Real estate as an investment alternative to equities & Co.?

Bonds, overnight money or even savings books hardly pay off anymore, share prices have been rollercoastering for years and gold is at a new high. On the other hand, money is cheaper than ever before. No wonder that more and more wealthy Swiss and institutional investors are interested in real estate as a safe investment.

Not everyone is suitable as a real estate investor. Before investing in real estate, every potential investor should answer the following questions – calmly and individually:

• Am I able to invest my money for the long term or will I need liquid funds in the foreseeable future?
• Do I have the time to look at various properties offered to me by an estate agent?
• Can I finance any refurbishment and renovation work that may be necessary and can I coordinate and control the necessary work with the craftsmen?
• Do I want and can I take care of the management of my property myself or who takes care of the daily business for me?
• Am I in a position to finance a complete property myself or is it perhaps more sensible to purchase only part of the property?

If you have any doubts about honestly answering these questions, you should not read any further. You must be aware that an investment in a property is always associated with a certain risk. However, by investing in a real estate bond, the risk can be spread over numerous properties and many tenants and thus reduced.

The most important criterion is the situation

Whether a real estate investment is worthwhile depends decisively on the location of the real estate. Not every property pays off as a capital investment. Before investing in a property, you should at least consider these points:

• Properties in exclusive top locations in sought-after cities rent out much faster and at higher prices.
• Of course, the infrastructure of the property also plays an important role: If it is a quiet residential street, there are shops for daily needs within walking distance, schools, kindergartens and a connection to public transport are available, etc.
• You should thoroughly check the structure of the building and consult an expert if necessary. Complex refurbishments and renovations can quickly destroy the planned return over many years.
• Take a look at the neighbours in the house and in the immediate vicinity. Not everyone wants to live in a hip environment with a distinctive nightlife.
• The property should meet all current requirements in terms of energy consumption, environmental protection, etc.
• And of course the price must be right. Be careful when you discover an alleged bargain. A very low price compared to the average can be an indicator of a problematic property. If in doubt, consult an expert./li>

Numbers, numbers, numbers: Calculate your planned investment exactly

One advantage of real estate as a capital investment is that banks are very happy to finance and lend on real estate. Real estate generates a positive cash flow through rental income. The purchase of a property is expensive – not only in terms of the price of the property, but also in terms of additional costs such as notary fees, brokerage fees, land registration costs, land transfer tax, etc.

Depending on the region, you should expect additional costs of at least 10% of the property purchase price. If you have taken out a loan, you may also have to pay the financing costs, i.e. the monthly repayments of principal and interest. You should not forget the often due renovation and ongoing repair costs.

If one considers all these aspects, an effective net yield of 2 – 3 % remains at the beginning – nothing more!

In the case of returns above 3 – 4 %, it is important in the current market situation to carefully examine which points have not been taken into account at most, such as deferred costs or the actual and forecast future utilization rate. In order to prevent a certain risk, there is the option of passive real estate investments. Clearly, the risk potential here is reduced proportionally to the return, as the management of third parties such as platforms, fund managers and bonds must also cover their costs. On the other hand, with little capital, there is the opportunity to invest broadly diversified in highly lucrative properties without having to bear the sole default risk. Read more in the following blogs:

https://digialog.com/blog/investitionen-unter-100k/