The traditional savings book does not currently have good cards. In times of zero interest rates, savers must look for other investment opportunities for their money in order to achieve returns. A popular alternative is real estate – also known as “concrete gold”. They lure with attributes such as security and stability of value. Due to the low interest rates, loans can be taken out with the bank at very favourable conditions in order to acquire shuttercraft houses or residential property.
However, it does not necessarily have to be directly the home of one’s own: Equities, bonds, funds and crowd investing platforms are also a way to enter the real estate market. As great as the opportunities are, so great are the pitfalls. A guide through the jungle of asset classes.
The most important at a glance
Investors should inform themselves well in advance about alternative investments and various asset classes. You can invest in real estate through direct purchases, equities, bonds, funds and crowd investment platforms.
The criteria of risk distribution, investment volume, capital commitment, costs and effort as well as self-determination play an important role in the choice of asset class.
The purchase of a property is currently favoured by low interest rates on loans and high increases in value in metropolitan regions. As an investment form, however, it only makes sense in the long term and means a lot of effort for the investor – whether in the selection of the yield property or the administration afterwards.
Real estate shares are subject to strong price fluctuations – attention risk!
In spite of real collateral, real estate bonds usually suggest only fictitious security and are sometimes complex and non-transparent in structure. You should have a close look at the product. Real estate funds are not as risky as real estate shares. They also offer a cheaper and less expensive alternative to buying.
Venture something new: Real estate crowd investing offers private investors who join forces via an Internet platform access to an asset class that was previously reserved for major investors only.
Overview of real estate investments
The most common way to use real estate as an investment is to buy apartments or houses directly:
Real estate stocks
Real estate shares are an alternative form of investment. These are share certificates of companies from the real estate sector that develop, produce, manage and market the properties. These can be large construction engineering companies, real estate agents, housing associations or professional property management companies.
Real estate bonds
Real estate bonds or mortgage bonds are fixed-interest securities that are often secured by mortgages. Moreover, the real estate bond is a normal bond. In contrast to real estate shares, which represent the equity capital of the respective real estate company, real estate bonds are debt capital.
Real estate funds With real estate funds, professional investors – fund managers – collect the money in order to then invest it in several properties. Based on their experience, the managers can usually generate a high return. Investors can choose between open-ended and closed-end real estate funds.
Open-ended real estate funds have many properties in their portfolios. In addition, they usually have an unlimited investment volume. This means that the fund assets continue to grow as new investors come in with new money. This also means that you can sell your units at any time. With closed-end funds, on the other hand, the volume is limited. Once all units have been sold, they are closed. You then have to hold your units until the end of the term. In addition, they often only invest in one or two properties such as hospitals, hotels or shopping centres.
Real estate crowd investing
Recently, real estate crowd investing has become a trend as a way of investing money. Instead of raising a lot of capital for a property, one joins forces with many other private investors via an Internet platform and invests as a “crowd” together in individual construction projects.
This already works with small amounts and enables small investors to invest in larger real estate projects. This type of investment, the so-called mezzanine capital, was previously reserved for professional large investors only. Today, private investors also benefit from the high interest rates of up to 7.5% per annum.