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Is it worth investing money in real estate?

Investing money in real estate – where do you actually start? Should you invest your money in real estate? How can I invest money in real estate?

Why invest in real estate?

Why invest in real estate?

Nowadays in particular, the majority of people long for a certain degree of financial security. No wonder, given the ever-increasing personal responsibility when it comes to retirement provision. After all, those who rely on state pensions today could be in for a nasty surprise in old age. The BMWi’s Scientific Advisory Council published a press release on this topic in 2021:

The advisory board predicts a shock increase in funding problems in the statutory pension insurance system from 2025 (…) Source: Scientific Advisory Board to the Federal Ministry for Economic Affairs and Energy (BMWi) 2021

What sounds alarming is implicitly a call to action: don’t rely on your state pension. Let’s admit that there is no security (life itself is pure risk). But there may be options that combine future security with a manageable investment risk. This certainly doesn’t mean bonds or savings accounts. An obvious option these days instead: Investing money in real estate.

For many people, the first thing that comes to mind is owning their own home. Often, they even want to build a house themselves or finally buy the perfect apartment to live in. One possibility. However, there may be more… Let’s go one step further. How else can you invest in real estate? Imagine this: a sustainable, long-term and at the same time rewarding and, in the eye of the beholder, safe option. A property as a capital investment!

Buying a house or condominium as an investment?

Buying a house or condominium as an investment?

Why should you invest money in real estate?

By investing in real estate, you can create a secure form of investment and build up assets passively, which in turn can have a very supportive effect on individual life satisfaction. Especially in the long term.

How exactly does this work?

We would like to discuss the most important principle of real estate as an investment: Leverage. Investing money in real estate only makes sense if you finance the whole thing with borrowed capital. This not only ensures maximum financial leeway – using more borrowed capital ultimately means using less of your own funds – but also ensures a significantly higher return. After all, the aim is to make a profit.

In concrete terms, this means that the repayment of your loan, which was taken out to finance your dream property, is not paid by you, but indirectly from the rental income from your investment property. For this option to work optimally, the rental income must cover the interest and repayments as far as possible.

After a few years, you will not only have passive income from the rental income and therefore the opportunity to build up long-term wealth, but you will also own a fully paid-off property.

What options are there

  1. A condominium as an investment
  2. House/ apartment building as a capital investment

The former tends to appeal more to people with average wealth and income, while the latter attracts the higher net worth segment.

Should you invest your money in real estate and for whom is it suitable?

The wonderful thing about real estate as an investment is that a suitable opportunity can be found for just about anyone to get closer to the dream of an investment property. From the ideal property to the right financing, we will advise you with the utmost conviction and knowledge. Individually according to your situation. Generally speaking, who…

  • are looking for a secure and sustainable investment
  • want to invest in tangible assets with stable value
  • wants to invest for the long term and has no immediate payout requirements
  • is solvent for financing or has sufficient equity that you would like to contribute
  • is looking for a tax-privileged capital investment
  • wants a high degree of co-determination
  • want to generate a passive source of income
  • wants to provide for old age or future generations

…is considered suitable for entering the real estate investment business. Regardless of whether you are interested in several or almost all points, take the first step and seek individual advice.

Should you invest your money in real estate now?

Is now a good time to do so? Thoughts that are buzzing around in the head of every future investor. To answer the question in one sentence first: yes, you should. But only in the right way. Let’s take a look at the current economic situation for a moment. We have had the highest inflation for 20 years now. Of course, this also affects investment transactions.

Basically, real estate is considered a tangible asset and is not devalued by inflation; it is a relatively stable investment.

With regard to real estate, however, the whole thing becomes problematic in the home ownership sector. Logically, loan interest rates also rise after the agreed term expires during inflation. The loan becomes more expensive. In addition, there are sometimes incalculable maintenance costs and the costs incurred are not tax-deductible for owner-occupiers. The home does not generate any income – in this scenario, you can only dream of making a profit.

The situation is completely different with a property as an investment. This tangible asset generates additional returns, which means that the investor benefits in several ways. This is because the return in the form of rental income also increases due to inflation. The financing loan, on the other hand, remains stable for the negotiated period and the loan amount does not change. As a result, the loan can be paid off more quickly as rental income increases. Investing in investment properties is an excellent way to protect yourself against inflation.

A condominium as a capital investment

As briefly mentioned above, there is the option of either a condominium or a (multi-family) house as an investment. After all, you want to invest your money properly in real estate. The property should also match the individual’s available funds.

A condominium is ideal for the average normal earner. In concrete figures, we are talking about around 10,000 to 30,000 euros in equity, which should generally be used. The rest is covered by a construction loan. Owning a condominium is also pleasing in several respects with regard to future-oriented investments.

The prospect of owning a fully paid-off property after a certain period of time leaves plenty of room for maneuver. Regardless of whether the long-term goal is rent-free owner-occupation, passing it on to future generations or simply securing an additional stable source of income, the condominium as an investment opportunity opens numerous doors.

Of course, as the owner of a condominium, it is also important to bear in mind that in some matters you must always consult with other owners when it comes to measures on the common property. On the other hand, operating and maintenance costs are also shared, and the financial responsibility does not lie with you as the owner alone.

As you can see, it is perfectly possible to invest money in real estate without a lot of start-up capital. But it’s not just the figures that need to fit; investors should also think about issues such as administrative tasks and organization.

The fact is that a single apartment requires much less effort than an entire house. And we even have a wonderful solution to put this aside: the 360-degree all-round carefree package including comprehensive management. If you book this, you don’t have to worry about a thing. A few examples:

  • The tap in your rented apartment is dripping? No problem, the condominium management (SEV) will take care of the problem.
  • The tenant gives notice and you need a new one? That’s not your job either, the rental management will take care of it for you.

The work stays with us, the time with you as the investor.

Multi-family house as a capital investment

A multi-family home as an investment is completely different. Here, the sole decision-making power lies entirely with you. You can therefore enjoy the maximum degree of independence, co-determination and flexibility. Let’s start with a little information about what you need to consider when investing in an apartment building.

A distinction must be made between investing in an apartment building or a single-family home. In contrast to the latter, the former often generates a significantly better return. The more residential units, the lower the other or administrative costs.

A single-family home, on the other hand, similar to owning several condominiums, can be a way to generate more wealth than with just a single apartment. However, with lower costs and investment outlay, as is the case with an investment in the form of an apartment building.

As the owner of a house with several tenants, you are also responsible to a certain extent for ensuring that there is agreement between the various parties. They also act as a point of contact in the event of disagreements. Of course, you can also hand over this responsibility and commission a management service.

Unlike with a condominium, as the landlord of an entire house, you are on your own when it comes to maintaining the property. You should always be able to put money aside for possible investments, such as renovation or refurbishment work.

However, it is also obvious that a house as an investment represents a larger investment overall and therefore requires more financial resources. In addition, the owner of such an investment also has a high degree of responsibility. As your consulting and support company, we will of course also provide you with comprehensive assistance with this investment option, both before and after the purchase.

Real estate as an investment – advantages and disadvantages

What are the advantages and disadvantages of real estate as an investment? Does real estate investment make sense?

Advantage: increase in value

After extensive analysis and careful consideration of the favored property, you should definitely pay attention to the possible increase in value of the property. This can be a very pleasant side effect and is particularly the case for properties in areas that are flourishing and developing their potential. But even apart from the increase in value, there are convincing aspects as to why you should invest money in real estate.

Advantage: leverage

The concept of leverage defined above means that the loan taken out is paid off virtually by itself (= through rental income). You can build up a passive income and own a fully paid-off property after some time.

Disadvantage: money is tied up

If you decide to invest your money in the form of real estate, you are opting for a long-term and future-oriented investment. This can be a disadvantage if you need the capital tied up in the property quickly. It is often only possible to sell a property quickly if the selling price is reduced. Notarial certifications also take time. Apart from this, however, there are other advantages.

Advantage: tax savings

Investment properties are a tax-privileged capital investment. Up to 2% of the investment amount can be written off each year. Properties are also in the best tax position when passed on to future generations.

As already described above, a property as a capital investment offers a high level of security even in times of crisis, as it does not lose value as a tangible asset and the return even increases in the event of rising inflation. The supreme discipline in saving tax with real estate is the listed property, where significantly higher sums can be deducted from tax.

Advantage: security

As mentioned above, a property as a capital investment offers a high degree of security, even in times of crisis. As a tangible asset, it does not lose value and the yield even increases in the event of rising inflation, yield-producing properties can protect against inflationary influences. However, these investment transactions do not lose any of their flexibility and scope for co-determination. It is not for nothing that they are popularly referred to as “concrete gold”. Over many decades, real estate has proven to be a relatively crisis-proof investment.

Real estate in Germany: where to invest

Given that real estate prices have been rising for 15 years, the question of where it is worth investing in real estate in Germany is absolutely justified. If your main focus is on sought-after and well-known locations, it can be quite risky to invest money in real estate. Excessive demand can be observed in the south and west of Germany in particular.

Nowadays, only those who calculate with great precision and are able to correctly classify decisive factors have a chance of achieving a satisfactory return. This means a large investment of time, especially with regard to identifying up-and-coming locations that may still be undervalued at the moment.

But where exactly do you start? And above all, how?

We have made it our mission to provide you with sound and active support in precisely these matters. As experts in off-market real estate, we are able to provide you with the best possible advice. More specifically, this means that we do not use online listings as a source for properties, but have an excellent network of estate agents, developers and also property sales. These channels enable us to find exactly where others don’t even look, in order to develop properties that have the best potential for future value appreciation.

A distinction is made here between top locations such as Munich and solid and upcoming locations such as Nuremberg, Hanover or Stuttgart. With our sister company Meine Immoentwickler GmbH, we only buy properties and plots in need of renovation in locations that we are 100% convinced of.

This gives our clients access to top renovated investment properties with potential for value appreciation and minimized risk. For larger clients with an investment volume of 1 million euros or more, we also purchase “tailor-made” properties.