A property as an investment – have you already thought about buying a property? Or would you simply like to find out whether investing in real estate pays off? In any case, you are in the right place if you want to read about it, – when a property is worthwhile as an investment, – why real estate is so popular as an investment, – Which real estate is available as an investment at all and other points worth knowing about investment properties. If you are thinking about buying real estate, as an investor you should consider two important requirements: Buying real estate is particularly suitable for you if you have a secure job and own equity. Of course, as with other forms of investment, investing in "concrete gold" is associated with certain risks. In the end, the advantages of the property depend heavily on the location factors and the long-term development of your property. During the Corona crisis, not only investment properties have proven to be a popular capital investment. Private individuals are now also increasingly investing in condominiums, as these have established themselves as very good old-age provision. What is a good return on real estate? Due to the low level of interest rates, an investment in a house or apartment is not only considered stable in value, but also promises significant returns. Product developers and brokers expect a range of 4 to 6 percent per year. Returns of this magnitude – i.e. if more than five percent can be generated – were last seen on interest on savings accounts in the 1980s and 1990s. Are these fantastic returns realistic?You will find this out at the latest when calculating the yield for your property. Anyone who is interested in investing in real estate should take a close look at the model calculation or the agent's information on the expected return. This information is extremely important: In an exemplary return calculation, investors' expectations are met above all if the property value and rental prices rise significantly up to the point of sale and maintenance costs remain low. However, these assumptions are often extremely optimistic. Why is real estate popular as an investment? Many investors want to build wealth over the long term. Since fixed or call money hardly ever yields interest and the stock market is constantly up and down, investing in real estate offers a very good opportunity, e.g. B. to earn a fortune through rental income and to rely on a continuous increase in value. Experience shows that the German residential real estate market is very stable and the strategy of generating wealth through rental income from real estate often works. Therefore, real estate is extremely popular as an investment and the purchase of an investment property often surpasses other capital investments with its numerous advantages. Which real estate as an investment? Not all apartments are suitable as capital investments. In order to achieve a return of between 3 and 5 percent, you must consider other issues: – The purchase price and the rental income to be achieved must be in reasonable proportion. – Also take a look at the tenant structure. – In addition, the property should have good substance and no hidden defects or disadvantages. – The rental price multiplier should also be reasonable. We have compiled more detailed information on this for you below. In places like Munich, Stuttgart, Frankfurt or Hamburg, the purchase prices are usually so high that owners have difficulty finding solvent tenants who can afford the extremely high prices. Therefore, pay close attention to the location when buying. Real estate as an investment – why is the location so important? B locations, for example medium-sized cities, are often very attractive locations. Also, when looking for a good location, you shouldn't just look at the immediate area, but also consider the region. First take a look at the area around the apartment: – Are there shops nearby? – Are there general practitioners and specialists nearby? – Are there cafes and restaurants nearby? – How well connected is the area to public transport? – What is the parking situation on site? You should also consider which tenant target group you are addressing. Students, for example, prefer different areas than young families or seniors. The reason for also looking at the macro location (i.e. at the region) has to do with the value of the property. The faster the location grows, the better the prospects for an increase in the value of the property. Investors who pay attention to this when buying also have a better chance of finding new tenants quickly when a change of tenants is imminent. Therefore, clarify the following questions: – What is the economic outlook for the region? – How is the population development? – What is the vacancy rate for rental apartments? Location and risk – how are they related?When it comes to location, there is no explicit rule or formula that you can follow when making a purchase. You always have to assess for yourself how big the risk of a property as an investment is for you. The dilemma of location is often that – the better it is – the higher the price when you buy it. It is therefore quite possible that you will achieve a lower return when financing a property in a top location. If you invest your capital in a property in a region that is not yet so expensive, you can hope for higher returns. However, since you do not know how a certain region will develop in ten years, you cannot always count on a high return when financing or buying a property in a B location. But definitely consider properties in cities like Heidelberg, Mannheim, Ludwigshafen or Heilbronn. With regard to the macro location, these are just as attractive as metropolises such as Hamburg, Berlin or Munich. B-cities are large cities with 250,000 to 650,000 inhabitants, in which mainly German investors are represented. Attractive B-cities often feature universities and respected local employers, or benefit from being close to one of the metropolitan areas. Financing a property is not recommended in rural areas. Above all, these are places that are not in the catchment area of a large city and are poorly connected to the transport network. In summary, you should invest your money in a property that is located in a city with more than 100,000 inhabitants. This makes it easier to generate reasonable rents. In addition, the property should be very well connected to the public transport network. Shops nearby and ideally doctors, day-care centers and schools within walking distance are further plus points. Also make sure that the neighborhood has a homogeneous and stable structure. The shortest formula for location is: Can you imagine living there?If you answer that with yes, that's a good argument for the purchase. How high should the rental price multiplier be? Now we come back to the already mentioned rental price multiplier. When buying real estate as an investment, the rental price multiplier gives you information about which purchase price is justified for a property. Depending on the location, a multiplier of 25 is considered appropriate. In attractive large cities it can also be 30 or more. This means that a property should not cost more than 25 to 30 annual rents. If a condominium brings in 1,500 euros a month in net rent, that is 18,000 euros a year, or 450,000 euros in 25 years, or 540,000 euros in 30 years. However, a general evaluation of this key figure is only possible to a limited extent, since the calculation does not include the incidental acquisition costs and the running costs for management. It therefore only gives an approximate indication of whether a property offered is rather expensive or inexpensive. So if you are considering a property as an investment, you should definitely choose the right financing. Rettig & Partner will help you to gain specialist knowledge in this area with professional advice and will answer all your questions about money, banks, interest rates, inflation, real estate investments or real estate funds. What is an investment?With an investment, investors strive for a long-term return and thus increase the money invested over time. Another motive for a capital investment can also be the preservation of assets, for example in times of increased inflation. What investments make sense at the moment? In addition to call money, time deposits and savings, the purchase of investment funds, real estate or real estate funds, precious metals or shares can also be considered. In principle, investments in tangible assets (stocks, stock funds, real estate) are suitable as a means of combating inflation. What do I have to consider when investing in real estate? There are 5 rules of thumb for buying a property: – Location is the most important factor. Did you know that strong increases in value are possible, especially for real estate in outlying areas? – The construction is also extremely important. Before you buy, check the building structure of the property. It does not matter whether you are buying an old or a new property. The most important thing about any home is how well it has been maintained and cared for. – Energy efficiency: Before you buy old buildings, check their energy efficiency. – Also take a close look at the equipment of the property. Is there an age-appropriate facility? Are there additional rooms or areas such as e.g. B. a garden, a laundry room or a bicycle storage room? – In the case of rented objects, you should carefully check the current leases and leases. Has the rent been paid regularly so far? How much is the rent? Have there already been rent increases?
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