Exit Strategy (Ausstiegsstrategie)
Planning when and how to sell your property
An exit strategy (Ausstiegsstrategie) is your plan for eventually selling or transferring your investment property. Smart investors think about the exit before buying.
Common Exit Strategies in Germany
- Hold 10+ years, sell tax-free: Most common strategy to avoid capital gains tax
- Hold indefinitely (buy and hold): Pass to heirs or live off rental income
- Sell before 10 years: Accept capital gains tax for early liquidity
- 1031-style exchange: Sell and reinvest (though less favorable than US)
- Refinance instead of sell: Extract equity without triggering taxes
The 10-Year Tax-Free Rule
Thanks to Germany's Spekulationsfrist, properties held 10+ years can be sold with zero capital gains tax. This is the most tax-efficient exit strategy.
Real Example: Three Exit Scenarios
Property: Bought for €450,000, now worth €600,000
Exit Year 8 (Before Tax Deadline):
- • Capital gain: €150,000
- • Tax (26.375%): −€39,563
- • Net proceeds after tax: €560,437
Exit Year 11 (After Tax Deadline):
- • Capital gain: €150,000
- • Tax: €0 (tax-free!)
- • Net proceeds: €600,000
Waiting 3 extra years saved €39,563
Don't Sell — Refinance Instead:
- • New appraisal: €600,000
- • Refinance at 80% LTV: €480,000 new loan
- • Pay off old loan (€360k remaining): €120,000
- • Tax-free cash extracted: €120,000
Keep the asset, get liquidity, no tax consequences
When to Sell Before 10 Years
Sometimes it makes sense to pay the capital gains tax:
- Major life change: Relocation, health issues, divorce
- Much better opportunity: The new deal's returns exceed the tax cost
- Market timing: You believe property values will decline significantly
- Negative cashflow unsustainable: Can't afford to wait 2 more years
Estate Planning Exit
Many German investors never sell. Properties pass to children at stepped-up basis (Stichtagswert), avoiding all accumulated capital gains. This creates generational wealth with zero tax consequences.
Related Terms
Capital Gains Tax(Spekulationssteuer)
In Germany, profits from selling investment property are tax-free after 10 years of ownership (Spekulationsfrist). Before 10 years, gains are taxed at 26.375% (without church tax).
Appreciation(Wertsteigerung)
Appreciation is the increase in property value over time due to market forces, inflation, and improvements. In Germany, real estate has historically appreciated at 3-4% annually.