Contrary to popular belief, it is possible to invest in real estate even with little money. The market offers a large number of investment opportunities that can bring you attractive returns as a private investor. The market has become significantly more flexible and dynamic. This creates the opportunity for people with little equity or less money to take advantage of opportunities such as real estate funds or real estate ETFs. So why not build passive income by investing in real estate? Find out here what opportunities there are on the market to invest in real estate, so that you as a private investor can also benefit from them. Broad diversification is also very important when investing in real estate. With a savings plan, certain asset classes can be saved from as little as 25 euros per month. – No equity capital is required to invest money in real estate. There is no such thing as a perfect time – even when investing in real estate, you should just start at some point instead of analyzing more and more. – Check in advance which asset class suits you best if you want to invest in real estate. Disclaimer investment / tax advice How sensible is it to invest in real estate? The possibilities of investing in real estate are very diverse and can quickly attract investors with high returns. Even if this seems very interesting at first glance, you should always be aware of where you are investing your money and what risks are involved. As an asset class, real estate offers interesting profits and very good transparency. As a result, the "real estate" asset class is considered a very stable financial investment. Nevertheless, investing in real estate has its advantages and disadvantages, which you should always take into account.So how sensible is investing in real estate? As a private investor, you should ensure good diversification. Because real estate brings good profits and a high level of transparency, this area should not be missing in your portfolio. How can small investors also invest in real estate? In addition to buying a property, digital investment opportunities offer you many opportunities to generate returns. It is not always necessary to bring a lot of money or a high level of equity with you. A real estate fund is an association of several investors. The money invested is used by the companies to realize large real estate projects. Such projects are usually capital-intensive projects. This can be, for example, entire apartment buildings, shopping centers, retirement homes or hotels. The resulting rents result in a return on the investment for the investor. Investors should make a clear distinction between open real estate funds and closed real estate funds. With open-ended real estate funds, the investor acquires shares in a company. The share certificates can usually be sold again after two years at the earliest. However, you must register the sale at least one year in advance. With a closed real estate fund, as an investor you invest directly in a real estate project and thus finance the implementation of the object. You therefore participate in a special-purpose company. In order for the project to be realized, your money is invested for a previously defined period of time. Selling shares early is very complicated and often difficult or even impossible for small investors. Real Estate StocksInvesting in real estate by buying real estate shares is also possible. This is how the investor buys shares in a company. This company is active in the real estate sector and trades with or manages real estate from its own portfolio. The core activity of such companies is often to buy real estate cheaply, to renovate it and to sell it again at high price or to keep the acquired real estate in the real estate portfolio for the long term. In contrast to a real estate fund, a real estate share has no holding period and can be sold again at any time. In Germany there are a large number of real estate shares that are listed in the share indices Dax, MDax, SDax or the RX REIT. The largest companies in Germany include Vonovia, Deutsche Wohnen, TAG Immobilien and LEG Immobilien. REITs REITs are a special form of real estate shares. The term REIT stands for "Real Estate Investment Trust" and means nothing other than investing in real estate stock corporations. These real estate stock corporations are invested in land and real estate. You can also benefit from income from the rental, sale or leasing of real estate and land the investor, which makes this type of investment very attractive, since you participate directly in the returns. REITs combine a direct real estate investment with a traditional share investment. Since REITs companies benefit from tax advantages, among other things, the returns can be higher than with other asset classes. This in turn enables a higher distribution of income to the investor. Learn more about REITs and their characteristics. We also took a close look at the best REIT real estate shares. real estate ETFsAn index is represented by a real estate ETF ("exchange-traded fund"). As an investor, you can invest money in such an index in a targeted manner. ETFs are available for a wide variety of sectors, such as automotive, energy or technology -Industry. In contrast to general ETFs, real estate ETFs only reflect the real estate sector and consist exclusively of shares in such companies. A real estate ETF is therefore particularly suitable for investing in real estate for small investors, as an investment with small contributions is possible. Another advantage is investing through a savings plan. The investor invests small amounts at certain intervals and thus benefits in the long term. With some providers you can start from as little as 25 euros per month. A real estate ETF is particularly useful if you have a long-term investment strategy, because as a small investor you can benefit from the compound interest effect.Crowd investing is another way to invest money in real estate. Various crowd investing platforms offer the opportunity to invest in real estate projects with relatively small sums. The provider presents these real estate projects in advance on its website and has a minimum term. The money invested is ultimately used by the company to realize the real estate projects. The investor benefits here with mostly attractive returns and even profit sharing if the project is successful. Crowdinvesting usually involves closed-end real estate funds. As a small investor, you should therefore be careful, because it is not easily possible to sell the shares again prematurely. With high returns, there is often a higher risk. This is also the case here. If the real estate project goes wrong, the small investor also bears a risk. As a rule, the large investors get their money back first. The real estate project offered should therefore be well analyzed so that you, as a small investor, are aware of all the risks. Rent out a purchased property Probably the most direct way to invest your money in real estate is to buy a capital investment in the form of real estate. However, this form of investment is associated with the highest capital expenditure. When renting a property, the investor benefits from the rental income generated by the property. Before you buy a property, you should calculate the purchase very well in order to get an overview of a possible rental yield in advance. The rental yield serves as an indicator of whether the investment is worthwhile or not. A rule of thumb states that the rental yield should be between four and six percent per year. Formula for calculating the rental yield:Income after tax x 100 / equity contributed If you buy and rent a property, with each installment payment to the bank (your borrowed capital), a small part of the property becomes your own property. This has the effect that, as an investor, you expand your total assets bit by bit. Particularly interesting: Even with little money you can invest in real estate. This means that it is not necessary to buy a condominium or an apartment building in order to be able to generate a return on real estate. Because digital investment opportunities, such as investing in REITs, real estate shares, real estate funds or real estate ETFs, also give small investors the opportunity to invest money in real estate. 5 tips for investing in real estate Investing in real estate is also possible without a lot of money. Digital investment options such as real estate ETFs or real estate funds also give small investors the opportunity to invest sensibly in the real estate market. Do the defined investment goals match the expected risks and returns? We recommend that you carry out an exact calculation in advance to check whether risks and returns are in a healthy relationship and whether they are also sustainable for you as an investor in the long term. There is no perfect time. As an investor, it is advisable to carry out detailed research and calculations, but at some point you should just start. Especially with a long-term investment horizon, it is important to start instead of waiting for the right time (which may not come). Investing in real estate does not require equity. Due to the different investment options, small investors can also invest in real estate without own capital. Finally, it is also possible to invest in real estate funds, ETFs or shares. An exact calculation of the possible investment amount must be determined in advance in order to be able to choose the type of investment in real estate. This question should be answered honestly so that the investment can be maintained in the long term. How high are the returns on a real estate investment? When investing in real estate, the level of return depends on the asset class. If you decide to buy and rent a property, the rental yield should be at least four to six percent. How high your rental yield is depends, among other things, on the location and condition of the property. Keep in mind that buying a property usually requires a significantly higher capital outlay. On the other hand, if you look at an open real estate fund, the average annual return varies from three to eight percent. A driving factor for partially lower yields is the corona pandemic. Overall, however, a positive trend can be seen in open-ended real estate funds. Compared to recent years, real estate ETFs have achieved very attractive returns. These were an average of five to eight percent per year. Above all, the relatively low costs, which make the real return higher, have to be taken into account. With the return you should always make sure that, for example, costs and inflation are taken into account in order to get the real return. This is the profit that is left for you at the end. Can you invest in real estate with little money? The answer to this question is: Yes, it is possible to invest in real estate even with little money. As an investor, you decide how much money you want to invest. Once this has been calculated exactly, you can select the appropriate asset class. When investing in an open real estate fund or a real estate ETF via a savings plan, you can sometimes invest from as little as 25 euros per month. There are also crowdinvesting providers who offer the option of investing from 25 euros. In contrast, you have to invest significantly more money with closed-end real estate funds. In order to be able to include a closed real estate fund in your portfolio, you usually have to raise at least 500 euros. Investing in real estate is still very attractive. It is not relevant whether you as an investor want to invest large or small sums. The large number of different investment options offer an opportunity for attractive returns for every wallet. Depending on the asset class, you can invest from as little as 25 euros per month. However, if you are more the type of person who would like to own a property, you can also consider buying a property. The area offers you many opportunities to invest, which has also proven to be useful with a look into the future.
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Investing in real estate 2 years, 2 months ago