Buying Property Through An Asset-Managing LLC
Optimizing Tax Benefits Through An Asset-Managing LLC
An alternative to private real estate ownership is purchasing properties via an asset-managing limited liability company (vermögensverwaltende GmbH). It does not operate actively in the market but focuses exclusively on securing, structuring, and increasing its own capital (real estate, corporate shareholdings, or securities portfolios). In doing so, it provides an efficient foundation for sustainable wealth accumulation.
It should not be confused with a real estate holding company. The asset-managing LLC primarily aims at the direct management of its own assets, whereas a real estate holding company holds and manages interests in other real estate companies. As a result, the complexity and taxation of these two corporate forms differ significantly.
An asset-managing LLC is an efficient way to minimize taxes, provided that sufficient surpluses are generated. This generally becomes worthwhile starting from a five-figure cash flow surplus. Caution is advised in the areas of property sales, furnishing, and special rental models, as these can quickly lead to a commercial classification, which increases the tax burden. It is advisable to consult a tax advisor for detailed tax advice in order to ensure that all individual factors and circumstances are taken into account.
- When Is It Worth It?
- Further Tax Considerations
- FAQ
When Is an Asset-Managing LLC Worth Considering?
Switching from private ownership to an asset-managing LLC makes particular sense when the goal is tax optimization. Many use this structure specifically as a tax-saving model—which only applies if you are generating taxable income in the first place, i.e., when you have a positive cash flow.
As a private individual, income is taxed at your personal income tax rate, with the top rate of 42% applying to incomes just over €67,000 per year. In contrast, profits in an asset-managing LLC are taxed at a flat 15% corporate tax rate, which is significantly lower.
However, an LLC also comes with its own costs, such as preparing and filing annual financial statements and hiring a tax advisor. Therefore, this structure usually only becomes worthwhile when you have—or expect to have—a five-figure annual cash flow surplus. This surplus could also come from property sales, but care must be taken not to cross the line into property trading.
Otherwise, in addition to corporate tax, trade tax becomes due, significantly increasing the tax burden. If the company is classified as conducting commercial real estate activity, it becomes fully taxable under commercial tax law. That said, even with trade tax, the overall tax burden might still be lower than under private ownership.
But what about situations in which the opposite is the case and the LLC has no properties in the portfolio? If the asset-managing LLC holds no property at a certain point in the year, it may be treated as a standard LLC, increasing the tax liability. Therefore, it’s important to monitor your tax rate and planned surpluses carefully in order to fully benefit from the LLC structure and justify the additional administrative costs.
Further Tax Considerations
When selling property as a private individual, profits can be tax-free under certain conditions.
Owner-occupiers must have lived in the property for at least three consecutive calendar years.
Investors must have held the property for at least ten years.
If sold earlier, capital gains are subject to tax—but these are typically taxed at lower rates within an LLC.
Different Property Types and Furnished Rentals
Certain types of real estate and business models—such as fix-and-flip strategies or furnished rentals—are challenging to implement within an asset-managing LLC. These activities are considered typical of commercial operations and may result in a different tax classification.
Withdrawing Funds from the LLC
There are several ways to withdraw funds from an asset-managing LLC. For instance, investors can provide their LLC with a shareholder loan to supply equity for property purchases and then repay themselves the loan principal or interest. This repayment is tax-free. However, it is generally more efficient to leave funds within the LLC and use them for further investments.