Real estate investment for beginners: how to do it on a budget

Geld anlegen?

In conversation with Lukinski / Kapitalanlagen (Stephan M. Czaja) – Buying your first condominium (as an investment) without risking everything right away – it’s possible. Small apartments around 25,000 euros are the perfect place to start. In many German cities, you can find small properties near the university or in peripheral locations that can be transformed into modern micro-apartments with a little skill.

Invest cheaply: Small apartment, big style & clever returns

Why is that?

Why 5,000 euros can be enough

For many first-time buyers, this sounds too good to be true. But: if you can raise around 20% equity – i.e. around 5,000 euros for a purchase price of 25,000 euros – and the bank finances the rest, you have already laid the foundation. In addition, there is a small buffer for modernization – and this is exactly where your leeway lies.

• Only 20 % equity required
• Low entry hurdle for your first investment

Upgrading with style: color, kitchen, charm

What you can get out of a nondescript apartment with a small budget is enormous. A new wall color immediately creates a fresh atmosphere. A laminate floor from the DIY store enhances the feeling of living. And with an inexpensive fitted kitchen, you not only add function, but also real added value – especially for potential tenants.

Achieve more rent with little effort

Those who invest in simple furnishings often get significantly more per square meter. Especially for students, young professionals or single travelers, it’s not the size that counts – but whether everything you need is there. Renting out furnished means you can charge a premium and appeal to a target group that is looking for exactly that.

• Fitted kitchen increases the rental value
• Furnished apartments generate more income

Who you rent to: Students, Singles, Mobile

Your small, cleverly furnished apartment is in tune with the times. More and more people are living alone – and they don’t want to live in huge apartments. Whether student or digital nomad: An apartment with 25 m², furnished and in good condition, is quickly rented out. Especially in cities with universities or good public transport connections, the vacancy rate is often zero.

High demand for small apartments

So why spend more or opt for large properties? Small apartments are not only easier to finance – they are also back on the market more quickly. And with a property management company, you don’t have to worry about almost anything.

• Stable demand for small units
• Property management takes over letting & administration

Less risk, more control

A small start also means: you risk less, but learn just as much. You build up initial experience, benefit from monthly rental income and can sell again at any time. Thanks to the compact size, you have lower operating costs, less maintenance – and a very clear calculation.

More overview with a small area

Instead of renting out a 4-room apartment, where you might end up with three empty rooms, you invest in a single small unit – with a clear target group. Your fixed costs remain manageable and you have full control over your income.

• Less effort, more overview
• Lower operating costs

Start with little capital – but a lot of impact

You don’t need millions to start investing in real estate. Just 5,000 euros is enough to buy a small apartment, upgrade it a little – and turn it into a real source of income. And best of all, you’ll learn everything you need for your future portfolio.

Micro-apartment as a capital investment: advantages for you

Small apartment with 25 m² instead of a large 4-room apartment. Why? More and more people are living alone in single households. Students, singles, holidaymakers, but also professional groups such as fitters, who are often in different cities. Learn more about investing in small condominiums, so-called micro-apartments, here.

• Micro-apartment as a capital investment

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

Coveted collector’s items: Luxury watches in focus

Luxury watches such as the Breitling Navitimer immediately stand out due to their craftsmanship and quality. Their long tradition is reflected, among other things, in the precise workmanship that sets them apart from conventional timepieces. Coupled with its iconic design, it is understandable that the luxury watch is a coveted collector’s item – even in comparison to other models. The same naturally also applies to many other models from Breitling and other well-known manufacturers. Swiss watches in particular – from regions such as Geneva, Schaffhausen and Solothurn – have a good reputation among collectors.

Stylish self-confidence: the psychological power of luxury watches

How we dress plays a major role in how we are perceived by others. But that’s not even the main reason for dressing smartly. How we perceive ourselves is even more important. It has been scientifically proven that clothing can act as a kind of psychological booster and special accessories such as luxury watches have the same effect. Wearing a luxury watch makes many people feel a lot more self-confident. The reasons for this can be very different, but wearers often associate a luxury watch on their wrist with personal success.

Remember:

1. Clothing influences self-perception
2. Luxury watches as a psychological booster
3. Increasing self-confidence
4. Association of luxury watches with personal success
5. Scientifically proven

Investing in elegance: luxury watches as capital investments

When we buy a luxury watch like a Breitling Navitimer, we are not wasting our money. Unlike most sports cars, fast fashion items or gold-plated household items, luxury watches tend to hold their value. This is why many people see them as a potential investment, even superstars like Ed Sheeren love luxury watches.

This is entirely justified, as some limited editions of popular brands have not only retained their value in recent years, but have even increased in value. In fact, it is not uncommon for a popular model to increase in value by 10 %, 20 % or 30 % within a single year. When comparing luxury watch vs real estate, a good return (profit).

Even higher increases in value are theoretically possible, as the Patek Philippe Nautilus has proven. In 2021, it experienced a huge increase in value of 85%.

Elegant appearance: luxury watches as subtle status symbols

The role of status symbols has been the subject of intensive research for many centuries. Status symbols can include academic degrees, material goods or social contacts. They enable us to show our status to the outside world. This in turn can help us in a wide variety of situations – for example in terms of career, networking and signaling belonging. However, it makes a big difference how we present status symbols. Things like a heavy gold chain come across as very ostentatious and create an unprofessional impression. A luxury watch, on the other hand, is much more subtle. We can simply wear it inconspicuously on our wrist without giving the impression that we are deliberately flaunting our status.

Versatile accessories!

For most people, luxury watches are a fashion statement. This is understandable, as a chic watch can be combined with a wide variety of styles. While some models go well with glamorous, conservative and formal clothing styles, others are suitable for eye-catching, innovative or sporty fashion. What is ultimately possible depends on the charisma, design and material of the luxury watch. This makes these and other luxury watches a desirable investment.

Discover the world of real estate with Timmy, Lea and Finn

Join Timmy and his friends on adventurous journeys that not only stimulate the imagination but also enrich the mind! Each story, whether it’s the discovery of the magical tree house or the mission to Color Island, is perfect for read-aloud time and provides a fun way for children to learn about real estate and appreciation.

With colorful illustrations and engaging storylines, these books will become an essential part of any read-aloud routine! Discover the joy of reading and learning together with Timmy.

Read online now or download as an ebook and turn reading time into a magical experience! The author of the little stories is by the way our editor Stephan. Read the books online for free or download the ebooks:

• Timmy’s Adventure – Immoblien book for children

A learning adventure full of excitement and inspiration

The stories of Timmy and his friends are more than just entertainment – they are an invitation to discover the world of real estate and investment in a playful way. The fascinating storyline encourages young readers to find creative solutions for the future and to take responsibility for their environment.

Why no nursery should be without these books

Parents watch out! The real estate adventures of Timmy, Lea and Finn are a must-have for every child’s room. Not only do they encourage little explorers’ imaginations and love of reading, they also impart valuable knowledge about real estate, sustainability and environmental protection.

Discover the magical tree house, the abandoned property or the color island and immerse yourself in an adventure full of magic and excitement!

Download the free ebook now and join Timmy, Lea and Finn on their exciting journey through the colorful world of real estate.

Tips for reading aloud: Make reading aloud a daily ritual

Reading aloud should become an everyday ritual that both parents and children enjoy. Here are some reading tips to make reading aloud a special moment:

1. Create a calm atmosphere
2. Find the right reading time
3. Choose suitable stories
4. Read aloud vividly
5. Interaction with the story
6. Imaginative conversations

Create a calm atmosphere

Provide a comfortable environment without distractions such as a TV or cell phone so that you can concentrate fully on your child and the story.

Find the right reading time

It is best to choose the same time every day for reading aloud. Before going to sleep is particularly good for calming down, but other times are also suitable, such as waiting times or traveling.

Choose suitable stories

Focus on your child’s interests, be it detective stories, adventure stories or non-fiction. If the child enjoys the story, they will also be more enthusiastic about reading it aloud.

Read aloud vividly

Adapt your voice and intonation to the story to make it more lively. This helps to keep your child’s attention.

Interaction with the story

Allow your child to ask questions and comment on the story. Look at the pictures in the book together and describe them.

Imaginative conversations

Discuss what you have read with your child, think about alternative endings or how the story could continue. Let your imagination run wild!

Frequently asked questions about reading aloud

From what age can I read to my child?

Reading aloud makes sense from the age of one or two. There are suitable books for different age groups, even for babies as young as 3 months.

Which books are suitable for reading aloud?

There is a wide range of books for all ages and interests, from picture books to children’s book series.

How often should I read to my child?

Ideally, reading aloud should take place daily, for at least 15 minutes.

Read & download for free!

Read the books online for free or download the ebooks:

• Timmy’s Adventure – Immoblien book for children

Berlin real estate: an urban investment

Urban treasures: Berlin’s real estate market

The properties we are looking at are located in the vibrant metropolis of Berlin. The city is known for its dynamic culture, history and growing economy, making it an attractive market for investors. The increasing demand for residential and commercial space in Berlin has led to a significant increase in value and thus to interesting investment opportunities.

The Rolex Daytona: an icon of luxury watches

The symbol of exclusivity: the Rolex Daytona

The luxury watch we are analyzing is the Rolex Daytona, an icon among luxury watches. Known for its precision and iconic design, the Daytona is not only a coveted collector’s item, but also an investment that has gained considerable appreciation. Its popularity and value are closely linked to the quality and prestige of the Rolex brand.

Performance since 2012: a detailed comparison

The figures speak for themselves: both real estate in Berlin and the Rolex Daytona have experienced an impressive increase in value. But the figures also show that the Daytona has put in an outstanding performance, outperforming the solid gains from the real estate market.

Table of value appreciation: a direct comparison

The following comparison shows the percentage increase in value of both forms of investment since 2012. The table illustrates the increase in value and the potential of both investment options:

Sources: Watch prices / Real estate prices

Rolex wins!

Rolex = 260.77 %

Property = 189.29 %

Conclusion: The importance of diversification

These figures underline the importance of diversification in investment portfolios. Investors should always monitor market developments and can minimize risk and maximize returns by spreading their capital across different asset classes.

Outlook: The future of the plant in style

Investing in luxury watches and real estate remains attractive. These forms of investment are expected to continue to play an important role for style-conscious investors seeking a combination of financial return and aesthetic value.

Rolex & Luxury Watches

• Luxury watches
• Rolex

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

Mistake 1 – The location is decisive

A property in a poor location without high demand quickly becomes a problem. Therefore, one should always buy in an attractive location.

Property in a bad location:

• Low demand
• Renting becomes difficult
• Consequence: Vacancy

Therefore our tip: Pay attention to A- B- and C- layers!

Real estate in good location:

• Buying in large cities (not metropolises in top A locations), example Bonn or Leipzig
• Conurbations, the famous Speckgürtel, with good B-location like everything around Munich, Darmstadt near Frankfurt
• B-location cities in demand, such as Kassel, Braunschweig or Heidelberg

Mistake 2 – A property that is too specific

Special real estate requires a special group of buyers – and this group is not easy to find. That’s why you should always go for real estate whose utility and use covers the needs of the broad masses. In our article on real estate types you can learn everything about apartment, house and co. So what are you looking for on the real estate market?

So what’s there to keep your hands off of?

• Loft/ Villa/ Apartment, everything that exceeds the normal consumer
• This type of property must be in a top A location in order to sell/rent it.

Our tip: 1-2 room apartment

In all locations, be it A, B, or even C, 1-2 room apartments can be found and the demand is constantly increasing. Since more and more people live alone, a look at the single apartments is always worthwhile.

An example of a special property in C- location: hard to sell.

Mistake 3 – Self-interest instead of investment

You can read a lot about owner-occupation in our article on the subject. Here you will learn again in a nutshell why it is not advisable to use your first property for personal use. Therefore, our tip: Do not buy an owner-occupied property without capital investment, because you are responsible for 100% of the operating costs, neither tenants nor the tax office comes to your financial aid.

Reasons against self-interest

• Self-interest is the most expensive way to live
• One will never be completely rent free due to ongoing costs
• You pay off the property yourself
• Self-interest reduces credit rating
• Property is not suitable for old age later

Mistake 4 – A house as a first property

If you choose a house as your first property, you must also be aware that this means that you will have to bear 100% of the costs. Therefore our tip: Buy a condominium as your first property.

Condominium: Cost allocation made easy

As soon as you acquire an apartment in a multi-party building as your property, you become part of a community of owners. Thus, all running costs incurred for repair, maintenance and modernization are divided among all parties of the house.

Here is a small example:

• Homeowner (100%): 12,000 euros
• 4-party house (25%): 3,000 euros (-9,000 euros)
• 8-apartment house (12.5%): 1,500 euros (-10,500 euros)

Mistake 5 – Let the emotions flow in

Real estate should always be viewed rationally instead of emotionally. Therefore, our tip: Never buy a property out of emotion. Even if you find the property at first sight insanely beautiful, think again well about it. Often such buildings are due to the year of construction and the condition dilapidated or in need of modernization, whereby for you in the end much more costs than actually jump out.

So what should you do?

• Avoid impulse buying!
• Testing at commercial and technical level
• Examination of yield, purchase and resale value

A typical property that is bought out of emotion: A lot of charm, little profit.

Mistake 6 – No attention to resale value

A really great purchase price! – And now? How much do you get out of it in the end? Many people don’t pay attention to the resale price when buying a property, but you definitely should!

The decisive factors for the resale value are:

• Property type
• Location of the property (see return or investment)

Comparison: location and increase in value

Let’s compare the 3 types of location and the increase in value:

• A- location: value increase at 4-6% per year
• B- location: value increase at 1-2% per year
• C- location: no increase in value

As a beginner, they opt for a condominium in a good C- location or B- location.

Mistake 7 – Top equipment- bad property

Great kitchen, great furniture, you bought the property only because of its great equipment? That’s bad for you, because you’ll make less profit. What you are looking for are properties in need of renovation, because this way you can renovate them yourself and then sell them, making a profit.

Mistake 8 – Paying in huge installments

You want to pay off your loan as quickly as possible and think large sums will help you? Unfortunately, this is wrong. Here’s our tip: It’s better to agree on small repayment installments with the bank.

• The tenant pays off the property, all surpluses are direct asset accumulation
• Inflation reduces the loan for a long time
• The higher you set the repayment, the less is left at the end of the month
• The faster a property brings cash flow, the higher the surplus

Next step: criteria to the condominium

The property for first-time buyers. Want to buy a condo as your first property, but don’t know where to start? Here we’ve created a checklist of 11 items for you to determine the basics and criteria of your real estate search. Whether determining the maximum purchase price, the question of owner-occupancy or capital investment, yield or investment property as well as existing or new construction – here you will get all the answers to your questions.

Owner-occupation vs. real estate as an investment: advantages and disadvantages of owning a home

The dream of owning a home is a goal that many people have in mind. But does it make sense to choose a house for personal use as the first type of property? Or is it not perhaps more sensible to use the first property as an investment? Living rent-free in old age will never quite come true, even with a home of your own, because you are always 100% responsible for all running costs. Therefore, in this article you will find a comparison between owner-occupancy and a property as an investment, which should help you make the decision to use your first property.

• Personal use vs. real estate as an investment

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 experience.com

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 experience.com

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.

New issue#13: Buying property in Germany

Here you will find a small overview of the topics printed in the new issue:

• Buying real estate in Germany: Overview of major cities
• Everything about buying real estate: tips & explanations
• Taxes: Everything about taxes!

Read online! Now on fivmagazine.com

Read the whole magazine online as well:

• FIV Issue #13

Buying real estate: wealth accumulation, investment & inflation

The inflation of money is omnipresent. If you invest money today, it will only be worth half in 30 years. This article compares the classic investment of money in the bank with a capital investment in the form of real estate. Real estate creates “real value. Find out what that means here!

• Buying real estate – First property purchase

Taxes: Basics, Real Estate, Books, Videos, Tips & Tricks – Guidebook

Taxes are often a tiresome topic, especially in Germany. A tax advisor can help or you can learn how taxes work. It is not that difficult! Wage tax, value added tax, real estate transfer tax (read more here: Taxes in Germany) and much more: it’s not easy to keep track of everything. But if you are not interested in hiring an expensive tax consultant (read more about tax consultant costs), you have to deal with the topic of taxes intensively. We want to help you with that! Here you will find an overview of guides as well as book and video tips on the subject of taxes. Whether we introduce you to individual types of German taxes or you watch a video on the subject of tax returns, all your questions about German taxes will be answered here.

Interview with real estate expert Jan Rickel from IHV – Die Immobilien Makler.

Capital investment real estate – You should note this

FIV: Investing money is complex. Especially when it comes to real estate. Condominium, single-family house, land or an entire apartment building. How would you describe your approach to investments in a few sentences for our readers? What do I need to know if I want to invest money in real estate?

Right from the start I work according to the motto “only those who know their goal can achieve it”! Sounds banal, and actually it is. I must have a clear idea of what I want to achieve when it comes to investment – as I do in life. Once I’ve defined the goal, it’s about the strategy to achieve it.

FIV: Okay! I’d like to be a millionaire. It’s a clear target, isn’t it? With which system can I achieve this in the best and safest way?

Since my business is real estate, I can ultimately only speak for this area. But this much is certain: when it comes to long-term prospects for capital accumulation, these can be very well and reliably planned with real estate. Company investments – whether as funds or investments in a single company – are subject to strong fluctuations in their performance. Although these can also be offset over a longer investment period, there is still a higher residual risk than with real estate. In addition, there is another very important aspect with real estate: Under certain circumstances, I can achieve a significantly higher return with my existing equity capital than with any other investment. This is due to the so-called lever effect. This always occurs when I do not use the purchased property myself – i.e. rent it out. The rent is my income with this form of investment. If I compare this return exclusively to my invested equity capital, then yields in the solid double-digit range are generated.

Should you take risks?

FIV: But these are tricks, aren’t they? I have to borrow money from the bank to buy a property. That also costs money in the form of interest and redemption.

I don’t MUST borrow money, but I should do it. And this has nothing to do with the interest rates, which are still favourable at present.
Assuming I had enough equity to finance the property I wanted without a loan. Then I save the interest and repayment, but have a much worse return, because I use a lot of money to earn the rent. If, on the other hand, I borrow the money from the bank, then I only have to deduct the interest from the rental income – if I am serious about it. The repayment of the credit is my over the repayment years stretched additional own capital funds, which I put into the “piggy bank” real estate. Strictly speaking, it does not depend on the return on equity. On the contrary, if I have made the right choice when choosing a flat or apartment building, the flat will continue to gain in value in the coming years. If the speculation period of ten years and best also the financing period has expired, I can sell the apartment again and collect the increase in value as an additional return on my redemption capital.

What do I have to consider?

FIV: Sounds very simple. But what’s the catch?

Only in two places you have to be careful! I had already mentioned one place with the right location of the property. If you want to invest your money in a rented apartment, you have to pay attention to the location. Even if it should not be the top location at the time of purchase, there must be a noticeable improvement in sight within the planned investment period – i.e. as long as one wants to keep the apartment. Otherwise, the increase in value won’t work.

On the other hand, this leverage effect only works if the financing interest for my borrowed capital is not higher than the total return on capital of the property. With the current interest situation, however, this is not an issue for the purchase of a decent apartment today.

I recommend here to simply visit one or the other bank. There you usually get clear statements as to which financing framework the bank is prepared to cover. Conversely, I then know how much own money I need as an investment or in which league I can afford an investment object.

FIV: What’s better then? To buy an apartment or a house for yourself, or rather to rent it out?

When it comes purely to capital investment and returns, a property for rent is the better choice. If I want to occupy the capital investment for “today” and the property itself for the future, then I should make sure when choosing the property that the furnishings and location of the property meet my own living requirements.

FIV: How do you then confidently walk the capital market, especially if the future always remains uncertain? Are there any concrete recommendations from you as an expert for our readers?

Of course I will only be able and willing to talk about the real estate market. Anyone who has invested in the real estate business for a long time already knows how to present themselves in this market segment. But everyone else can learn that well! For beginners in the investment business, I recommend starting small. A small two-room apartment in a city or region whose population has grown steadily in recent years is a good place to start investing safely in real estate. The certainty as to whether there will also be a move in for the following years or decades and thus a need for living space can be obtained from the respective municipal administrations, for example. Often the homepage of the city or region already has some information about the urban development.

Catch up with expert advice

With regard to the property itself, the overall state of construction and equipment is of course important. In case of doubt one can consult an architect, a friendly craftsman or other people with appropriate real estate expertise. What renovations have been made? What’s on the agenda? What is the overall ownership structure of the house like? How high is the fluctuation among the tenants of the other apartments? Is there any information about the apartment I’m about to buy? Of course, this is only possible with existing properties. In the case of new buildings, one takes a look at the houses that the developer has already built elsewhere and, if necessary, talks to the residents who have already bought from this developer.

The “right” purchase price still remains…. The Bank is in demand here, as I explained earlier with regard to the leverage effect. Be sure to have several banks calculate for you how rental income, running costs (reserves, etc.) will relate to the loan conditions and the equity capital for you. In plain language: You will also receive different offers from different banks. This may be worth it for you.

FIV: And now the question of how self-confident should I appear in the conversation:

Self-confidence doesn’t mean I’m performing with the proverbial big arms. On the contrary: the real estate seller and the banker will quickly notice how experienced you are in matters of capital investment. It’s better to be a beginner! After all, bankers are now also strongly liable if they give the wrong advice.

Is the investment worth it?

FIV: We currently hear a lot about real estate returns of 4.5 percent, sometimes 6 percent. In the context of the current development of interest rates on savings balances, this sounds like a sensible investment. Would you agree with me? How much do real estate currently pay off as a capital investment?

These yield data are really serious and covered by my experiences. As far as the pure return on equity is concerned, it often even looks much better, as we have heard above. I can only repeat here that real estate is a good and safe investment in terms of yield as a capital investment – the so-called “concrete gold”. Prerequisite: the location of the property is such that it generates continuous rental income at the normal market level. If longer periods of loss of rent are to be feared, for example because the residential area or the house has a high tenant fluctuation, then the investment does not pay off.

Various types of real estate – Investment opportunities

FIV: Which type of property would therefore pay off for me? Better the small single apartment, the large condominium for families or better a detached house?

If you are a beginner in the real estate business, then start with the small single apartment. The single-family house is rather a problematic thing as a capital investment for letting. If you are then times correctly in it and also have the necessary capital, it is with real estates like with shares: the mixture macht´s! Single-apartments in corresponding regions (e.g. student cities) combined with large housing units makes sense. In concrete terms, houses with apartments between 50 sqm and 110 sqm are ideal, as apartments over 110 sqm are usually more difficult to let.

FIV: Many questions, when is it worth investing? 10,000 euros, 20,000 euros. Are the investment opportunities just discussed suitable only after a certain financial framework or are there perhaps also new alternatives and possibilities, for example in the form of regular instalments?

Here, too, we would like to point out once again that good real estate can be financed even with small investment amounts. The prerequisite is that the bank also recognises that the property is a secure investment. Condition of construction, location, amount of rent, etc. – all this must be right so that you get the credit for the purchase price demanded. Ultimately, the annual net cold rent is the proverbial crux of the matter. Of course, everything also depends on my having a regular income.

FIV: For all those who are thinking about selling or buying. Which region and location do you consider to have the greatest potential in Germany?

Oh, dear… There are so many regions. I myself live in the Rhine-Main area. This is in any case a good region to buy. And I’m not just talking about the big cities of Frankfurt, Wiesbaden and Mainz. The small towns in this region are also doing well in real estate. Hamburg, the Bonn-Cologne-Düsseldorf line, the Munich area, Berlin and Stuttgart are further examples.

Investments in nursing homes or homes for the elderly

FIV: Finally, the question: What do you think of investments in old people’s homes or nursing homes?

Very little! – is my short answer. This is related to the very high risk that this form of housing has as an investment. We’re talking about so-called social real estate here. In view of the aging population and the resulting increase in demand for senior citizens’ and nursing homes, it is suggested that this is a safe investment. However, these properties as management properties – like hotels, for example – have a serious disadvantage: if the operating company works poorly, such a property quickly becomes a bottomless pit. In the meantime, there are numerous examples of nursing homes that were either not used to capacity or lacked the necessary investments to guarantee a high standard of care. Then again the residents are absent, which in turn leads to a lack of investment by the operators. A vicious circle! Not only is there no rental income, you usually also have to inject a lot of capital in order to get the house in shape or to keep it that way.

Private customers are already being taken advantage of when it comes to the purchase prices of nursing home properties! Usually nursing homes are acquired by so-called institutional buyers. Like a hospital company or something. However, they are only prepared to invest a maximum of 14 times the expected net annual rents. This is why the developers of these facilities have in the past switched to approaching private customers – with the corresponding return promises. Often 20 times the net annual rent is charged as the purchase price, because it is supposed to be a great and safe investment. I’m not saying “hands off”, but it takes a lot of experience and advice to get into this business.

Thank you very much for the interview!

Interview with real estate expert Jan Rickel from IHV – Die Immobilien Makler.