Capital investment — definition and useful information about real estate investment
What is a capital investment? - The definition
One Capital investment includes all investments that aim to generate profits in the long term. In real estate as a capital investment, investors purchase a property in order to rent it out and generate income through rental income and potential increases in value. The main criteria for a successful real estate investment are location, condition, rent level, vacancy risk, financing conditions and tax conditions.
Which properties are suitable as a capital investment?
In principle, various types of real estate can be used as capital investments:
- condominium: Ideal for investors with lower budgets, as responsibility and maintenance costs are shared.
- multi-family houses: Often offer the highest average return, but are capital-intensive.
- Commercial real estate and mixed properties: Suitable for experienced investors as they offer higher returns but also more risks.
Investors who are new to real estate investment usually choose condominiums (buy-to-let), as this type of investment entails a lower capital commitment and responsibility. More experienced investors who have more capital prefer to invest in multi-family buildings because of the stable return.
Questions about financing an investment property
Successful real estate financing depends on well-thought-out planning. Therefore, answer these questions in advance:
- equity: Is sufficient equity of at least 25% of the purchase price available?
- amortization: Is it possible to repay the second mortgage to 65% within 10 years?
- Long-term liquidity: Are the funds sufficient to cover both living costs and current expenses for the property?
- Attractiveness of the location: Does the region offer attractive development potential and long-term stability?
- Necessary renovations: Is there a need for restructuring and how does this affect profitability?
- Targeting: Is the property attractive to your target group?
- Risk and diversification: Spread your investments across various locations and properties to minimize cluster risks.
Avoid mistakes when investing in real estate
The most common mistakes when investing in real estate can be expensive. Pay particular attention to the following points:
- Excessive purchase price: Have an independent evaluation carried out. In the bidding race, it is easy to act emotionally. But if you buy too expensive, this can lead to major problems, especially when interest rates rise.
- Undiscovered deficiencies: Identify the need for renovation and repair before you buy; for older properties, it is worthwhile to call in craftsmen for the analysis.
- Land registry entries ignored: Check the land register for charges such as easements and housing rights.
- Interest rate development neglected: Calculate your investment even if interest rates rise. Part of the costs can be passed on via the reference interest rate, but this will be delayed!
- FOMO (Fear of Missing Out): Don't invest under pressure. Real estate as an investment means a long-term commitment with regularaeExpenditure on maintenance, administration and rental.
Alternative real estate investments without direct acquisition
If you are afraid of buying real estate directly, indirect forms of investment can be an attractive alternative. These include:
- Real estate funds and stocks
- Crowdinvesting: Enables investments in real estate projects with low capital requirements.
- development projects: Some providers, such as ImmoZins, offer investments in new construction projects, with full project management and marketing.
Through a indirect investment investors benefit from the return opportunities offered by the real estate markets without having to assume the challenges and running costs of an ownership role. Feel free to contact us if you are looking for a hassle-free and carefree investment opportunity!
.png)