Long-term tenants – The most valuable resource in any yield portfolio
A major advantage of the German residential real estate market for property investors is the attraction of long-term tenants. In Germany, people traditionally rent for many years, often even across generations. This provides stability, as tenant turnover is low, and tenants treat their apartments as if they were their own property.
About half of the German population lives in rental apartments, with up to 84% in large cities like Berlin. Thanks to good social security, secure pensions, and a savings mentality, many Germans prefer renting to buying and often stay in the same apartment for decades. At InvestiX, we manage over 5,200 tenants in more than 2,500 properties.
Our data shows:
- 30% of tenants have lived in their apartment for over 10 years
- 10% for over 20 years
- 5% for over 30 years
- 2% for over 40 years
This long-term rental culture allows us to build stable and lasting relationships between tenants and property managers, leading to more accurate forecasts of rental income and greater stability.
Rental Culture in Germany
The rental culture in Germany differs significantly from other countries. Rent costs are relatively low, which encourages tenants to stay in rental apartments, even when they have to pay fees like property taxes and insurance. Many buildings have historically subsidized rents, which have kept rent growth subdued. The application process for an apartment can be time-consuming and includes interviews, salary statements, references, and a SCHUFA credit check. “Blacklists” for “bad tenants” make future rental offers more difficult. In addition, apartments are usually unfurnished, which keeps tenants tied to their apartments and reduces tenant turnover.
Tenant Protection in Germany
The German rental market offers comprehensive protection for both tenants and landlords. Every municipality maintains a “Mietspiegel” (rent index), which lists the average rental prices based on factors like the year of construction and apartment size. Landlords may increase rent by up to 20% within three years, except in Berlin, where stricter regulations apply. However, rents cannot exceed the local rent index. This protection provides security for tenants while allowing landlords to make fair rent adjustments.
According to German tenancy law, landlords must keep rental properties in good condition and finance necessary repairs. However, it is common for tenants to cover the costs of minor maintenance and cosmetic repairs. Unlike for tenants, there are no “blacklists” for landlords, but similar sources of information such as local tenant associations and online review sites exist.
