Investing in real estate has many advantages. But which ones are they? Have you ever asked yourself that? I do. And that is exactly what this article is about. I've always wanted to invest in real estate, ever since I was little. Nevertheless, I then asked myself whether there wasn't also a "reasonable" reason. Because a childhood dream is all well and good, but as a banker I've learned to question such dreams from time to time. As a result, questions came to my mind like: – Is it all worth it? – Are there other really "reasonable" reasons? After some research I was able to answer these questions. Yes, there are reasonable reasons, several in fact. And I would like to list these reasons for you: What do I mean by intrinsic value? By value, I simply mean tangible value. There is something behind it, you can see it and touch it.Many people struggle with stocks and other investment products because they cannot touch and hold them. They are not within their reach. It's different with real estate. You can touch them and even hug them if you want? Joking aside. What I mean by that is that a property is a tangible asset. You have real value behind it. The land has value and so does the property. You're probably thinking that I've got total damage, right? After all, real estate often costs from EUR 50,000 upwards. Nevertheless, you need a relatively "small" amount of equity to invest in real estate. Why is that? You can have your property mortgaged. And that's a big advantage. Because your property is one of the few investment opportunities that you can borrow at a fairly high percentage (usually 80-90%).So you don't have to pay the full 100% for your property, just 10-20%. Isn't that great? Your property costs EUR 300,000. How much equity do you need for your property? Let's take a value of 20%. Then the calculation would look like this: EUR 300,000 x 20% = EUR 60,000 So you only need equity of EUR 60,000 for your EUR 300,000 property. So I think that's relatively small. What do you say? What is meant by net worth? Your net worth is your total assets minus your debts. For example, you have the following financial situation: Assets: – Call money account EUR 10,000 – ETF depot EUR 20,000 – A condominium with a value of EUR 80,000. Debts: – EUR 64,000 for your condominium – EUR 5,000 for your carSo you have total assets (gross assets) of EUR 112,000. (EUR 10,000 + EUR 20,000 + EUR 80,000 = EUR 112,000) And debts totaling EUR 69,000 (EUR 64,000 + EUR 5,000 = EUR 69,000) Now if you subtract your debt from your gross worth, you have your net worth. EUR 112,000 – EUR 69,000 = EUR 43,000 But how can your real estate grow your net worth faster? That can be explained quickly. You take out a loan for your property. You repay this loan regularly. The value of your property remains stable. So your credit is getting smaller and your net worth is getting bigger. If we stick to our example above, you have an apartment for EUR 80,000. And your loan of EUR 69,000 is getting smaller every year. Since your net worth is the difference between your total assets and your total debt, it keeps growing. Another wonderful effect is that you don't have to pay off the debt yourself. Your tenant will do this for you with the rent he has paid. [thrive_lead_lock id='501′]Hidden Content[/thrive_lead_lock] By investing in real estate, you have the opportunity to generate additional income on top of your monthly 9-to-5 job. This makes you less dependent on your employer, which in many cases leads to a more relaxed approach to work. You are less stressed and you have more financial options, e.g. for a vacation or other nice things. How? Do I protect myself from inflation by owning real estate? It is exactly like that. A short twist for that. What is inflation doing? It reduces my purchasing power because it reduces the value of money.What is real estate again? Exactly, a real asset. Consequently, this is not affected by inflation. Because it lowers the value of money. In addition, inflation is even working for you. Because inflation decreases the value of money. What did you record when you bought your property? A credit exactly. This is a monetary value. In other words, the value of the loan also decreases. The sum x is still there, but the purchasing power behind this sum and thus the value has fallen. Isn't that awesome? This point goes hand in hand with the point of borrowing. Because you don't finance the property with 100% equity, but only with 35% (20%+15% additional costs), this has a positive effect on your return. It should be said that there are several yield calculations for real estate. I am referring here to the return on equity for the purchase of an investment property.Exactly how this is calculated would go beyond this blog article. Therefore, I will go into the return calculations in a separate article. The formula for this is very simple: (Annual Rental Income Cost) x 100 / Purchase Price = Return on Equity – Purchase price of our property: EUR 300,000 – Annual rental income of EUR 24,000 Since each property is individual, it is not possible to give a flat rate for the costs. For our example, we take 20% of the gross annual rent, i.e. EUR 4,800. So our calculation looks like this: (24,000 – 4,800) x 100 / 300,000 = 6.4% If we don't pay the full purchase price, but only finance EUR 60,000 (20%) and the rest, then our return looks completely different: (24,000 – 4,800) x 100 / 60,000 = 32% So you could quintuple your return. Just by taking out a loan.Anyone who has ever dealt with it knows that there is always something going on in a house or apartment. Be it the windows that pull or the heating system, which dates back to the Stone Age. These are all measures that make you happy as an investor. Maybe not at the beginning, but later. Because if you optimize your property, it increases in value. Which means you might be able to take out a bigger loan, charge more rent, and/or get a higher selling price. Consequently, such optimization potentials are real gold mines. Housing is one of the most important human needs. We all like having a roof over our heads. And with that, as a real estate investor, you ensure that other people can afford this roof over their heads. Many real estate investors have been implementing this concept for decades. Investing in real estate is therefore not only topical at the moment, it is a permanent topic. If you look at cities like Frankfurt, Berlin, Hamburg or Munich, the number of housing requests has clearly exceeded the supply of housing for a long time. As a real estate investor, you have to pay tax on your income from renting and leasing, there is no way around it. But as an investor you also have a lot of tax advantages. In this way, you can claim revaluations for your property for tax purposes and even write off the annual deterioration of your property over several years. Another tax benefit is that for rented properties, you can also deduct the interest you pay on your loan from tax. Here is a brief note on the tax advantages: Please do not buy a property just because of the tax advantages. These should always be the icing on the cake. The object should also carry itself without these advantages. What do I mean by "tax in hand"? It's simple. As an investor, you set the tone for where the journey is going. How about a stock, for example? If you want to influence what happens at the public company. how can you do that You can take part in the general meeting and try to steer the course the way you want with your voting rights. Your voting rights will likely be as little as 1% unless you have a huge number of shares. What do you think? Does this approach have any chance of success? I think less so. Exactly, that's a major disadvantage of many investment options. You are only a passenger and cannot really help determine the route. When investing in real estate, you have the reins in your hand. If you say a new bath is necessary, then so be it and it will be done. This is a major advantage of the investment. In this way you can to a large extent help shape the development of the rent and the value retention or even the appreciation of your property. In order to look after a larger portfolio of real estate, many hands are often necessary. Management so that everything runs smoothly in the property and the tenants don't all call you if the toilet doesn't work. A tax consultant for the tax return and the development of a tax strategy – as well as many craftsmen and appraisers to keep the property in good shape. You know the majority of these people as an investor because you hire them to do these things for you. 12.) Bonus reason: You increase your financial leeway Hard to believe, but a real estate investment also increases your reputation with your bank. Well, in fairness it should be said that this only applies if you already own a partially or even fully paid off property. This shows the bank that you are a trustworthy partner and that you know what you are doing. You can often negotiate better conditions and if you have payment difficulties, the bank has the other property. As you can see, there are many points in favor of investing in real estate. This list does not claim to be complete. There are certainly many other important points. Here they are again at a glance: 1.) Real estate offers you real intrinsic values 2.) You can move a lot with "little" equity 3.) Your net worth increases faster 4.) You produce an additional income 5.) Real estate protects your money from inflation 6.) You can leverage your returns 7. ) Real estate often offers you high optimization potential 8.) Real estate investments are not a fashion trend 9.) Real estate offers real tax advantages 10.) As an investor, you are in control 11.) You know most of the people involved 12.) You increase your financial leeway And now it's your turn. Can you think of any other advantages? Or do you still have questions about the advantages mentioned? Then simply write a comment on this article.
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