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Alpha Real Estate Investments
German Property Newsletter
September 2007
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Welcome to the September edition of our German property
newsletter.

In this issue we will take a detailed look at the typical
running costs buy-to-let investors can expect to pay in
Germany. As every month, we also have a comprehensive
roundup of all the news affecting the German market today.

And, in case you've missed our recent newsletter issues,
they are available for you here:

http://germany.alphare.net/newsletters.php

In this issue you will find:

1. Global Investors Confident in German Market
2. Understanding Running Costs in German Property
3. Exceptional Opportunity in Booming Dresden
4. Tell Us What You Think!

===================== FEATURE EDITORIAL =================

1) Global Investors Confident in German Market

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Economic roundup
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Many this month have been concerned with the effects of
the US subprime lending fiasco, not least customers of
Northern Rock that have seen the impacts manifested here
in the UK. But what effect has this situation had on the
German market?

Germany is significantly lower geared (less borrowing)
and the German banks (with a few exceptions) are not as
closely affiliated with those in the US as they are here
in the UK. German lenders - already notoriously cautios
anyways - don't expect a further tightening of lending
conditions at the moment.

The main effect on the German economy could be a decrease
in exports to the US which of course may decrease the
GDP for the year. German Economy Minister Michael Glos
stated that the economy remained “strong” and growth
looked “favourable”.

One factor for this optimism may be that because of 5 years
of a weak dollar already having affected exports the Germans
have diversified their trading partners, shipping ever
increasing amounts of goods eastward to Russia, China and
the new EU member states. This has happened to such a degree
the Michael Glos went on to say that a weak dollar in many
ways was a benefit, keeping the cost of dollar denominated
energy imports down!

Despite that there have been several revisions to GDP
forecasts for the year. The ever cautious government stated
that economy will grow by 2.3% (which is what they were
originally saying at the beginning of the year).

However, the slightly more upbeat IfW in Kiel put the figure
at 2.7%. Admittedly this is down from the previous 3.2%
but still a whole 0.5% up from where they started the year.

Also, figures for the state of Saxony showed that the region
was well ahead of the curve with economic growth of 4.3%,
that’s faster than any other state!

But what does this all mean to you?

Well, the bottom line is that the German economy is probably
in the best position in Western Europe to brush off the
effects of what’s happening in the US. This is of course
good news for the continuing strength of the German Property
market. And as usual it isn’t only us who think so.

Property market news
--------------------

There have been several massive deals agreed and completed
this month. One which stands out from the crowd is the move
by Ballymore to acquire a 1 million sq. ft. mixed use building
on Kurfürstendamm in central Berlin, one of the most
expensive streets in the city.

Ireland's Ballymore, as many of you will be aware, is one
of Europe’s largest developers and investors in property,
with currently 58 major projects on the go, totalling over
43 million square feet of development. So they know a thing
or two about what makes a good investment.

The firm bought the property for 155 million euros. Sean
Mulryan, Ballymore's CEO, said: "This is a stunning location
in the very heart of one of the great cities of the world.
We plan to further develop and enhance the Kudamm Karee to
make it an appealing destination for Berliners and visitors
alike. This demonstrates our global focus on large scale
mixed use developments in prime locations."

Also this month Schroders German Fund acquired 987 apartments
in several major cities in the country, with a total of over
60,000 square meters (apx 700,000 sq. ft) for 73 million euros.

Cork based CMC Capital acquired a major Berlin shopping
centre (Schloss Strasse Centre) for over 100 million euros.

Spreymill Deutche Immobilien (AIM listed) is also reported
to be on the lookout for 975 million euros of German
residential and commercial property.

These are just some of the major transactions taking place
in spite of some fears of global repercussion from the
credit problems in the States.

So the bottom line is that regardless of the situation in
the US the German market continues to power forward and
may in many ways benefit from this crisis as capital is
diverted from other countries less able to cope than Germany.

As always we have several exciting properties - in Dresden,
Berlin and other German cities - waiting for you to get
involved with. So if you're looking for a single apartment,
an entire apartment block or even a shopping centre, don’t
hold back and get in contact today to start your journey
into the most promising property market in Europe!

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2) Understanding Running Costs in German Property

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There are of course many differences in the way buy-to-let
investments work from country to country and Germany is
no exception. This is why today we will explain the ins
and outs of landlords' ongoing running costs, since these
can make the difference between building a successful,
cash flow positive portfolio, and not!

The property market in Germany is different to the UK in
many ways. One of the positives of the strong German rental
market is that your tenants will pay a large proportion of
your running costs. If you have a tenanted residential
property all you need to pay, in effect, are the management
costs and building maintenance. Of course this is great
for you, the investor, because when seeing a quoted yield
you know this will not be too different from what you take
home! Of course if you are making mortgage payments it's a
whole different ball game.

There are two types of management fees that you should
expect to pay, these are...

House Management: Costs 15 to 25 euros (+19% VAT) a month

This covers the cost of running the building, similar to
the service charge on a leasehold property in the UK.
The house management company will oversee the day to day
running of the building including arranging for any repairs
and administering the sink fund. The sink fund or building
reserve fund is a pool of funds contributed to by every
owner in the building (at a rate per square meter). This
is used to cover future repairs of the building.

Rental Management: Typically 15-25 euros (+19% VAT) a month

This covers the service that you would expect from an
estate agent managing a property in the UK. From making
sure that rent is paid on time to finding and vetting new
tenants (letting however is charged extra, at 1-2 months
rent), the services will cover anything that concerns the
tenant so that you the landlord will only need to communicate
with the management company and not with your tenant. The
management company also deals with the collection of the
utility pre-payments (see below).

Even though the tenants paying the majority of the running
costs is of course great for you the landlord, it is not
generally implemented in a way that we are used to in the
UK. Those who have already made a move into the German
market will know exactly what I'm talking about.

Yes, the pre-payments.

Standardly German tenants pay for utilities and heating
cost for their apartments, as well as associated costs
like building insurance, property tax, cleaning of communal
areas, etc. The tenants however do not pay directly to the
utility companies and other service providers.

You the landlord will have to pre-pay a set amount to the
utility companies, generally on a monthly basis. Don't
panic though, the tenant will in turn pay to you an amount
each month (on top of their rent). This is set at the end
of every year based on the usage from the previous year
and is set out in the tenancy agreement.

At the end of every year the utility companies will check
the actual usage and any over/under payment by you the
landlord will be refunded or charged. Your management
company will then recalculate the payments for the tenants
who will have to be refunded/charged for any over/underpayments
they made to you.

This can cause a degree of confusion but the system is in
fact quite simple. And the bottom line is that you have a
buy-to-let apartment with running costs as low as 30 to 50
euros a month! This is pretty spectacular if you compare
it to similar properties in many other countries.

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3) Fantastic Deal in Saxony's Capital Dresden

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We have a few excellent apartments available in a unique
investment opportunity in Saxony's booming capital Dresden,
rated as the most progressive German town and one of the
country's most desirable cities to live.

Stunning modern apartments in a sought-after green district
just minutes from the centre are available at just 47-68k
GBP for large 1-2 bed apartments. The properties boast
modern new build standards and are all let at fantastic
5.71% yields.

To receive a full information pack please email us at
info@alphare.net.

* * *

A range of high quality apartment blocks and commercial
properties from 200k GBP to 300 million are also on offer
in main German cities. Please email us your requirements
or visit http://germany.alphare.net/ for further details.
We will be happy to assist you in taking advantage of this
exciting and lucrative market.

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4) Tell Us What You Think!

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We would love to hear what you think of this issue of our
newsletter. We hope you find the information useful and
wish you best success in your investment activities.
And of course, if you have any suggestions for upcoming
issues that you'd like to share with us, please send them!

Just e-mail us at: contact@alphare.net

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We are looking forward to seeing you next month. In the
meantime, if you have any questions or would like to
request further information, please contact us at
info@alphare.net or at +44 (0)207 851 3570.

Best of success,

Your Team at Alpha Real Estate Investments