The costs to consider for investing in real estate
Real estate has always been an opportunity for profitable and sustainable financial investment. Indeed, the profitability and the return on investment, especially in case of resale of the good, are much more interesting than savings. Whether one is investing in real estate for personal use, whether primary or secondary, or that one wishes to buy for rent, charges exist and must be taken into consideration. A careful study of these needs to be done to establish a financing plan. There are two categories of costs: those relating to notarial deeds or state taxes and bank charges.
Expenses inherent in the deed of sale
They are of triple nature. First of all taxes are due to the Luxembourg Public Treasury, related to the costs of registering deeds, the VAT on the transfer or the tax on land registration. They are collected by the notary who then transfers them to the administrations. Then, expenses of disbursements are cashed by the notary when it realizes for you the drafting of the deed of sale and the preliminary researches. Indeed, to ensure the security of the transaction, it carries out checks on the land register, it acquires the necessary documents from surveyors and trustees to finalize the deed of sale and these expenses are borne by the investor. These first two types of expenses do not therefore strictly speaking come under the remunerations of the notary, since he is only acting as intermediary between the investor and the State. Lastly, the notary receives remuneration for his work, fixed by a Grand-Ducal regulation. All these costs represent approximately 7% of the amount of the acquisition, but it is possible to benefit from a reduction of the notary fees thanks to the provisions introduced by the "Bëllegen Akt". This is a tax credit that reduces the incidental costs of buying a home. An allowance is thus provided for financial investments in goods intended for personal housing use. The tax credit is limited to 20,000 euros per buyer and is doubled for a couple. Another type of expense is incurred through notaries, which is mortgage fees. When you buy real estate, the bank asks for a mortgage on it and this act must be registered with the Mortgage Bank. The notary drafts a special deed and the costs of establishing the deed and the registration fees with the bank are borne by the purchaser of the real estate.
Fees for applying for a bank loan and for acquiring or renovating a property
It is not always possible to buy real estate directly. Indeed, it may be advisable to resort to a bank loan even when one has a significant contribution , notably thanks to the tax allowances planned for real estate investments. The banks will charge a number of fees which here is an overview. Before granting you a bank loan, whether fixed or variable, the bank will ask you to take out some insurance to protect you against accidents of life, illness or death. Most often, you will be asked to consent to the insurance on the outstanding balance. This is intended in case of death of the investor to repay the balance of the loan up to the amount of the subscribed capital. It will therefore prevent your loved ones from finding themselves destitute if necessary. Of course, whether it is to open a loan, or for the subscription to any insurance, fees are applied by the bank. In-fill costs may also be expected. Sometimes, you can invest in a property without having sold the previous one and need a bridging loan, or you want to proceed with work and start repaying your loan only after completion of these in both cases costs will be applied to you.
To conclude, also think about taking into account additional costs, such as the connection to an Internet or gas network, work planned by the condominium soon such as the renovation of a facade or the installation of an elevator, which can also weigh on the expenses related to an investment. Do not neglect unexpected expenses , such as rising prices for materials needed for some jobs.