Garage as an investment: How to check financing online and maximize your return
14 Jul 2025
7
Minutes
Katrin Straub
CEO at nextsure
A garage is more than just a parking space; it's a stable investment with attractive returns. We show you how to check the financing of a garage as an investment online and avoid pitfalls.
The topic in brief and concise terms
Garages offer a solid return on investment of four to eight percent with minimal administrative effort.
Financing is often done through installment loans, as banks rarely offer mortgage financing for small amounts.
Rental income must be taxed, but acquisition and ongoing costs can be claimed for tax purposes.
Realistically Assessing the Return Potential of Garage Investments
Investing in a garage promises stable income with manageable effort. In many German cities, an annual rental yield of between four and eight percent can be achieved. With a purchase price of 20,000 euros and monthly rental income of 100 euros, this results in a gross yield of six percent per year. Demand is further driven by the 65.8 million registered vehicles in Germany, which ensures a low vacancy rate often below two percent. Particularly in metropolitan areas, the demand for secure parking far exceeds supply. Another advantage is value stability; garages are less sensitive to price fluctuations than residential properties. With a well-considered real estate loan for investors, equity yield can be further optimized. These solid metrics form the basis for deciding to check the financing of a garage as an investment online.
Identifying the right financing options for your garage project
Financing a garage differs from that of a flat, as loan amounts are usually below 50,000 euros. Many banks shy away from the effort required for a mortgage-secured construction loan for such relatively small amounts. A common and flexible alternative is a loan for any purpose. This does not require a land registry entry and the process is often completed within a few days. For building a new garage, possibly as a double garage or carport with a tool shed, a modernisation loan may also be an option, provided it is linked to an existing property. Check the conditions carefully: An instalment loan often has higher interest rates but offers more flexibility than an annuity loan. The following options are typically available:
Instalment loan: Quickly available and without land registry entry, ideal for purchase prices between 5,000 and 50,000 euros.
Modernisation loan: Earmarked for construction measures, often with more favourable interest rates, but tied to a property.
Construction financing: Sensible for very expensive properties or the purchase of an entire garage complex with more than 10 units.
Equity: For purchase prices below 15,000 euros, a direct purchase without external capital can be the most profitable solution.
Choosing the right financing method is a crucial step before calculating the actual costs.
Accurately calculate cost factors and additional expenses
The total costs for a garage extend beyond the mere purchase price or construction costs. A solid prefabricated concrete garage costs from about 5,000 euros, while a brick variant can quickly exceed 16,000 euros. For the foundation, you should additionally expect costs between 1,300 and 1,600 euros. Many investors underestimate the additional costs, which can account for up to 15 percent of the purchase price. A detailed budget calculation for the loan application helps to keep track of all items. The essential cost points include:
Purchase or construction costs: The largest single item, depending on material and size (e.g., from 10,000 euros for a double garage).
Foundation and groundworks: Necessary for stability and durability, approximately 100 euros per square meter.
Additional purchase costs: Land acquisition tax (depending on federal state, 3.5 to 6.5 percent), notarisation and land registry fees (about 2 percent).
Running costs: Maintenance (about 50 to 100 euros per year), property tax and insurance.
Optional equipment: An electric gate can cost an additional 1,500 euros, a wall box for electric cars from 1,000 euros.
Accurate calculation of these factors is essential to correctly evaluate profitability and check legal frameworks.
Successfully Master Legal and Tax Frameworks
Before you invest, you must check the legal requirements, particularly the need for planning permission. This is a matter for the states: in Bavaria, garages up to 50 square metres often don't require permission, whereas in Baden-Württemberg the limit is 30 square metres. An enquiry with the relevant building authority provides clarity and helps avoid fines of up to 50,000 euros. Renting out the garage is also relevant for tax purposes. You must declare the rental income on Annex V of the tax return. The key is in the deductible costs: you can write off the acquisition costs over 20 years at a linear rate of five per cent per year. This means that with a purchase price of 20,000 euros, you reduce your taxable income by 1,000 euros annually. Interest on a long-term loan, maintenance costs, and property tax are also deductible. Note the 19 per cent VAT obligation on the rent, from which you are only exempt as a small business owner. With this knowledge, you can better assess the risks of your investment.
Risk minimisation through strategic site selection and safeguarding
A successful garage investment largely depends on the choice of location. In urban residential areas with high population density and parking shortages, demand is consistently high, and a vacancy rate of less than two percent is common. In contrast, a garage in a rural region with ample parking space is unlikely to achieve a return of over three percent. Analyze the local demand: Are there many apartment buildings without underground parking or a high concentration of classic car owners? An often overlooked risk is maintenance, especially for older garage complexes or underground garages. Plan for one to two percent of the purchase price annually for repairs to the roof or door. To protect against unforeseen events, a residential building insurance policy that includes the garage is essential. In the event that you install a solar power system on the garage roof, you will need special operator liability insurance. This way, a good idea becomes a secure long-term investment.
The digital path to financing: Online review in four steps
Checking the financing of a garage as a capital investment online is straightforward today and saves time. With digital comparison portals, you can get an overview of the conditions offered by various banks in just a few minutes. The process can be divided into four simple steps. First, you enter the desired loan amount based on your cost calculation, and a term typically ranging from seven to ten years. In the second step, you provide details about your financial situation, such as income and monthly expenses. Many providers conduct a credit check in real-time without immediately affecting your SCHUFA score. In the third step, you compare the non-binding offers; pay attention not only to the interest rate but also to the possibility of special repayments. The fourth and final step is digital identification via video identification and uploading the necessary documents, such as salary statements and the draft purchase agreement. This way, you can conveniently manage the entire process from checking to completing your annuity loan from home.
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More useful links
The Deutsche Bundesbank provides detailed financial stability reports, offering insights into the German financial landscape.
The KfW provides information on funding programmes for private individuals in the field of existing properties, which can also be relevant for garage projects.
The ifo Institute offers current analyses and data on its thematic page on the real estate market, useful for investment decisions.
FAQ
What is the cost of building an average single garage?
The cost of a single garage varies greatly. A simple prefabricated garage made of steel or concrete is available from around 5,000 euros. A solid, brick-built garage, including the foundation and additional costs, can cost 20,000 euros or more.
What ongoing costs are associated with a rented garage?
Ongoing costs include property tax, the cost of building or liability insurance, and an annual maintenance reserve of about 50 to 100 euros for minor repairs to the gate or roof.
How do I find the right tenant for my garage?
Use local online classifieds portals and noticeboards in nearby supermarkets. Describe the location, size, and amenities (e.g. power outlet) in detail. Credit checks are uncommon for garage tenants, but a deposit of two to three months' rent is advisable.
Do I have to pay VAT on the rental income from a garage?
In principle, renting out a garage is subject to VAT (19 percent). However, you can opt for the small business regulation if your total revenue did not exceed 22,000 euros in the previous year and is not expected to exceed 50,000 euros in the current year.
What are the notice periods for a garage rental agreement?
When a garage is rented separately from an apartment, commercial tenancy law applies with more liberal rules. The statutory notice period for both tenant and landlord is three months to the end of a calendar quarter, unless a different, shorter period has been agreed in the tenancy agreement.
Is it worth buying an entire garage yard?
Purchasing a garage courtyard can enhance returns through economies of scale and distribute the risk of rental loss across multiple tenants. However, the administrative effort is higher and the initial investment typically requires traditional property financing, which involves a more thorough examination by the bank.
