Note: The following article is for general guidance only. For binding advice, we strongly recommend that you consult an expert. We will be happy to put you in touch with the right experts in our region.
Over the decades, investing in property has established itself as one of the safest and most profitable forms of capital investment. Whether for retirement provision, as a source of passive income or as a hedge against inflation - property offers a wide range of benefits. But how does property work as an investment, what opportunities and risks does it harbour and what strategies should investors pursue? This article gives you a comprehensive overview.
Why property as an investment?
Property enjoys the reputation of being a crisis-proof investment. But what makes it so special? Here are the most important advantages:
Stable performance
Property retains its value in the long term and offers capital growth, especially in sought-after locations.
Regular income
Rented properties secure a reliable and predictable income through rental income.
Protection against inflation
Property prices and rents often rise in line with inflation, which safeguards real asset value.
Tax advantages
Depreciation and the deductibility of costs such as interest or renovations increase the return.
Value appreciation potential
The property value can be increased through modernisation or site development, which enables additional profits.
Diversification of the portfolio
Property contributes to risk diversification and supplements an investment portfolio in order to balance out fluctuations on the financial markets.
Which investment is right for me?
Choosing the right investment depends heavily on your individual goals, financial capabilities and risk appetite. Here are some important options in the property sector:
- Condominiums: Ideal for beginners, they offer a good mix of stability and flexibility.
- Apartment blocks: Attractive for experienced investors seeking stable income and better diversification.
- Commercial property: High returns, but also higher risks and more complex management.
- Holiday properties: Holiday properties are suitable for investors who want to benefit from seasonal income and possible owner-occupation.
What risks and hurdles are to be expected?
Despite the advantages, investors should not underestimate the risks:
- High entry costsPurchase price, ancillary costs and possible refurbishment costs can significantly increase the initial investment.
- Vacancy riskWithout tenants, the income is lost while the costs continue.
- Market volatilityRegional or economic changes can influence prices.
- Administrative expensesReal estate requires time and commitment, be it in the search for tenants or maintenance.
TipThese risks can be minimised through sound planning, a good choice of location and professional support.
What are the most important key figures for investors?
When buying a property as an investment, sooner or later the crucial question arises: How profitable is my investment? The answer is provided by the rental yield - one of the most important key figures for property investors.
Gross rental yield
Net rental yield
Return on equity
What strategies are there for investors?
Long-term letting:
Stability through long-term tenants.
Particularly suitable for locations with high demand.
Fix-and-flip:
Buy, renovate and sell on at a profit.
Requires precise market knowledge.
Diversification within the property class:
Combination of residential, commercial and holiday properties.
Reduces risks in the event of market fluctuations.
Property as a retirement provision:
Goal: debt-free in old age and income from letting.
Does equity have an influence on the capital investment?
Equity plays a decisive role in financing your property. It reduces the financing requirement and thus lowers your monthly burden. A solid equity base of at least 10 to 20 % of the purchase price is often recommended in order to secure favourable interest rates and minimise risks.
With equity:
- Reduce the financing risk.
- Improve your return on equity.
- Increase your chances of getting a loan.
Conclusion: For whom is a property suitable as an investment?
Property is an excellent choice for investors who think long-term and want to build up their assets securely. They offer stability and a wide range of potential returns - provided the property is chosen carefully and solidly financed.
Your next step: Check how a property fits in with your personal goals. We will be happy to support you in choosing the right investment and strategically planning your investment!
