Above all, when it comes to residential real estate, one can still speak of a boom that is apparently hardly being impressed. Because while commercial real estate is currently being shaken by the pandemic and many companies willing to build are also exercising financial restraint and consolidation, the demand for living space continues to rise almost unchecked.
This means that at least this part of the real estate market is and will remain a highly interesting field for investors for the foreseeable future. So interesting and significant real estate should not be missing from any portfolio. But what interesting forms of investment are currently available? How are strengths and weaknesses, opportunities and risks distributed? The only thing that all forms have in common is that real estate, despite its “permanent” nature, is not an investment field that should be invested in without preparation.
Own purchase with various forms of income
Of all the possible forms of investment, this is probably the most obvious variant: using the available investment sums to buy real estate. Based on this, several approaches are possible:
- Buying a property below its value, followed by a quick sale at a more competitive price without further investment.
- Purchase of a property followed by further investments for modernization and subsequent sale. This includes renovation and other furnishings like cabinets (RTA cabinets).
- Purchase of a property that is no longer worthwhile with the aim of using the property to build a new property there; possibly with changed use.
- Purchase of real estate with or without additional investments for the purpose of renting.
In any case, the investor then appears as the property owner. The resulting advantages and disadvantages:
Advantages
- In the case of sales, there is only a short period of time between the investment and the distribution of profits; Rental, on the other hand, ensures constant and monthly cash flows.
- The annual price increases are sometimes enormous, so attractive investment opportunities in the style of an initial rental followed by a sale after a few years with manageable risk are also conceivable.
- The interest in real estate of all kinds remains high. Not only can buyers be found quickly, but also tenants. This also makes it easy to find additional funds for attractive projects. A lot is currently happening here, especially in the mezzanine segment, which is further proof of the uninterrupted boom.
- In addition, there are hardly any differences in demand between different regions, which can be clearly seen in the current geographical overviews. There is therefore plenty of room without having to worry about not finding anyone interested. With enough skill, attractive profits can be made within a short time.
However, buying real estate yourself does not only have advantages.
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Disadvantages
- Due to the high prices, high investment sums are also necessary. Both for the purchase of real estate as well as any modernization.
- It is true that state-mandated energy-saving measures have no proven share in the increase in the price of new buildings and renovations, but this is true for other technical installations. This can severely reduce the profit margin.
- Buying real estate requires a great deal of expertise in order not to fall for covertly bad properties with an unforeseeably high investment requirement.
- The real estate buyer not only bears a great deal of responsibility, but he also bears all the risks.
- Renting can prove disadvantageous. Both in relation to tenants who do not handle the property with care and to artificial price distortions (“rent price brake”).
Overall, it can therefore be said that there are extensive requirements for self-purchase. It is the possible gains that make it attractive – especially if you have a good sense of upcoming boom locations and sufficient investment funds.
