Real estate investment is easy
Real estate investment
Real estate investments at a glance
A property is considered a safe and profitable investment. It should not be missing in any portfolio if you want to save assets. Often one even hears the term “concrete gold” when referring to real estate. It makes it clear how popular buying a home is in Germany. But how can you invest in houses or apartments? It is not always necessary to buy your own property. There are interesting alternatives that are just as safe and profitable.
Investors should know about these five real estate investments
Before deciding to invest in houses or apartments, the alternatives must be compared. In principle, there are five different ways of investing in concrete gold.
You can choose to purchase:
What are these individual investment opportunities all about?
The real estate purchase
Buying a property is arguably the best-known way of investing in concrete gold. The investor can use his own home himself and does not have to pay rent after a few years of age. He can also rent it out to a tenant as an investment.
The real estate stock
If you want to invest your money in stocks in the real estate business, you buy shares in public companies that are active in the real estate industry. Such companies develop, build, operate and market houses. These are mostly multi-family houses with commercial or residential use.
The real estate bond
Real estate bonds are fixed-income securities. They are usually secured by a mortgage. A bond is a debt security. A bond is usually subordinated collateral. This means that in the event of bankruptcy, all outstanding claims of the creditors will be reimbursed first. A bond is therefore a real estate investment with a certain level of risk. It is not suitable for every investor.
The real estate fund
If you want to invest your money in real estate at manageable costs (here more about costs for investments), you might choose a fund. With a fund, a fund manager collects money in order to invest it in various objects. He looks for properties with a high return. As an investor, you have the choice between open and closed real estate funds.
In an open real estate fund, the investment volume is usually unlimited. Fund assets grow when new investors invest money. The shares can be bought and sold at any time. For the investor, the costs of an open fund are usually manageable.
A closed real estate fund is characterized by a limited volume. When all the shares have been sold, it is closed. The investor must hold his share until the end of the term. In the case of closed-end funds, a minimum investment is usually required. This means that the investment volume per investor is higher.
Equity crowdfunding in real estate
Real estate crowdinvesting is still a rather unknown form of financial investment in Germany. With this type of investment, a single investor does not have to raise a large sum. Rather, many investors join together to form the so-called “crowd” and invest in larger construction projects. A real estate investment is possible even with small amounts. Nevertheless, the return is attractive. Real estate crowdinvesting is a form of investment that was previously reserved for institutional investors.
Five criteria determine an investment
As an investor, you should look at the following five criteria in order to assess a capital investment.
- Risk diversification: No investor should put all of their money into a single investment. In order to reduce the risk of losses, it makes sense to distribute the amounts over several investments. If you put everything on one card, the risk of losing all of your money increases.
- Minimum investment: The minimum investment determines how much money you have to invest. Anyone who can invest 50 euros per month has other investments to choose from than an investor with a volume of 5,000 euros or 10,000 euros. For small investors, an open real estate fund or crowd investing is ideal with a monthly contribution of 50 euros. If the volume is higher, you might buy your own property or a closed fund share.
- Capital commitment: Once the money is invested, it can no longer be accessed. That is why you should only put on what you don't need. A strong capital commitment reduces flexibility. This is something to keep in mind before choosing an investment.
- Costs: Every investment comes with a cost. Sometimes there are expenses for the brokerage, for the broker, for the administration or for the maintenance and modernization. Before you close, you should compare the costs.
- Co-determination: With some investments, investors have the right to co-determination. With other investments, decisions are left to a professional administrator or manager. Which choice is right depends on how much you want to influence as an investor yourself.
The right real estate investments for every investor
The variety of financial investments makes it possible: There is at least one suitable option for every investor to invest in real estate.
Real estate purchase
Anyone who buys a house or apartment for their own use or as an investment naturally has no risk diversification. The buyer invests all of the money in a single property. Those who want to live rent-free in old age opt for self-use. If you want to expand your financial leeway, rent the property. However, the entire assets of the investor are often tied to a property. The costs are incurred for the purchase, for the management and for the maintenance. It is therefore important to carefully consider whether a property is the right investment. It is suitable for investors who want to invest for the long term.
Real estate stocks
If you want to buy real estate stocks, you should pay attention to a broad diversification of the securities. It should also be considered that prices have risen sharply in the past. Nobody likes to judge whether further price increases are possible. Nevertheless, stocks are still an investment with an attractive long-term return.
Real estate bonds
By issuing a bond, a company takes out outside capital. It depends on the creditworthiness of the issuer whether the investor will get the loaned money back at some point. That is why bonds carry a certain amount of risk. Many securities are complex and difficult to understand when it comes to contract design. That is why bonds are usually not suitable for newcomers to the real estate business.
Real estate funds
Investing in open funds is possible even with small amounts. The capital commitment remains manageable By including several properties in the fund, you achieve a good risk diversification. A real estate fund is therefore well suited for investors who want to invest with solid returns over the medium to long term. Closed funds lead to a high and long capital commitment. They can be risky and are therefore rarely an option for private investors.
Equity crowdfunding in real estate
With crowdinvesting, the investor takes part in attractive return opportunities even with small amounts. The capital tied up is manageable. The risk diversification is high, the risk of loss is rather low. That is why crowd investing is ideal for private investors who want to invest in the medium term.
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