Condominium as an investment: investing money in real estate?
Especially because of the financial crisis, many investors are now afraid that their hard-earned money is becoming less valuable. In search of a meaningful capital investment, therefore, real estate is increasingly becoming a target of private investors Regal Assets Crypto IRA.
No wonder, after all, real estate such as a condominium or a house are real assets and these are now classified as much more crisis-proof than paper money. Many people wonder: should you invest money in real estate? Is the purchase of a condominium or another property worthwhile as an investment? I took a look at the topic.
Investing in real estate: What options do you have?
For one thing, you can of course move into a purchased condominium or into a house and thus save on rental costs. On the other hand, you can rent a property and then cash in regularly. In addition, one can invest in real estate stocks or real estate funds (definition) and thus indirectly use real estate as an investment (Info: What are funds? ).
What advantages does a house or a condominium have as an investment?
1. There has been a significant increase in the value of real estate in the past, especially in cities. According to a study, a property bought in the 1970s is on average worth twice that amount. Experts also expect rising real estate prices in the future.
2. You pay with self-use of the condominium or the house no more rent. In addition, you do at a home purchase as an investment at the same time something for retirement, since the property is usually paid off at retirement age and then you have less spending.
3. If you do not use the purchased property or parts of the real estate, you can rent them and receive money through rental income. This results in a regular, additional source of income. The sooner the property is paid off, the more important is of course this advantage.
4. Real estate is considered quite crisis-proof, as apartments and houses are real assets. In addition, real estate is generally subject to only minor fluctuations in value.
5. A real estate investment opens up a variety of tax benefits. For example, the offsetting of financing costs with rental income is possible (financing costs are interest on debt, maintenance costs, etc.).
What disadvantages does a house or a condominium have as an
investment?
1. In recent years, there have been strong price increases in many parts of Germany, especially in urban or peri-urban areas. As a result, it is usually very difficult to find an attractive and at the same time reasonably priced property.
2. Despite good prospects, real estate prices could fall sharply again over the next few years and decades (especially in these uncertain times, no one can finally look to the future). The value of the property would then decrease.
3. Most time consuming effort in finding a good and inexpensive property.
4. Debt risk: Many need to borrow and are therefore more or less in debt (the higher the borrowed, the more dangerous it is).
5. Buying a property is usually not worth it in the short term. This type of investment is more apt for the long-term investment horizon, especially if the value of the property increases only slowly.
6. There may be possible defects in the property, which will be visible only after the fact. Eventually then additional money must be put in, which was not previously calculated.
7. You have a poor risk diversification, if the bulk of your own assets in the property. Because this does not spread the risk evenly across different investments (as it is actually recommended).
8. High unplanned additional costs that may be incurred over the years (repairs, renovations, alterations, etc.).
9. You have little of a possible increase in value of the purchased property if you live in it forever. Reason: No profit through sale or no increase in rents possible.
10. Possibly annoyance with late rent payments (of course only if you do not use the house or the condominium).
11. Temporal effort when looking for new and reliable tenants (even when renting).