The acquisition of real estate as an investment is currently very popular again. The reasons for this are manifold: One reason is the still historically low interest rates . On the one hand, this affects the profitability of traditional investments and, on the other hand, it enables loans to be raised at better terms with the bank. According to experts, the German real estate market is also in a long overdue catching-up process. Especially in coveted cities such as Hamburg, Berlin, Frankfurt or Munich, prices could continue to rise in the coming years – this price increase is ultimately reflected in a high return.
But if you want to buy an apartment as an investment, you first have to make many important decisions. In today’s blog post we have collected some advantages and risks for you when purchasing a property as an investment.
The real estate market is booming due to low interest rates
If you want to invest in a property , you can benefit from the lowest possible interest rates by a long-term interest rate , as this will protect the interest rate against rising interest rates in the future.
Before you consider a high capital expenditure for the purchase of a property as an investment , consider some fundamental aspects:
• Advice from financing professionals – we are happy to assist you!
• Use of equity
• Financial cushion for unplanned costs
• Location of the object in a location with a future
• Single apartment or multi-family house
• Condition and equipment of the object of purchase
Why it pays to invest in an investment property
There are many good reasons to buy an investment property – we have gathered four key aspects:
• A property as an investment is an attractive investment
For several years, the housing market in Germany has been experiencing an increasing imbalance between supply and demand . High demand is offset by comparatively low housing supply. Especially in metropolitan areas , the demand for single apartments is steadily rising. In the long term, apartments are therefore an attractive investment as an investment.
• A property as a pension
In order to be able to maintain the usual standard of living in old age, the acquisition of a property as a private provision can be considered. The ownership of a property and the associated rental income can secure income beyond working life and supplement the statutory pension . In the best case, the financing of your property is designed so that you are free of debt at the latest when you join the pension.
• Safe return on investment real estate
Even if investment real estate at first glance promise lower returns compared to equities, they offer long-term predictable returns in terms of security and value retention. In the case of investment properties with a high purchase price, the initial yield may initially be low, but the long-term return in the coveted metropolitan areas is nevertheless attractive. Especially in regions with promising future prospects , attractive returns can be expected over the long term.
• Save taxes on investment property
Invest eg in a property with preservation, receive up to 35% of the purchase price by the tax office and can write off the entire modernization costs over a period of 12 years. In the case of new properties and existing properties, the costs incurred in connection with the rented property can also contribute to reducing the tax debt.
Which risk factors are there?
But despite all certainty, apartments can still lose value as investments. Below we have summarized the biggest risk factors for you:
• Capital commitment: apartment or apartment building?
Often, investors put all their capital into an apartment . If there is a loss of value , there is no risk distribution . The resident can lose his entire investment by the capital tie to an apartment. If the financial situation allows it, it is advisable to purchase an entire residential building or several apartments in different locations as an investment property.
• Purchase price and purchase costs
Investing in an apartment incurs further costs for the investor, which must be considered. Operating costs for the administration of the dwelling should be taken into account, as well as necessary remedial measures and maintenance measures . The costs for the broker as well as fees for the notary, the land registry and the trade tax must also be observed by investors.
• Rental of the investment property
With the investment in an apartment, it is not yet done, as an investor, you must also take care of the rental and thus the selection of future tenants . Without the support of a property manager , these processes can be very time consuming.