Apartment as an investment: How much is the investment worth? A savings account has long ceased to be worthwhile. Real estate offers other opportunities to make more out of your money. An apartment as a capital investment is considered to be "concrete gold" of stable value. But how much is the investment in real estate really profitable? Here we show you what investors should look out for when buying condominiums. Real estate boom: how useful is an apartment as a capital investment? The demand for real estate could not be better. There is still a veritable boom on the real estate market. However, high demand also means that prices are rising. And not only for those interested in owning a home, but also for buyers of capital investments. Despite the still low interest rates, prospective buyers should therefore think carefully about whether buying an apartment is still worthwhile for them as an investment and whether they want to invest.Due to the low interest rates for real estate, many buyers are entering the market. This is understandable because of the temptingly low interest rates, but on the other hand, the purchase prices continue to rise. Opinions differ on how long the real estate boom will last. Many believe that the market in metropolitan areas is already overheating. When buying an apartment as a capital investment, it is all the more important to calculate exactly whether the investment is worthwhile. What are the risks involved, what are the costs? Good return, little risk In short: A real estate investment is worthwhile if the return is good. Nevertheless, you should weigh the return and risk of an investment against each other. Of course, the risk should not be too high, otherwise there will be no profits and you may even face losses. These four points should be met so that the purchase of an apartment is worthwhile as an investment: The property is not overvalued when you buy it The property value increases Renovation costs are kept within limits Rents increase If all four conditions are met, you can buy with peace of mind. Unfortunately, such an ideal case can only rarely be expected. Nevertheless: If as many of the four requirements as possible are met, you minimize the risk of buying real estate enormously. However, sometimes predictions are difficult. It is all the more important that the reliable forecasts for the desired property prevail. What are the risks of real estate investment? An investment always involves risks. When buying a home as an investment, the greatest risks are when one of the following scenarios occurs: The boom in the real estate market endsThe rental price brake is implemented nationwide and nationwide. More and more apartments are being built Of course, one can only speculate about how the real estate market will develop in the coming years. A certain level of security is therefore important for you: If you are interested in real estate as a capital investment, you should ask yourself how you can protect yourself against risks that can be traced back to developments in society as a whole. The consequences of such developments for investors should not be underestimated. If the real estate boom ends, the apartment could also lose value. The investment would therefore become unprofitable or even loss-making. Even with a Germany-wide rental price brake, rental income would most likely decrease. If more apartments are then built, the supply of apartments will increase. That would also have a negative impact on the rent level and can depress returns. Buying a home: when is real estate overvalued? A property is overvalued if the relationship between investment and expected profit is not right. In other words: If the purchase price when buying an apartment as a capital investment is so high that no or only very low profits are generated despite owning the property, the relationship is not correct. With apartments, you invest primarily in the purchase price and in possible renovation work. The profits are rental income and any increases in the value of the property. Whether a property increases in value cannot be influenced by individuals. Therefore, statements about the increase in value are pure speculation. Rental income, on the other hand, can be estimated well. There are, for example, rent indexes with comparative rents that you can use as a guide. You can either request a rent index from a tenants’ association or you can search the internet. The information is often available online free of charge. Apartment as an investment: Minimize the risk If you want to invest in real estate as a capital investment, you should also keep these four points in mind in your considerations in addition to the risks. Overvaluation: The rule of thumb here is: Buyers should not pay more than 25 times the annual rent for an apartment, otherwise there is a risk of the property being overvalued. The higher the initial investment, the longer it will take to make profits. With overvalued properties, the initial investment is too high. Increase in value: There are no reliable statements here, it is more speculation. Therefore, the increase in value as a factor cannot really be included in the calculation, because the more speculation, the higher the risk. Renovation costs: You should get help here. An appraiser can professionally assess the condition of a property. Here, too, there is a simple rule: the better the building fabric and the less you have to invest in maintenance measures, the lower the costs. Otherwise, such expenses reduce the return considerably. Rental income: If you as an investor can count on secure and solid rental income, buying a condominium as a capital investment makes sense. One can only speculate as to whether rents will rise. But the rent index in particular provides reliable information about rent developments in the past. Long-term rental income can therefore be better consulted in the calculation than, for example, the possible increase in value of the property. Apartment as an investment: Which area is lucrative?Peripheral areas and medium-sized locations are the major sources of returns when it comes to real estate investments. The favorite argument of real estate agents is still "location, location, location", but you have to take a close look here. In the popular trendy districts of major German cities, the purchase price for top locations is often set too high, and the apartments there are often overvalued rental income does not necessarily have to look for the right condominium in the trendy district. An apartment is often more promising as a capital investment in the outskirts of metropolitan areas. In the "belt belt" many tenants are deliberately looking for a quieter residential area close to the big city. It may not be possible to achieve astronomical top rents here, but you can count on solid and long-term rental income that offers a good basis for real estate financing.Residential areas in the inner city that are not part of the trend districts, but are not too far out, can also be interesting as an investment. One speaks here of the middle position. Although there are often no larger green spaces around, there are shopping facilities and public transport stops nearby. Here, too, no top rents can be achieved, but solid rental income. The rule of thumb here is: Location is important, but it doesn't have to be a top location if you want to use the apartment as an investment. What is important when making a purchase decision? If you need help with your purchase decision, you can use three factors as a guide: 1. The location The condominiums in the trend districts of German metropolises are not the most interesting. The return on real estate in the suburbs, in middle locations and in the so-called medium-sized towns is much better. Medium cities have up to 100. 000 residents. They are particularly interesting for investors if they are close to major cities. In concrete terms, an apartment as a capital investment in Darmstadt could bring more returns than a comparable property in Frankfurt am Main. The same could be said of Potsdam and Berlin. 2. Population development The population development is also important when making the decision, because the apartment should be rented out as permanently and long-term as possible. The better the population development, the more likely this is to be guaranteed. Statements about this can be found, for example, on the website of the Federal Statistical Office (www.destatis.de). Under the heading of population development, immigration and emigration in regions, the age structure of the population and much more can be displayed. In particular, those who are looking outside of the trendy areas of the metropolis could find interesting data here and thus determine which area is suitable for buying an apartment as a capital investment. 3. The infrastructure Even those who decide to live in a small town or close to nature as a tenant do not want to spend too much time traveling. The infrastructure is therefore also important for investors when deciding to buy a property. Are shops, schools and doctor's offices nearby? Is there a good connection to public transport? How far is it to the nearest freeway? The better the infrastructure is developed, the more worthwhile the investment is. When will the banks give money? Banks want to make more money with the money they lend. So they grant loans if three conditions in particular are met: There are guarantees.As collateral, banks accept different sizes – the more, the better. Borrowers should ideally have a permanent position with a secure salary. The Schufa score should be impeccable and there should be other assets. This can be real estate in an attractive location that has already been paid for or capital investments such as securities. The property is valuable. A property is valuable if it is in the right location and is in good condition. In short: the property increases in value over time, but at least it remains stable in value. The rental income is secured. If continuous rental income can be expected, banks rate this positively when lending. After all, a permanent cash flow can then be expected. Apartment as an investment: conclusionWhether a property is a good investment and thus generates a good return is always a matter of decision that requires careful consideration. However, a comparison with other forms of investment often helps. Stocks, for example, can yield average returns of seven percent without necessarily taking too much risk. On the other hand, the stock market is constantly in motion and the investment therefore requires a lot of commitment and time. Real estate investing, while also requiring your attention, is not as labor intensive as stocks. The guideline here is: A property should achieve a return of four to five percent so that one can speak of a worthwhile investment and the "concrete gold" is stable in value. Would you like to invest in real estate? To determine if your investment is worth it, you need to determine the economics of your investment… moreInvesting in shares is becoming more and more attractive for many private individuals. Real estate stocks are also becoming increasingly popular… more In economically uncertain times, when interest income is close to zero or even negative interest rates are charged, investors are looking for lucrative… more The main argument for real estate buyers to buy a rented condominium: to invest their equity securely and as profitably as possible. A… more Post written by Florian J. Fischer Immoportal.com as a guest at Hausgefrage Immoportal in Immobilien Zeitung Immoportal.com visits Immo-Austria What can we do for you? In addition to specialist knowledge, Immoportal.com offers much more. The following free services are available: property prices This real estate market report shows you what your house or apartment is worth? real estate agents in your areaHere you will find the right real estate agent in your area. Inspiration and craftsman search Here you will find ideas, suggestions and the right partner for your project for many trades around the house, such as building a chimney, green roofs or seamless bathrooms. TOP item What if the mortgage certificate is missing? You can no longer find the mortgage certificate for your house? Without this deed, selling the property could be difficult. We give you a few tips on how to solve the problem. What is better equity or debt capital? And which ratio is optimal? Realizing a real estate project without external financing is rather the exception. In practice, a mix of equity and debt is usually used. What are the advantages and disadvantages of the individual financial structures Self-disclosure: What does it say and what do I need it for?If you want to buy a house or an apartment, you will usually need a loan from the bank for financing. Since the bank wants to check in advance whether you are able to pay the installments later as agreed Ordering a land charge: What you should know as a homebuyer Found a property you want to buy? Then the next step is financing. With a land charge order, you offer your bank the security that it requires to grant a loan. Everything Borrow money for your property safely with a loan agreement If you want to fulfill your dream of owning your own property, you usually have to raise more money than the current account balance indicates. The common solution to still be able to finance the construction or purchase of a house is Construction financing: Does disability insurance make sense here?Do you want to buy a property and are thinking about solid financing? Then you should also think about the issue of disability.
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