Author | Source
Alexander Hübner – Le Bijou
Alexander Hübner – Le Bijou
Investments | Real Estate
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:
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:
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: