Small money, big opportunity: micro-apartments

In conversation with Lukinski / Kapitalanlagen (Stephan M. Czaja) – Investing with little money, spreading risk from the outset and earning even more money directly through kickers such as furnished rentals – sounds good? It is!

My tip for young investors: Invest in micro-apartments – even with little money! I’ll show you why here!

You can enter the real estate market even with little start-up capital. Micro-apartments in particular offer you the advantage of a manageable price, but can still generate a solid return – especially in sought-after locations.

Perfect for trainees, students, young professionals! You can get such apartments with 25m², 30m² in medium-sized and larger cities for less than €20,000 (with 20% equity, you would only need ~ €4,000)

You heard right! Let’s continue:

What is a micro-apartment?

A micro-apartment is a small, efficient apartment of around 20 to 30 m². Perfect for students, young professionals or commuters who want to live centrally and compactly. For you as an investor: low purchase price, easy to let.

5 facts: What makes a micro-apartment

These features are standard in micro-apartments and make them particularly attractive:

1. Small living space of 25m² – 40m²
2. Combined living and sleeping area
3. Compact kitchenette or kitchenette
4. Small bathroom with shower
5. Furnishing with clever storage space solutions

Micro-apartment?! Small apartment, high yield

You can find more videos of me on YouTube x Real Estate Experience!

Why micro-apartments are interesting for you

If you want to start small, this form of housing is ideal. You don’t need a lot of capital and still benefit from stable demand and good rental opportunities.

Advantages at a glance

These arguments clearly speak in favor of micro-apartments as a starting point:

• Already available for less than €20,000
• Easy to rent – furnished and compact
• Low ancillary costs due to small area
• Popular in cities with universities or commuter structure

Sample calculation: how realistic your entry is

You can find a micro-apartment for €25,000 in cities like Braunschweig or Magdeburg. With negotiation and a bit of luck, you can pay just €18,000. With 20% equity – i.e. €3,600 – you can finance the rest from the rental income. Your start in the world of real estate – without a huge budget.

What you should look out for when buying

It is particularly important not to buy too emotionally when starting out. You should check these factors beforehand:

Checklist for your purchase

Get an idea before you buy – these points will help you:

• What is the location like? (Proximity to university, city or train station)
• How much renovation is required?
• Are there comparable rents in the area?
• Is the apartment furnished or do you need to upgrade?

Why demand is so high

The trend is clearly moving towards small, efficient apartments, as more and more people are living alone. This is also shown by the figures from recent years:

• Almost 50 % of all households in Germany are single-person households
• Many people live alone today – whether young or old
• The desire for central living continues to grow
• Rents are climbing – especially for small units

What should you bear in mind?

Micro-apartments have many advantages, but you should also be aware of their limitations:

• Little space – not for families or furniture fans
• Fluctuation can be higher (e.g. for short-term rentals)
• Furnished rentals need a little more organization

Get off to the right start!

Getting started doesn’t have to be complicated. Look at specific offers, calculate realistically and focus on good locations with high demand. The best way to gain initial experience is with a small, manageable property.

My tip for young investors: Invest in micro-apartments – even with little money

Even if you “only” have €10,000 or €15,000 at your disposal: You can get started! Micro apartments offer you a real opportunity for your first real estate investment with manageable risk and potential for more. My tip: Watch the full video on YouTube or visit immobilienerfahrung.de for more practical tips.

Bought and now? Rent as….

Imagine entering the world of real estate – not with millions in your bank account, but with only around 5,000 euros in equity. Sounds like a dream? But it is possible. That’s what today’s special is all about: how to start your first own apartment as an investment with style, color and a little courage.

• Renting a student apartment

Interview: Family foundation in Germany

FIV: So that we can all get an idea, what are the big family foundations that everyone knows about?

Stephan: There are some well-known examples that most people will be familiar with. The “Krupp Foundation” and the “Siemens Foundation” are two of the best-known family foundations in Germany. Both foundations have set themselves the task of preserving the family fortune and passing it on to the next generation. However, they also support social and cultural projects. The purpose of a family foundation is primarily to secure and increase the family’s assets in the long term.

FIV: What is their purpose, why do these well-known families set up foundations?

Stephan: Large family foundations such as Krupp or Siemens are often about keeping the company and its assets in the family and protecting them across generations. The foundation separates the assets from the private assets and they cannot be sold or inherited so easily. Family foundations also enable long-term tax optimization and provide a legal framework to protect the inheritance from external influences.

FIV: We also stand for names and who has what! Can you give us a small top 3 of the larger foundations?

Stephan: Let me think for a moment.

• There is the Körber Foundation, which I believe has a volume of around 600 million euros and was founded by Kurt A. Körber,
• There is the Robert Bosch Stiftung, founded by Robert Bosch and worth a few billion euros,
• Or the Quandt Foundation, which everyone knows BMW with a volume of around 1 billion euros, founded by Johanna and Susanne Klatten.

Family foundation explained: What is it?

FIV: What exactly is a family foundation and how does it differ from other foundations?

Stephan: A family foundation is a private foundation whose main purpose is to preserve the assets of a family over generations. In contrast to charitable foundations, which focus on the common good, family foundations focus on the protection and preservation of family assets such as real estate, companies or other investments. The highlight here is that the assets are transferred to the foundation and therefore legally belong to the foundation and no longer to the founder or descendants. This offers a number of advantages, such as protection against inheritance disputes or third-party access.

What are the benefits of a family foundation?

FIV: What are the specific benefits of a family foundation? What advantages can you expect from it?

Stephan: The biggest advantage is certainly the protection of family assets. Through the foundation, the assets remain bundled and cannot be split up or sold so easily, for example in the event of a divorce or inheritance disputes. There are also tax advantages. Income generated within the foundation is usually subject to a lower tax burden than private income. Gift and inheritance tax can also be legally minimized by setting up a family foundation.

Here again very briefly:

1. Protection of family assets from sale or inheritance disputes
2. Tax advantages due to lower tax burden
3. Minimization of gift and inheritance tax

Who establishes a family foundation?

FIV: Who does this? Is there a certain type of person or family for whom a family foundation is particularly worthwhile?

Stephan: Family foundations are particularly attractive for entrepreneurial families who want to keep their company in the family for generations, or for families with large real estate holdings. But wealthy private individuals who want to secure their capital and optimize it for tax purposes also use this option. The establishment of a family foundation often comes into play when assets exceed the limit of around 1 million euros – at this point it really is worth considering.

How can you set up a family foundation yourself?

FIV: If you want to set up a family foundation yourself, what are the first steps?

Stephan: The first step is to get comprehensive advice. There are many legal and tax aspects that need to be considered, and mistakes can be expensive. Basically, everything starts with drawing up a foundation charter that regulates the purpose of the foundation, the organization and the management of the assets. The foundation must then be registered with the relevant tax office and the foundation supervisory authority. It is also important to think about the composition of the foundation board, as this is responsible for the administration of the foundation.

FIV: Can real estate and assets also be transferred to a newly established foundation?

Stephan: Yes, that is possible, I have a great guide online, maybe you can link to it: Transferring real estate to foundations.

FIV: Thank you very much for the interview, Stephan! Is there anything else you would like to tell our readers about the family foundation?

Stephan: Yes, I would say: inform yourself well and get professional advice. A family foundation is a great instrument for protecting assets and saving taxes, but it needs to be well planned and carefully implemented. If you do it right, you can protect your family and your assets in the long term. May I give you two more link tips?

FIV: Yes, of course!

Stephan: If you want to know more about

1. Foundations in general, you can also visit the Federal Association of Foundations
2. Establish family foundations for real estate, please have a look at my website under foundation establishment
3. And now generally on Saving One about family foundations in Germany

The design of the Louis Vuitton sandwich bag

The Louis Vuitton Sandwich Bag is a handbag made of high-quality leather, both inside and out. It is available in the MM size and is characterized by its unusual shape. The name “Sandwich Bag” may seem unusual at first glance, but it aptly describes the special shape of this bag.

5 facts about the sandwich bag

• The Louis Vuitton Sandwich Bag is a unique luxury accessory made from high-quality leather.
• Part of the Louis Vuitton men’s collection with an eye-catching design.
• Spacious main compartment with Velcro fastening, simple exterior with monogram pattern.
• Price: $3,100 ($3,500 with tax), emphasizes high quality and craftsmanship.
• Interesting for collectors and fashion connoisseurs due to the unique design and high-quality materials.

The spring/summer 2024 collection from Louis Vuitton is here, and one very special accessory stands out: the leather sandwich bag. Inspired by classic school lunch bags, it features high-quality leather decorated with the Louis Vuitton logo and the year of foundation. An eye-catching blue pull tab provides the closure. This unique piece is a tribute to Virgil Abloh and stands for the new luxury(Hypebea).

The special features of the Louis Vuitton sandwich bag

This bag has a spacious main compartment without additional compartments or zippers. The closure of the sandwich bag is equipped with Velcro, which ensures easy handling. The design of the bag is simple yet striking, with the iconic Louis Vuitton monogram pattern on the outside.

Price and value of the Louis Vuitton sandwich bag

The Louis Vuitton Sandwich Bag is priced at $3,100, and with tax, the total price can rise to around $3,500.

This may seem high at first glance, but when you consider the craftsmanship and high-quality materials used in the production of this bag, the price becomes more understandable.

Although the Louis Vuitton sandwich bag is certainly not to everyone’s taste, it still has the potential to become a coveted accessory in the world of luxury fashion. Its unique design and the quality associated with the Louis Vuitton name make it an interesting collector’s item for fashion connoisseurs.

Louis Vuitton Sandwich Bag! Invest?

Overall, the Louis Vuitton Sandwich Bag is a bold and creative design that redefines the boundaries of luxury fashion. For those who are willing to invest in a unique and exceptional accessory, this bag might be worth a look. Its unique design and high-quality materials make it a one-of-a-kind piece that no collection should be without.

Virgil Abloh: Who was he?

Virgil Abloh was an influential fashion designer, creative director and entrepreneur who passed away in 2021. He was born on September 30, 1980 in Rockford, Illinois, USA. Abloh was known for his groundbreaking work in street fashion and streetwear and became one of the leading figures in the contemporary fashion world.

He rose to fame as the creative director of the fashion brand Off-White, which he founded in 2012. Off-White became known for its unique designs and the combination of streetwear elements with high-fashion appeal. Abloh also worked as Artistic Director for menswear at Louis Vuitton, becoming one of the few African-Americans to hold a leading position at a renowned French luxury fashion house.

His creative work had a far-reaching impact on the fashion industry and he was seen as a pioneer for diversity and inclusion in the industry. His tragic death in 2021 left a void in the fashion and design world, but his legacy and influences will continue to live on in the fashion industry and beyond.

Pharrell Williams x LV: New Era

Pharrell Williams has been a major creative force since his debut at Louis Vuitton. His collaboration with the luxury house has produced innovative designs and unique pieces. The Spring/Summer 2024 collection once again showcases his artistic vision, which is reflected in the eye-catching leather sandwich bag. This partnership between Pharrell Williams and Louis Vuitton has made the world of fashion more exciting and creative.

• Louis Vuitton

Loss of rent: yield effect

Vacancies, rent arrears or even re-letting and tenant selection. There is a lot for you to consider when buying real estate. Even if you have found a profitable property in the real estate acquisition process with a good property yield, 2 or 3 months of vacancy per year can make your investment suddenly unprofitable. Why and why is the choice of location / property type so important? You can find out more here in the Real estate purchase risk guide.

This guide is therefore about raising awareness of the topic of location selection and property type. When buying a property, in most cases you are taking over the current tenant. It is therefore important to always check the seller’s tenant history!

Loss of rent = you pay the costs instead of your tenant

Let’s start with the topic of vacancies.

Reasons for vacancies and rent losses

Tenants who don’t want to pay quickly make an investment unprofitable. But it doesn’t always have to be the worst-case scenario – rental nomads are rare – rent defaults can also occur because your tenant has financial difficulties and can no longer pay the rent on time. Or a change of tenant when you move and your new “ideal” tenant only moves in a month or two later.

In addition, there are structural changes, long-term vacancies, when the location becomes unattractive for tenants.

There are therefore many reasons for rent losses:

• Rent not paid – tenant has financial problems
• Vacancy, e.g. for new tenants – “desired” tenant arrives later
• Vacancies due to structural changes – in 5, 10, 15 years

Location + property + tenant selection

In addition to the choice of location and type of property, you, as the future landlord of a capital investment, also need to select tenants.

Let’s take a worst-case scenario as an example. Your tenant refuses to pay the rent, regardless of whether for personal reasons or financial reasons, and it takes 9 months to file an eviction suit. If the tenant himself is not sufficiently solvent, you will never see your money (costs of the eviction action) again.

Central, think about:

• Choice of location – structural vacancy? Less housing in the future
• Real estate type – How do you live? Micro apartment, instead of loft apartment
• Tenant selection – Who is a tenant? Creditworthiness (and trust)

The better you prepare for this when buying your first property, the better.

• Choice of location: A, B and C location
• Property type: Houses or apartments

Vacancy or not: loan installment must be paid

The vast majority of people finance their property. This means that you give about 15% equity and a bank gives you the rest (85%) as a loan. You repay the loan. The monthly installment of repayment and interest is called the loan installment. The bank doesn’t care if your tenant gets into trouble. You have to pay the monthly installment.

No matter what happens:

All costs continue to run!

Vacancies: influence on real estate yields

When buying real estate as a capital investment, the main focus is on returns. Simply put, the rental yield indicates how much rental income you achieve in relation to the investment (purchase price of the property, ancillary costs, maintenance). The result is a percentage. The higher, the better.

Example (simple):

• Investment in real estate: 100,000 euros
• Rental income / year: 3,000 euros
• Yield = 3%

3% would be relatively low, as you have to expect around 6% for interest/repayment and maintenance (currently). This means that your property must yield at least 6% to cover the costs.

As soon as you slip below ~ 6% yield, you pay more

Assuming you have calculated extremely tightly when buying real estate. So that you just achieve a 6% return, which covers the management / loan installment (interest and repayment). Now you have only 2 months of rent loss – the calculation is no longer correct and the yield drops to 5%. At 5%, the “missing” percent has to be paid out of your own pocket.

• Calculate real estate yield

Calculation: Return effect 2 months default

Let’s now calculate with the extremely tightly calculated 6% yield property. The big goal in all our guides:

Your tenant pays for your property = good return

Example 6% yield with full rental payment:

• Investment in real estate: 100,000 euros
• Rental income / month: 500 euros x 12
• Rental income / year: 6,000 euros
• Yield = 6%

Example effect of loss of rent (2 months):

• Investment in real estate: 100,000 euros
• Rental income / month: 500 euros x 10
• Rental income / year: 5,000 euros
• Yield = 5%

That means 1,000 euros out of your own pocket this year.

– 1,000 euros instead of “Tenant pays for your property”

Financial freedom? That’s why preparation is so important!

Tenants should therefore always be closely scrutinized. You should do a really thorough check.

• Self-disclosure
• Previous landlords speak
• Schufa information
• …

Rent arrears and reserves

It doesn’t always have to be a complete loss of rent. In practice, there are many reasons, for example, your tenant may not accept a rent adjustment following modernization measures. In other words, you modernize and adjust the rent and your tenant refuses to accept the rent increase.

Here, too, you are faced with the problem that you have made your investments and suddenly the tenant refuses. A dispute like this can go on for a long time and, in the worst case scenario, it can take 6 – 12 months before an eviction action is brought.

So that you can go into your first property without any worries, remember this:

Build up reserves!

What does that mean?

Building up reserves: security for the first property

Ideally, protect yourself financially against two possibilities:

1. Reserve for maintenance
2. Reserve for rent losses
3. Reserve for all eventualities

Reserves do not have to be set aside. However, they protect you from costs that you may not know how to cover spontaneously. Because, as you have learned, it doesn’t matter whether it’s rent arrears, loss of rent or vacancy:

All your costs continue to run

Reserve for maintenance

One cost factor that you will always have to bear is maintenance. More or less, of course, depending on the year of construction and condition of the property. In general, however, you already calculate 2% reserves for maintenance in the first yield calculation.

Part of the yield calculation, 2% maintenance reserve:

2% reserve for maintenance

Property for 100,000 euros (investment) = 2,000 euros reserve / year

Reserve for rent losses

In addition, a 6% rent reserve is recommended for possible rent losses:

+ 6% reserve for rent losses

Property for 100,000 euros = 6,000 euros reserve

6% would also correspond to a return of 6% = 1 annual rent.

Reserve: Extra, for all eventualities

Especially for the first property, without large assets of your own (as a rule), you should think about an additional reserve. Why? So that you never run out of money and miss a payment to the bank.

Ideally for the first property, not a must but security:

+ 10% extra reserve

Property for 100,000 euros = 10,000 euros reserve

Follow-up financing: risks and interest rate changes

Vacancies not only have a negative effect on yields. Most property loans have a fixed interest rate with a fixed term. At the end of the term, the conditions are renegotiated, known as follow-up financing.

This is where the 2 central aspects come into play again:

• Choice of location – structural vacancy? Less housing in the future
• Real estate type – How do you live? Micro apartment, instead of loft apartment

Lending: Factors

The bank also follows a clear path for follow-up financing. Let’s say you fixed the interest rate for 10 years for your first real estate financing. After 10 years, with 25 normal repayments, the remaining debt is around 76%. This must now be financed.

For follow-up financing, go back to your bank or to another one. If you are offered better conditions, it is worth obtaining alternative offers for the follow-up financing. Bank A, B, but also C will take another focused look at your property and you:

• Real estate
• Creditworthiness

Structural change: lower property valuation

Factor 1: Structural change – Because everyone is reassessed for the follow-up financing. Let’s say your fixed interest rate expires after 10 years and the bank says the property is now worth 20% less, for example because many people have moved out of the region in the last decade, property prices are falling and so on.

Banks want security, if the property is then worth less, the bank would have lost money in the worst-case scenario (loan installment defaults, forced sale/auction). So the interest rate rises.

Interest rate change: interest rate development in 10, 15, 20 years

Factor 2: Interest rate changes – Interest rates are currently lower than ever. It is impossible to make a serious forecast of what interest rates will be in 10, 15 or even 20 years’ time. However, a look back shows that interest rates in this country were still above 8% until 1990, 4-6% until 2000 and currently only 1-2% for real estate loans. If interest rates fall, it’s great for your follow-up financing. However, if interest rates rise, it’s bad, because then you pay more and the return calculation no longer works.

What to do? Tips for good returns

First of all: keep your eyes open when buying real estate!

Don’t buy yourself any problems!

Don’t buy yourself any problems, learn here with us step by step how to buy your first property, from the preparation, to the acquisition (finding profitable properties), to the purchase contract. By the time you’ve read our guide to buying your first property, you’ll know how important it is to find profitable properties in the real estate acquisition process.

Read here again:

• Choice of location: Buying an A, B or C location?
• Property type: Houses or apartments?

3 tips: Low interest rates

You now know that it is very unfavorable if the property suddenly costs money instead of bringing in money. What can you do? Here are 3 simple tips:

Tip 1: Buy cheaply – It sounds simple, but “the profit is in the purchase”. A piece of business wisdom that is also true when buying real estate. Buying cheaply means finding a property that is sold below market value, or that you, as the buyer, buy below market value. We have more on this topic here: Buying real estate.

Tip 2: Fixed interest rate – If you fix your interest rate for 10 years, you will have to take care of follow-up financing in 10 years. The longer the fixed interest rate, the longer you don’t have to worry about interest rate changes. To maintain the current low interest rates, you can agree a longer fixed interest rate, for example 15 years or 20 years. In case of doubt, until the end of the loan.

Tip 3: Higher repayments – If interest rates explode and ruin many yield calculations, higher repayment installments are an option to reduce interest rates. Interest is always calculated on the basis of the debt or, from the first payment, on the basis of the remaining debt. The lower the remaining debt, the lower the interest. With the current low interest rates, however, it is worthwhile financing real estate over a long period of time, as inflation ensures that your loan installment is always “smaller” in terms of purchasing power.

You can also start financing with more equity right at the beginning. This means that the loan amount is smaller and so is the repayment. This means that the loan is repaid more quickly and long-term interest rate changes no longer affect your financing.

Let’s summarize the 3 tips once again:

1. Purchase price – Buy cheaply (below market value)
2. Fixed interest rates – agree longer fixed interest rates (15 years, 20 years)
3. Repayment rate – Repay more or start with higher equity

Here are 2 practical tips for finding “problem-free” properties:

2 tips: Real estate viewing

Here are 2 practical tips for your real estate search.

Tip 1: Pay attention to the property management company – Is the property management company doing a good job from your perspective? In other words, do you have the feeling that the property management company knows what it is doing?

Tip 2: Owner-occupiers in the house – When you view properties, you also make sure that there are a few owner-occupiers living in the house. You tend to make sure that the property remains “well-maintained” in terms of its condition and the tenants.

In short, you pay attention to:

1. Property management and trust
2. Owner-occupier in the house

Earn money with real estate

Capital investments are currently becoming increasingly popular as protection against inflation. Inflation reduces the purchasing power of your money over time. Rising inflation therefore basically devalues your money. This is shown by the inflation rate in Germany.

You can find more statistics at Statista

In contrast, real estate prices are rising nationwide every year. This is due to social growth, urban growth and a decline in living space. This is also shown by the Federal Statistical Office’s house price index.

You can find more statistics at Statista.

Real estate increases in value over time, and can therefore not only secure the value of your money, but also serve as a wealth accumulator.

Achieving financial freedom with real estate

For more and more people, investments are the path to financial freedom and a secure pension. If you want to make money with real estate, you buy properties in good locations with a profitable yield with the help of financing from the bank, then rent out the property and pay off the monthly installments through the rents. In the long term, the investor makes an additional monthly profit that goes into their account.

Of course, that’s not all you need to know as a real estate investor. To minimize the risk of losses, you need as much know-how as possible. Good news! You don’t have to start from scratch or trawl through thousands of books. There are already many experienced investors who have successfuly made their money with real estate. That’s why this article gives you 5 tips from real experts on the subject.

5 tips from real professionals

If you are thinking about good investments to increase your wealth, buying a property as an investment is the way to go. Real estate is a proven way to optimize your wealth and achieve financial freedom. Are you a total newcomer to the business? No problem. There are already hundreds of success stories of experts who have made money with real estate. We’ve compiled the knowledge for you in one article. Here are 5 tips from real professionals!

Insider tip: location is the key to success

The first tip promises to be the big secret behind real estate success. The location of a property is crucial to the success of your investment. Real estate experts recommend investing in prime or up-and-coming neighborhoods, as they often offer the best rental income and performance. A-locations are prime locations close to key facilities and amenities. B-locations offer a happy medium, while C-locations are a cheaper but riskier option. It is important to choose the right strategy for your future plans. Your choice should therefore depend on your investment goals and risk appetite.

You should remember this about the various location strategies:

• A-location – expensive & profitable
• B-location – the good center
• C-location – inexpensive & risky

Careful yield calculation protects against losses

The return is a decisive factor in the assessment of a capital investment. The key word here is: return formula. Experts recommend calculating a gross yield and a net yield. The gross yield considers the annual rental income in relation to the purchase price of the property. The net yield also takes into account operating costs, taxes and financing costs. It is recommended to make sure that the return matches your financial goals before you invest.

The gross yield helps with initial decisions for or against an investment in a property. Before drawing final conclusions, however, the net yield should also be calculated. Otherwise, later losses cannot be ruled out.

It is important to know:

The net yield is more secure than the gross yield calculation.

In our guide to real estate investments, we reveal how high the yield currently needs to be: Real estate as a capital investment for beginners.

A smart and well-considered approach to financing

The right financing is crucial. It is advisable to use at least 20% equity to minimize mortgage interest and risk. Make sure you have checked your credit rating and can pay the monthly installments without any problems. Choosing the right financing option can make a significant difference in your real estate investment in the long run. Usually, an annuity loan is taken out as a loan.

You can find more statistics at Statista

Those who think short-term end up spending far more

Real estate investments should be viewed with a long-term perspective. Experts recommend not investing in real estate if you expect short-term gains. Demand for housing increases over time, which offers long-term benefits. Plan for long-term success and remain patient.

Professional support takes you to the next level

It may be advisable to seek professional help. Real estate agents, financial advisors and tax experts can offer valuable advice and support. An experienced real estate expert can help you choose the right property and manage your investment. Our tip: Many real estate advisors offer a free initial consultation where you can ask all your questions about real estate investment.

The most important statements of the professionals summarized

Real estate investing requires research, planning and a clear strategy. By following these tips from experts, you can increase your chances of success and build your portfolio as a real estate investor. Let’s recap what really matters.

Investing in real estate can be a smart investment if you pay attention to the right factors. The choice of location, return targets and the right financing are crucial to your success. Remember that real estate investments require patience and are best invested for the long term. If you keep these points in mind, real estate as an investment can be a lucrative investment that offers you long-term financial stability.

Get off to a good start with real estate with the guide for beginners – one article to learn everything you need to know!

Guide for beginners

You’ve decided you want to invest in real estate – that’s a great idea! Real estate can be a stable and profitable form of capital investment. If returns and positive cash flow are still foreign words to you, then you’ve come to the right place. We unravel the mystery of the money-making machine that is real estate ownership. In this article, you’ll learn the basics of investing. Location, yield, financing: what really matters?

• Real estate as an investment for beginners

5 mistakes! What to look out for when investing?

Your goal is financial freedom? Anyone can build wealth with real estate. Investments allow you to build up money over the long term. By investing, you can make your real estate work for you and benefit from interest, dividends and price gains over time. However, investing in real estate without any knowledge is too risky. You don’t have to reinvent the wheel. Every real estate professional has already made mistakes that you can benefit from. Stick to this checklist, avoid the 5 mistakes and minimize your risk of failure. Let’s go!

Risk checklist: What you should avoid

Stick to these points and nothing will stand in the way of your successful investment:

1. Don’t invest in real estate with too low a return
2. Designing financing for the long term instead of the short term
3. Bring in enough equity
4. Financing compared
5. Calculate net return not just gross return

Find out now what the 5 biggest mistakes are that you can make when investing.

Is it worth investing in capital assets?

Does real estate make sense as an investment? Capital investments are currently becoming increasingly popular as protection against inflation. Inflation reduces the purchasing power of your money over time. Real estate increases in value over time and can therefore serve as inflation protection and wealth accumulation. For more and more people, capital investments are the path to financial freedom and a secure pension.

For whom is a property worthwhile as an investment? Purchasing condominiums as an investment has become a proven strategy for generating passive income. However, this approach is not equally suitable for everyone. To assess whether a property as an investment is worthwhile for you, you should consider your individual goals, financial resources and risk tolerance.

The right location: The first rule of real estate investment is: location makes all the difference! You need to be aware that not every area provides the same returns. A-locations, such as sought-after city center locations, often offer the highest rental and appreciation opportunities. B-locations, i.e. areas close to the city, can also be attractive. C-locations, the outskirts or less popular neighborhoods, are often less expensive, but also involve more risks. Choose the location wisely, as it has a significant influence on your return.

Return and positive cash flow

How to find real estate with good returns: Your investment should be worthwhile, right? To achieve a solid return, aim for at least 9%. This means that after deducting all costs (maintenance, taxes, insurance), you still achieve a positive return. A positive cash flow is crucial to generate profits beyond cost recovery. Remember that real estate investments are for the long term, so it’s worth waiting patiently for a good return.

The right financing for capital investments

Financing is a key aspect of your real estate investment. We recommend putting at least 20% equity into the property. This reduces the risk and increases the chances of a positive return. The loan should pay for itself through the rental income. This means that the monthly rental payments cover the loan installments and also generate a profit after some time.

These were the essential basics of what is important when investing in capital assets. Do you want to get started with real estate now?

The first capital investment: guide & tips

Read an article and take away the most important tips for investing in capital assets. Start your career in the real estate industry now with the investor’s guide. Learn how to do it:

• Real estate as an investment for beginners

5 mistakes! What to look out for when investing?

Successful investments are the key to financial stability and independence. But how do you achieve this goal? In this article, we present you with a useful step-by-step guide on how to invest successfuly. Whether you already have experience or are new to the world of investing, this checklist will help you achieve your financial goals. Get started with real estate now!

• Risk checklist
• Buying an apartment: 11-point checklist

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Investment book recommendations: Basics & C0.

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Video tips: Real estate as a capital investment

Do you prefer to learn with helpful videos? Then these video tips are just right for you. Find out about the basics of real estate investment now!

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Learning tips: Building wealth with real estate

No time to study? With these real estate podcasts and real estate apps, you can get all the important information you need to be successful in real estate on the side.

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The Interview: “Digital Art” NFTs

Thank you for taking time for us today, on a busy Monday morning. Most people who search the internet for the word “NFT” certainly still know very little. Could you perhaps summarize briefly and quickly….

What are NFTs, explained very simply?

Stephan Czaja: With pleasure! I also try to keep out as many technical terms as possible. But you have to have heard a few.

NFT means “Non-fungible Token”. Simply explained, a token is a digital object that can contain additional information. This is also how we get to the NFT. “Non-fungible” means “not replaceable.” Here, simply put, every transaction is recorded. Meaning: I publish a GIF in a NFT marketplace, someone buys this GIF and sells it. Every transaction is documented. So even the 2nd, 3rd and 4th buyer knows that it is the original.

Simply translated, a digital file whose ownership is documented.

The big advantage is this: Suppose someone makes digital art and publishes it. No matter if it’s a picture or a video, it can be copied easily and nobody has the reference to the original file anymore. Through documentation (blockchain), you can trace individual files. So you can see who published a file, who bought it and who sold it. Through this transparent trade, values can be measured to individual digital objects, whether image, video or other.

Just like in the “real” art world.

Mona Lisa at the Louvre, Justin Bieber NFT, … Comparison

I always like to explain it with the Mona Lisa. There are thousands of copies, millions of photos, but only one original. We know that it is the original because its history is precisely documented and it hangs in the Louvre today. In principle, the picture is worth no more than the material from which it is made. The value only arises through supply and demand.

Suppose Justin Bieber makes an NFT. Many fans would want to own it, knowing that this object (whether physical or digital art) is from him.

So the big question now is how will the demand side develop? Will digital art establish itself, will it remain a niche product?

Personally, I think there’s just as big a market for digital art as there is for psychic art. Of course, it will take another five years, ten years, for me to solidify the structure, from capital investors and investors, to auction houses – sort of away from “nerds”.

Can you give us a successful example?

Successful examples of NFT art now abound.

Spectacular! 69 million $ for 1 picture

69 million for 1 artwork – The most spectacular sale was the digital work “5,000 Days”. The international auction house Christie’s wanted to integrate the hype about NFT art into their own portfolio. So they looked for artists who were already making digital art. They then found a New York artist who had already been making a digital painting for 15 years, every single day. Perfect! They put the 5,000 photos together and made it into one big, single piece of art.

Artist (Beeple) after the sale:

https://www.youtube.com/watch?v=AXC-_kWqZXo

The artwork was then sold for 69 million dollars. This made the artist the 3rd richest living artist in the world overnight. This shows the potential of digital art.

CryptoPunks and Bored Ape: Successful Collections

CryptoPunks – Especially popular are collections, which are compilations of computer-generated images. Let’s say 1,000 different cats, each with 50 different hats, glasses, hairstyles, which are compiled individually. Among the most successful projects are the “CryptoPunks”.

Here also to see in the marketplace:

• CryptoPunks

Screenshot: OpenSea / CryptoPunks / Lukinski.com

Bored Ape Yacht Club – However, the “Bored Ape Yacht Club” collection was also extremely successful.

Here also to see in the marketplace:

• Bored Ape Yacht Club

Screenshot: OpenSea / Bored Ape Yacht Club / Lukinski.com

What does such a top NFT cost?

Prices for these special, very successful collections are high.

The most successful CryptoPunks work would currently have to be around 120 ETH (Ethereum), which is round about $360,000.

At Bored Ape Yacht Club, the most expensive pieces are currently at 100 ETH, or $300,000, at the current rate.

What can be an NFT?

In principle, any digital object can be an NFT. Primarily, it is about giving a digital object additional information, e.g. sales history or a smart contract.

This is how artists earn (more) money!

This smart contract is particularly interesting for artists. In the normal art market, they profit once when they sell. With NFTs, artists get a percentage for each subsequent sale. The percentage is determined in the Smart Contract itself and is usually between 1% and 10% of the sales price.

Artists earn money:

• Physical art: 1. When sold
• Digital art (NFT): 1st sale + each subsequent sale (pro rata).

NFT types at a glance

Artists can then publish various forms, images, videos, but also accessories for the metaverse in the future. There are already games that work with this, which means that NFTs are also a topic in gaming. Of course, the principle of the classic trading cards can also be easily transferred to the digital world, with a certificate of authenticity.

• NFT images
• NFT videos
• NFT Games
• NFT Collectibles
• NFT Music
• …

Why buy NFT? What do you do with NFT art?

As mentioned before, in the end it is not different from the Mona Lisa or other famous works of art like “Fillette a la corbeille fleurie” by Picasso, “The Scream” by Edvard Munch or even “Adele Bloch-Bauer I” by Maria Altmann. When enough people attach value to an object, but this object is scarce or unique as in this case of artworks, the price increases.

If no one is interested in an object, it has no price, well maybe the material value.

Anyone who buys NFT art assumes that it will increase in value in the future. Accordingly, NFT art is an investment, like many other things, whether Rolex watch or real estate.

What is the cost of 1 NFT?

There are millions of works of art that you can buy, images, videos, many for very small amounts. If you consider that a single collection, of an artist, can already contain 10,000 individual works. Payment is often made in Ethereum, a cryptocurrency. Currently, one unit is worth about $3,000. Some things can be bought for as little as 0.001 Ethereum, which is about $3. So the initial amount is relatively small.

Caution. Take transaction costs into account

Here’s another tip for those who are buying for the first time: Pay attention to the transaction costs when transferring. Without any further settings, the transaction costs can be as high as $70 for some providers. You can always find the settings at the end of the purchase. The faster the NFT is to be transferred (entry in the blockchain), the more expensive, so $70 maximum, approximately.

NFTs from well-known artists are then already more expensive, even new releases can cost several $1,000 here.

How to get NFT?

You can buy, sell and trade such digital art via NFT marketplaces or NFT exchanges. Currently there are about 20 providers, which I have also listed on my website: NFT Marketplaces.

In principle, you can imagine the platforms as well as ebay.

Providers are among others OpenSea, Binance, there are many. Here you can buy an NFT, sell an NFT or even hold it in your wallet, which is a digital wallet. A wallet is a small app, nothing more. Sellers, or artists, put their works online at a fixed price or even an offer price, with duration from 7 days to 6 months.

What are the advantages / disadvantages of NFTs?

If someone actually wants to invest their money in NFTs, they should always keep in mind that they can only resell their artwork if they find a buyer. Ultimately, like the stock market. The only advantage is the potential increase in value, comparable to the first Bitcoins, which were relatively cheap at the beginning.

Be careful though, NFTs are individual objects (tokens) and not exchangeable like shares or cryptocurrency

So remember:

You can only sell if someone wants to buy!

Those who are risk-averse and have “play money,” money that he or she can invest:

• Potential increase in value

For artists in addition, the previously mentioned share, of each additional sale.

What are the disadvantages of NFTs?

As mentioned earlier, there are tens of millions of NFTs. Each one has an individual value. Anyone investing should be well versed and knowledgeable about the art market in general. Buying NFTs is not as “easy” as cryptocurrency, for example.

• Risk of losing money – 1 NFT out of 1.000.000 has success

Wow! Thank you for the detailed interview.

If you want to learn even more about NFTs, including coins, tokens and the blockchain, read more on Stephan Czaja’s website here.

NFT: Blockcain, Coin, Token, Marketplace – Step by Step

NFT – Digital Art, a new phenomenon. Here you will learn everything: What is an NFT? How do you buy NFTs? What marketplaces are there and how is the art market developing for investors. Meanwhile, higher prices are being achieved in the digital art market than in the physical one. Collections like “CryptoPunks” , “Bored Ape Yacht Club” are just two of the most famous works of digital art. The work “5,000 Days” made the artist overnight the 3rd richest living artist (sold at the price of $69 million at Christies). Buy, sell, collections and picture frames for digital art. Welcome to the world of NFT.

• NFT: Digital Art – external

Crowdinvesting: basics and rental yields

Invest in real estate instead of the next sneaker? Sounds strange, but that’s no longer a problem with crowdinvesting. Crowdinvestment means as much as real estate investment for everyone. But what exactly is crowdinvesting?

Here in short, before we go into details, the most important summarized on the subject of crowdinvestment:

• Many shares of a property divided to private individuals
• Only a small outlay of equity
• Loan is not paid to developer, but only participation in property

What does crowdinvestment mean exactly?

Crowdinvestments are very similar to a corporation that sells many company shares to private individuals and institutions in order to obtain the necessary financing for the company’s growth. So too, with crowdinvestments, individual shares of a property are sold to private investors. The advantage? You can invest in such real estate even with a small amount of equity and thus secure your pension.

• Comparison: stock corporation
• Many shares of a property divided to private individuals
• Only a small outlay of equity

How does crowdinvestment work in the first place?

Let’s stay with the example of the stock corporation. When a property is newly built or renovated, it is published on a special crowdinvestment platform. This is responsible for the distribution of the real estate shares to capital investors. Through the platforms, the owners are considerably relieved.

Differences from a normal investment:

• No targeted partners for financing, but division of the property by platform
• Loan is not paid to developer, but only participation in property
• Share is not used for personal use, one obtains the part of a yield

How do I find profitable real estate?

In order to know which property is worth investing in, one should know what the return on investment of the respective property is. Here you can use a simple formula to calculate this.

Formula Rental Yield:

Annual rent / investment x 100 = rental yield

If you want to know even more about rental yield, read our article Rental yield and purchase price factor here.

Financing real estate yourself? Equity

When you’re young, you often don’t have the equity directly available to invest in a property. Thus, equity probably plays the biggest role in real estate purchases for first-time investors. Many ask themselves the question, how much equity do you need at all for a regular property?

Equity depending on the situation

The answer is always related to the location of the property. If your property is in an A location such as Munich, Cologne or Hamburg, it is unaffordable for most people. In a B – location or good C- location, however, the prices fall. Depending on the micro-location, prices can also vary depending on how far into the city center you want to live.

• A- location (big city) extremely expensive
• B- location and good C- location moderate prices
• Microlocation is crucial

Equity investment depending on financing

No matter what the final purchase price of a property, the bank usually always requires an equity contribution of 15%, especially for first-time investors. In addition, one must always reckon with the addition of the ancillary purchase costs, brokerage costs (if commissioned) and the land transfer tax.

• 15% equity investment

Real estate as an investment: Provision for old age

Our pension is getting smaller and smaller and our money in the bank is subject to inflation in any case. So we are left with real estate as a good way to invest our money, as it neither loses its value due to inflation nor is it always in demand. Moreover, after a few years we benefit from the increase in value of the property.

The great advantage of a property as an investment is that it is rented out, unless you want to buy your property for your own use. The income from the rent generates a constant cash flow, with which the property and all costs incurred can be covered. By earning a high return at best, you build wealth on top of that. In addition, real estate always remains fairly constant on the market, which means that you minimize risk when you buy.

• Real estate is stable in value
• Real estate offers inflation protection
• Real estate provides constant cash flow
• Asset building

Crowdinvesting: Videos

To better illustrate crowdfunding, we have two videos here for you to illustrate the point.

What is crowdinvesting?

Here, crowdinvesting is explained to you with the help of graphics and drawings.