and the move-in date. This filters by itself: whoever gets in touch already knows the basic terms.

Honesty saves everyone time: an "embellished" listing only leads to disappointed applicants and cancelled viewings. Keep the documents from step 1 at hand during the appointments, so serious applicants can clarify their questions on the spot.

Select the tenant: documents and questions

With several applications, the customary documents help you reach an objective decision: a tenant self-disclosure form, proof of income, a credit report (for example from SCHUFA, presented by the applicant themselves) and a certificate of no rent arrears from the previous landlord.

A clear line applies to the self-disclosure form and the interview: your questions must be relevant to the tenancy, because the German General Equal Treatment Act (AGG) prohibits discrimination in tenant selection.

Sign the tenancy agreement

The heart of the letting is the tenancy agreement. Use a current, professionally reviewed template and not a form that is years old. Particular care is needed with the cosmetic repairs clauses: rigid deadlines are invalid. Set aside a quiet hour for the agreement and complete every field in full, from the names of all tenancy parties through the start date and the rent level to the agreed deposit.

Clear rules apply to the deposit: it may not exceed three months' net rent, the tenant may pay it in three monthly installments, and you keep it separate from your own assets.

Hand over the apartment and sign the report

The handover includes a handover report. In it you record the meter readings, the condition of the rooms, any existing defects and all keys handed over. Both parties sign the report, and each receives a copy. This half hour of diligence pays off at the latest at move-out, when the condition of the apartment is at issue.

Duties during the ongoing tenancy

With the handover of the keys, everyday life as a landlord begins. Two tasks recur regularly: maintaining the apartment and the annual service charge statement. For the statement you have 12 months after the end of the billing period; all the details, from the deadlines to the recoverable costs, are covered in our guide to the service charge statement.

Clear rules also apply to rent increases. During an ongoing tenancy you may raise the rent up to the local reference rent, limited by the capping limit: at most 20 percent within three years, in many cities 15 percent. After a modernization you may pass on 8 percent of the modernization costs per year, capped at 3 euros per square meter within six years (2 euros where the rent is below 7 euros per square meter).

Taxes: Annex V and deductible expenses

Rental income counts as income from letting and leasing and belongs in Annex V (Anlage V) of your German tax return. The good news: many expenses reduce the tax burden. Deductible are, among others, building depreciation (usually 2 percent straight line, varying by year of construction), loan interest, management costs, repairs and travel costs.

So collect receipts from the very beginning, ideally in a dedicated folder per apartment. And because every situation is different: individual questions belong with your tax advisor.