I'm looking for opinions on which option we should go for, as we find the decision really difficult. We are looking to invest on a very small scale in Berlin. We know that the growth potential is not as high as elsewhere, but would be happy with buying there.

There are two 2-room apartments in a block of flats directly above each other, and we quite like them, and buying as a package seems quite attractive. The total cost of buying these together is ca EUR 153,000

Option 1)
Buy both flats and finance as follows:
buying with own capital: EUR 58,000
mortgage: EUR 95,000
In addition, the bank wants a security deposit invested with them of EUR 20,000.
We find the mortgage quite high (according to the payment plan it'd take about 30 years to replay, but we might be faster with additional payments. However, the rent would cover all regular payments and expenses.)

This all works out of tying up EUR 78,000 of our own capital, and having to make more than EUR 200,000 in mortgage repayments.

Option 2)
Buy one flat only completely with our own money at about EUR 76,500. no mortgage.

What do people think we should go for and why?

Hi Spirelli

interesting that everyone is trying to buy in berlin, I know its the capital but whilst I was inspecting property there with a old wise man who has made a fortune in property he pointed out how much free space was still availabe to build and develop. This is unlike any other european capital and that is why the property is so cheap and will probably stay like that for a long time. The unemployment rate in Berlin is still 16% and next year is the 20th anniversary of the fall of the Berlin wall !

On the other hand Dresden which is only 150 KM from Berlin has only 10% unemployment, 6 million tourists, city centre 7% yields on the best of properties. I have bought a few there and im delighted.

Any one agree with me.

Spirelli

If you can get a mortgage at a reasonable rate then use it. It is all about tax. Mortgage interest is tax deductable. I assume you are not German so you will be taxed in Germany then taxed in your own country (after subtracting German tax paid). German interest can be offset in both countries. Which bank are you using? What are the conditions of the security deposit? Do you intend letting out both properties? Are they fairly priced (do you know local prices) and do you know the mietspiegel (official rent) for the property?

Seamus McConville