Garage as an investment: How to check financing online and maximise your returns
14.07.2025
8
Minutes
Katrin Straub
Managing Director at nextsure
A garage is more than just a parking space; it is a solid 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 as an investment offer a solid return of four to eight per cent with little administrative effort.
Financing is often provided through instalment loans, as banks rarely offer mortgage financing for such small amounts.
Rental income must be taxed, but acquisition and ongoing costs can be claimed for tax purposes.
Assess the return potential of garage investments realistically
Investing in a garage offers stable income with manageable effort. In many German cities, an annual rental yield of between four and eight per cent can be achieved. With a purchase price of 20,000 euros and monthly rental income of 100 euros, this already results in a gross yield of six per cent per year. Demand is further driven by the 65.8 million registered vehicles in Germany, which ensures a low vacancy rate, often below two per cent. Especially in urban areas, the need for secure parking space far exceeds supply. Another advantage lies in value stability; garages are less price-sensitive than residential property. With a well-considered property loan for buy-to-let investors, it is also possible to further optimise the equity return. These solid figures form the basis for deciding to review garage financing as an investment online.
Identify the right financing options for your garage project
Financing a garage differs from that of a flat, as loan amounts are usually below EUR 50,000. Many banks shy away from the effort involved in property-secured construction financing for such comparatively small amounts. A common and flexible alternative is a loan for unrestricted use. This does not require a land register entry and the process is often completed within a few days. For building a new garage, perhaps as a double garage or carport with tool shed, a modernisation loan may also be an option, provided it is linked to an existing property. Check the terms carefully: an instalment loan often has higher interest rates, but offers more flexibility than a repayment loan. The following options are typically available:
Instalment loan: Available quickly and without a land register entry, ideal for purchase prices between EUR 5,000 and 50,000.
Modernisation loan: Purpose-bound for construction work, often with more favourable interest rates, but tied to a property.
Construction finance: Makes sense for very expensive properties or the purchase of an entire garage complex with more than 10 units.
Equity: For purchase prices below EUR 15,000, buying directly without borrowed capital can be the most cost-effective solution.
Choosing the right financing route is a decisive step before the specific costs are calculated.
Calculate cost factors and ancillary costs precisely
The total costs for a garage go beyond the pure purchase price or construction costs. A solid prefabricated concrete garage costs from around €5,000, while a brick-built version can quickly exceed €16,000. For the foundations, you must also expect costs of between €1,300 and €1,600. Many investors underestimate the ancillary costs, which can amount to as much as 15 per cent of the purchase price. A detailed household budget for the loan application helps keep track of all items. The key cost factors include:
Purchase or construction costs: The largest single item, depending on material and size (e.g. from €10,000 for a double garage).
Foundations and groundworks: Necessary for stability and durability, approx. €100 per square metre.
Ancillary purchase costs: property transfer tax (depending on the federal state, 3.5 to 6.5 per cent), notary and land registry fees (approx. 2 per cent).
Ongoing costs: maintenance (approx. €50 to €100 per year), property tax and insurance.
Optional features: an electric gate can cost an additional €1,500, a wallbox for electric cars from €1,000.
A precise calculation of these factors is essential in order to assess profitability correctly and check the legal framework.
Successfully navigating legal and tax frameworks
Before you invest, you need to check the legal requirements, first and foremost whether planning permission is required. This is a matter for the federal states: in Bavaria, garages with a floor area of up to 50 square metres are often exempt from planning permission, while in Baden-Württemberg the limit is 30 square metres. An enquiry with the responsible building authority will provide clarity here and prevent fines of up to 50,000 euros. The garage rental is also relevant for tax purposes. You must declare the rental income in Annex V of your tax return. The key advantage lies in the deductible costs: you can depreciate the acquisition costs straight-line over 20 years at 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 each year. Interest on a long-term loan, maintenance costs and property tax are also deductible. Please note the VAT liability of 19 per cent on the rent, from which only small businesses are exempt. With this knowledge, you can better assess the risks of your investment.
Risk minimisation through strategic site selection and hedging
A successful garage investment depends largely on choosing the right location. In urban residential areas with high population density and a shortage of parking, demand is consistently high and vacancy rates of less than two per cent are the norm. A garage in a rural region with sufficient parking space, by contrast, is unlikely to achieve a return of more than three per cent. Analyse local demand: Are there many apartment blocks without underground parking, or a high density of classic car owners? An often overlooked risk is maintenance, especially with older garage courts or underground car parks. Plan for one to two per cent of the purchase price each year for repairs to the roof or door. To protect yourself against unforeseen events, building insurance that includes the garage is essential. If you install a photovoltaic system on the garage roof, you will need a special public liability insurance policy for operators. This turns a good idea into a long-term secure investment.
The digital path to financing: online verification in four steps
Checking the financing of a garage as an investment online is straightforward today and saves time. With digital comparison portals, you can get an overview of the terms offered by various banks in just a few minutes. The process can be broken down into four simple steps. First, you enter the desired loan amount, based on your cost calculation, and a term of typically seven to ten years. In the second step, you provide details about your financial situation, such as income and monthly expenses. Many providers carry out a credit check in real time, without your SCHUFA score being affected immediately. In the third step, you compare the non-binding offers; pay attention not only to the interest rate, but also to the option of making unscheduled repayments. The fourth and final step is digital identification via video identification and uploading the necessary documents, such as proof of salary and the draft purchase agreement. This allows you to manage the entire process from review to completion of your annuity loan conveniently from home.
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More useful links
The Deutsche Bundesbank offers detailed financial stability reports that provide insights into the German financial landscape.
The KfW provides information on funding programmes for private individuals in the area of existing properties, which may also be relevant for garage projects.
The ifo Institut provides current analyses and data on its topic page for the property market, which are useful for investment decisions.
FAQ
How much does it cost to build an average single garage?
The costs for a single garage vary considerably. A basic prefabricated garage made of steel or concrete is available from around 5,000 euros. A solid, brick-built garage can cost 20,000 euros or more, including foundations and ancillary costs.
What ongoing costs are incurred for a rented garage?
Ongoing costs include property tax, the cost of buildings or liability insurance, as well as an annual maintenance reserve of around 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 classified ad portals and notices in nearby supermarkets. Describe the location, size and features (e.g. power connection) precisely. A credit check is unusual for garage tenants, but a deposit of two to three months' rent is recommended.
Do I have to pay VAT on the rental income from a garage?
As a general rule, renting out a garage is subject to VAT (19 per cent). However, you can make use of the small business scheme if your total turnover did not exceed 22,000 euros in the previous year and is not expected to exceed 50,000 euros in the current year.
What notice periods apply to a garage rental agreement?
If a garage is rented separately from a flat, commercial tenancy law with more lenient rules applies. The statutory notice period for tenants and landlords 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 complex?
The purchase of a garage complex can increase returns through economies of scale and spread the risk of rental defaults across multiple tenants. However, the administrative effort is greater, and the initial investment usually requires standard property financing, which in turn involves more thorough scrutiny by the bank.
