Buying real estate: Asset building, investment & inflation

Wealth accumulation – You finally have the necessary equity saved up to buy your first property as an investment? Great, unfortunately the inflation of money is omnipresent. If you invest money today, it will only be worth half in 30 years. The way out? The investment in real estate! In this article, the classic investment of money in the bank is compared with an investment in the form of real estate. Real estate creates “real values”. You can find out what that means here!

Saving or investing? – What do I do with my money?

You have two options for building up wealth. Either invest money or invest money. If you rely on real estate as a capital investment, your financing will “reduce” itself over the years, and this way also offers protection against inflation.

Here we have summarized the decisive advantages of real estate as an investment:

  • Real estate is stable in value with inflation
  • Inflation “reduces” your loan

Source: Asset building/ Real estate

Money investment and value investment in comparison

Let’s look here at the investment of money in the bank and the investment of value as real estate in comparison, with its impact on the loan.

  1. Investment: Savings book, Riester pension & Co.
  2. Investment: Real estate as a form of investment
  3. Loans: steady reduction due to inflation

Investment: Savings book, Riester pension & Co.

The typical forms of investment are still present. Not much has changed in society’s savings behavior in recent years. Many blindly invest their money in the bank in the form of building society savings contracts, Riester pensions or endowment life insurance policies. Often, people save and, due to interest rates and inflation, receive almost less money than they paid in.

  • Interest and price increase are credited to you
  • Loss of value due to inflation – amount of money remains the same or even becomes less

So, simply put, 10,000 euros will always remain 10,000, as described above.

Real estate vs. savings book: Who wins?

Even in times of crisis, real estate is considered a safe investment. It is stable in value in the event of inflation and even your loan can be positively affected by a depreciation of money, so you can sell your property later for twice its value.

  • 10,000 Euro savings account after 30 years: 10,000
  • 10,000 Euro Property after 30 years: 20,000

Reduce loans: Inflation as your best friend

Due to the devaluation of money, the value of your property is constantly increasing. So what happens to your loan?

A quick look at a loan taken out:

  • 10.000 Euro credit today, are also later still 10.000 Euro

If you have already rented out your property, all the better! Due to inflation you get steadily more rent, and continue to pay off your loan through your passive income.

  • 2020 = 350 Euro rent / repayment 300 Euro
  • 2035 = 460 Euro rent / repayment 300 Euro

Don’t think so? Look it up yourself: Inflation Table

Source: Asset building/ Real estate

Year Purchasing power Inflation
2021 2393,30 2%
2022 2345,43 2%
2023 2298,53 2%
2024 2252,55 2%
2025 2207,50 2%
2026 2163,35 2%
2027 2120,09 2%
2028 2077,68 2%
2029 2036,13 2%
2030 1995,41 2%
2031 1955,50 2%
2045 1473,75 2%
2046 1444,27 2%
2047 1415,39 2%
2048 1387,08 2%
2049 1359,34 2%
2050 1332,15 2%
2051 1305,51 2%
2052 1279,40 2%
2053 1253,81 2%
2054 1228,73 2%
2055 1204,16 2%
2056 1180,08 2%

Conclusion: Real estate as a money pit

In the long run, real estate is a real goldmine. In addition to the return earned through rent payment and profit on sale through appreciation, the amount of income increases thanks to inflation. So your repayment of the loan becomes easier and easier.

Here again our most important points summarized:

  • Real estate is stable in value with inflation
  • Property can be sold later for double the value
  • Investment: loss of value due to inflation – amount of money remains the same or even becomes less

The next step: real estate for retirement provision

In our last article on wealth accumulation, you already learned what inflation means. Here we will show you the effects of inflation on your future pension. Here again the question arises whether real estate is not the better way to provide for your old age than an investment in the bank or the statutory pension plan. In this article, we compare your three alternatives to show you the best way to stop worrying about your assets in old age.