#16 5th Phase of PILC: Refurbishment

Updated: Jul 27

If you have been following our work and reading our blogs regularly there is a possibility that you already know what’s coming. Yes, it is the 5th phase of the Property Investment Life Cycle or PILC for short. It may not sound as exciting as the previous topics as the word itself reveals quite a lot about its nature; “REFURBISHMENT”. We all been there, we all have done it one way or another in our life. - I can hear it already - like your thoughts are scraping the inside of my skull: “interior design, colours, furniture, wooden floor, modernizing, upgrade, re-purpose, recycle, annoying contractors, way too much dust” and so on.


Well, somewhat you are on the right track but what if I tell you that you are overlooking the most important aspects of this step. What if I tell you that, there is much more to this PHASE than what meets the eye at first glance? In this episode I will guide you through all the details using my experience from previous projects taken place in Germany to paint a clear and exciting picture to you, just like how Paul Klee would have done with his paintbrush.


Before we dive in you can see the list of the previous steps below, in case you have missed some and now standing here wondering how did we get here?! Fear no more there is always time to catch up!


1st Phase of PILC: Land Acquisition

2nd Phase of PILC: Construction / Development

3rd Phase of PILC: Management

4th Phase of PILC: Renovation


Over time, property can become beyond repair especially if it is not properly managed or if it has been abandoned for a long period of time. In certain countries, like the UK and Germany, there are a lot of historical buildings that are either abandoned or the owner does not have the financial capacity, or expertise, or both, to refurbish it into sustainable conditions. Also there is a list of things that can and can’t be done to a building that is classified as a heritage/protected building.

For example: the original façade must be restored to its original state and cannot be replaced by modern cladding – just to highlight one.

< At a later stage I will collect all these into another blogpost for those who are interested. Please leave comment for me.>


“Heritage is our legacy from the past, what we live with today, and what we pass onto future generations” (UNESCO)

Quick History Lesson:

After world war two, urban planning strategies gave precedence to transport infrastructure and many historic buildings were destroyed to make way for new developments. As Germany’s economy was on a rise new housing areas, new roads, new town and new city structures were planned. This growth in the economy led to a rapid expansion of infrastructure, such as the construction of roads and other transportation networks, industrial buildings and new houses, and consequently many historic buildings were destroyed (more than were destroyed during World War Two) to make way for these new developments.


In 1975, efforts were made to ensure that the general public became more aware of the cultural, social and economic heritage and value of historic monuments, old buildings and sites of special interest in both urban and rural regions. In Germany, heritage protection became an important aspect of urban planning and in the creation of attractive cities and villages.

<source: Preserving Germany’s Cultural Heritage through Legislation, (RICS Research 2007)>


So, how does this relevant to us you may ask?

In Germany, there are still a lot of abandoned or rundown listed (heritage) building which can be purchased at a much lower price than market which later can be refurbished into modern and luxury apartments to be sold at much higher prices, especially those located at prime locations.

On top of that, that German government has also introduced special tax incentives that allow the German taxpayers to depreciate the costs for refurbishing or modernising works carried out on Monument Status buildings to reduce their tax as an option to encourage the German citizens to buy and refurbish those listed buildings.


Investment Strategy

The opportunities given by the property market in Germany are becoming overpowering due to the numerous advantages in this economy. In this segment, listed buildings refurbishment projects are utilized as the investment technique.

Tax Incentives

The German tax framework is comparative to those of other western nations. On the list of the most noteworthy assess rate within the western nations, Germany is positioned 2nd right behind Belgium. Germany features a social security net against more economic growth. The minimal assess rate of an normal salary laborer is 39.9% as for in Belgium it is 42.8%.


The conservation of monument buildings is a priority for the German Government. By restoring and obtaining such a building German buyers may get a unique tax advantage. It is expressed within the German Tax Laws that German buyers are able to reclaim 100% of their investment over the next 12 years as a deduction from their tax charge. They can deduct 9% cost from their tax charge each year amid the 1st to the 8th year. After that, they can deduct 7% from their tax charge for the remaining 4 years.

To encourage Germans, the purchase and renovation of these buildings are intensely incentivised with tax advantages. Due to the high taxes Germany (up to 46% charges), by acquiring the listed apartment it gives the perfect opportunity for them to diminish their taxes. German Tax Law permit German citizens to devalue the costs for refurbishing /modernizing work carried out on a Monument Status building as takes after one of the most straightforward ways to invest within the German Listed Building Refurbishment project is to collaborate with dependable nearby developer.

There are a lot of developers that specialized in listed building refurbishment projects and also in urban regeneration, building reputation for making homes that outperform desire in term of plan, quality of development and vision for maintainability improvement. Refurbishment is used in Germany because of the tax incentives.

Why German Listed Buildings Refurbishment Projects are the way to go?


  • Germany has created many ancient monuments over the last couple of decades.

  • Also knows as HERITAGE BUILDINGS and these are protected by the government.

  • Listed buildings are protected under the Monument Protection Act which classifies the property as cultural heritage.

  • Less than 1% of all buildings in Germany are listed buildings.

  • They are refurbished by initial acquisition through planning, designing, building and finally marketing development. At each stage the developer has to undertake detailed risk assessment, taking into account the relevant sustainability issues, and the changing culture of the market place. Developments combine leading edge design while maintaining and renovating key elements from German architecture heritage.

Conclusion:

Listed / Heritage status of a property is administered by a proper government registry and act, for example Listed Property Act which classifies the property as cultural heritage. Most of the buildings are in ruins due to war and age. Hence, there's incredible potential to contribute in their heritage buildings. By repairing and obtaining such a building, the buyers may get a special tax-incentive.

Did this article answered all your questions regarding the REFURBISHMENT stage? If it didn’t, please don’t hesitate to get in touch with us.

In the meantime stay tuned because in 2 weeks we going to arrive to final step of the PILC what is called RE-DEVELOPMENT.

“Omnium Rerum Principia Parva Sunt – ‘The beginnings of all things are small.”


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