Real estate investing tips and strategies for beginners

First steps to buying an apartment

Buying your first property – an exciting project for all real estate newcomers. There are a few things to bear in mind to ensure that your first property is not a flop. Before you start with real estate, you should acquire some basic real estate knowledge.

The principle of real estate as an investment is basically simple: you buy a property and have the purchase financed by a bank. The property is then rented out so that you receive monthly rental income to help you pay off your property. The financing expenses consist of interest and repayments.

Ultimately, your tenant is indirectly helping you to pay off your bank loan for you. You only have a small financial outlay, but you will own a paid-off property a few years later. Buying a property first steps: To get started, you should find out more about the following topics:

• Location analysis
• Example calculation of a yield property
• Calculating real estate returns
• Requirements for bank loans
• Administrations for real estate
• Different strategies for investors in real estate

If you’re a beginner to real estate investing, you’re bound to have some unanswered questions. It is better not to do anything on your own, but to seek advice from an experienced expert (e.g. from our team). We offer our clients offmarket properties that we have developed ourselves. We support you with financing and find the bank with the best conditions for you. And, if you wish, we can accompany you to the notary appointment and are available to answer any questions you may have in the months that follow.

In our blog, you can read up on the topic of real estate as an investment in advance. This will give you tips on what to look out for in the future before you actually buy a property. Our guide article gives you a good overview of the topic. Feel free to browse through the other articles on our site. You will also find topics such as cash flow real estate, retirement planning and comparisons with other investment options. Buying and letting your first property is no walk in the park – but neither is it rocket science if you are well informed.

Real estate investing tips for beginners

The three most important tips for investing in real estate

1. Location

   Choosing the right location for your property is crucial to the success of your investment. Several factors play a role here: micro-location, macro-location, development of a neighborhood, etc. A trained eye can recognize early on how a district will develop. Don’t worry, you don’t have to be able to do this yourself. We can help you find the perfect location. We have tools at our disposal that provide us with information on different locations and their future development to avoid the risk of buying a property in the wrong location.

2. Financing

   There is a lot of potential here. If the interest rate is only 0.1% lower, that already makes a considerable difference. There is also the question of how the property should be financed. Should the ancillary purchase costs also be financed? Should you bring in more equity? We will be happy to advise you on these questions. We have a large network of more than 500 banks and know the best financing concepts.

3. Rental yield

   A property as an investment has one major goal: to achieve an attractive rental yield. Depending on the location, this should be at least 4%. Of course, 4.5% or more would be better. The worse the location, the better the rental yield must be. Example: In Munich, a rental yield of 4.8 % is a good value. In the countryside, it should be significantly higher.

Real estate investing for beginners with no money

Many newcomers to real estate investment ask themselves: How much money do you need to invest in a property? It is usually required that at least the incidental purchase costs are covered by equity. This is known as 100% financing.

With 110% financing, the ancillary purchase costs are also financed. This form of financing is suitable for people who have a good income but no equity. However, we generally cannot recommend this approach, as the interest rate is usually higher with this type of financing.

Where to invest in real estate

We are also often asked where is the best place to invest in real estate in Germany. This question can generally be answered as follows:

• Investments are worthwhile in locations that have a positive economic outlook
• This means: no dependence on a single, large company; at best, many small and medium-sized companies that provide jobs; no regions that lag behind in terms of technological and infrastructural development
• Invest where the population balance is positive, i.e. more people move in than move out
• In addition to these macro factors, the micro location in a particular district is of considerable importance, as good and, above all, long-term rentability plays a significant role in the success of your real estate investment.

We are therefore currently developing properties in the Stuttgart, Nuremberg, Hanover, etc. regions.

Becoming a real estate investor step by step

All beginnings are difficult – as hackneyed as the well-known phrase may sound, that’s exactly how it is with real estate at the beginning. How do you start with real estate if you have no idea and have to start from scratch? There are two alternatives:

a) Acquire the theory: learn, learn, learn

Learning starts with the basic workings of the real estate investment asset class (buying an apartment/house, financing options, use of leverage, refurbishment if necessary, letting or fix & flip, tax basics, etc.).

If you have the stamina, you can gradually familiarize yourself with the various topics. If you want to take a shortcut, you can read summaries by well-known authors from the real estate sector such as Thomas Knedel.

If you have spent at least six months intensively studying the theoretical material, you can start with practical research into locations, banks/financing partners, tax advisors, etc. There are countless different tools for each area.

Realistically, it takes at least a year from learning the theory and taking the first steps in practice to buying your first property as an investment. If you can’t or don’t want to be that patient, b) is an option:

b) Take the shortcut: Benefit from the knowledge of others

If you don’t want to take this admittedly long route but want to get started with real estate as soon as possible, you should look for an experienced partner. A partner who, in addition to the necessary theoretical knowledge, above all has the practical experience to be able to quickly assess…

• ..whether an object has potential,
• ..how future financing conditions are likely to develop,
• ..which locations have a positive outlook from a macro perspective, etc.

Objective, balanced real estate advice, such as that offered by Meine-Renditeimmobilie.de, is valuable for any newcomer to the real estate sector. More experienced real estate investors also make use of our properties, which are usually sold off-market.

Property investment: advantages and disadvantages

Starting a real estate business has huge advantages over other ways of investing money. However, as always, there are also disadvantages, which we would like to discuss below:

Advantages:

• A secure and long-term return
• Tax advantages
• Serves as a retirement provision
• Provides protection against inflation
• Long-term increase in property value

Disadvantages:

• Rent default risk
• Possible administrative costs (tenant management)

The bottom line is that there are many advantages that other forms of investment cannot offer. Especially in times of economic ups and downs, a tangible asset such as an investment property is an attractive form of investment to emerge as a winner from the current inflation and take advantage of your own opportunities. Find out more about apartments as an investment in a free info call (by phone, Google Meet or in one of our offices).