Which properties are suitable for an entry-level investment?

Those who are considering investing in real estate for the first time are likely to think first of apartment buildings or condominiums. These are considered to be very safe investments, suitable for building up a private pension, among other things. Very safe, but also usually with limited return expectations. However, the whole point of an investment is to identify properties with particularly good return opportunities. Here are some suggestions of the types of real estate you could consider when looking for profitable investment properties.

Student apartments

Student apartments or halls of residence have been a popular investment for some time now. In university towns, demand is consistently high and the risk of vacancies low, so that the high tenant turnover does not have a negative impact. On the contrary, the generally shorter rental periods make things much easier and there are fewer legal disputes with tenants than with a multi-family house, for example. Now that universities are largely returning to in-person teaching after a long period of closure due to the coronavirus, student apartments are likely to be in high demand. In some cases, it may also be worthwhile for large investors to convert unprofitable office or hotel properties into student residences, for example.

Retirement apartments and care properties

In our ageing society, the demand for special properties for senior citizens and people in need of care is constantly increasing. In addition, care properties in particular have many advantages for investors compared to classic residential properties. Rental yields are usually higher, the very long-term rental contracts are usually not concluded with the residents, but with the operators of the care facility, and they guarantee a high level of rental security with little or no administrative effort. In addition, there are considerable tax advantages that make nursing care properties particularly attractive for investors. Such tax advantages include depreciation in the tax return. The building portion and the exterior of the nursing care property are deductible at two percent annually. In addition, the inventory can also be depreciated in the tax return, in addition to the property.

If the property is not a nursing home but a well-equipped apartment for senior citizens or a residential complex with a full range of services, the rents are also usually higher than the average for the region. This type of property, which is becoming increasingly diversified, also offers solid opportunities for returns.

Listed properties

A listed property can be an interesting investment for capital investors. This is the case when the investment decision is not based on the return directly generated by the property, but on the tax optimization of the overall entrepreneurial result. This is because the costs for the renovation and modernization of a listed property can be written off 100% over 12 years. If the necessary initial capital is available and the will to deal with the legal and technical requirements of a renovation in line with the preservation order, a very high increase in value can be achieved in the long term, and thus – taking into account the tax savings effect – a high return.

Office and commercial real estate

In contrast to the generally positive and stable development of the residential real estate market during the coronavirus pandemic, the consequences of the pandemic are clearly felt in the commercial real estate sector. There are both winners and losers. It is often said that city centers are reinventing themselves and that new uses must be found for many retail spaces. Existing owners may withdraw from inner-city commercial real estate, creating interesting investment opportunities for newcomers. For the implementation of innovative concepts for the transformation of inner cities, bold investors are needed – and there is a lot to be gained for them. However, a serious risk assessment by a proven expert in real estate investments should be carried out first. In the case of office properties, it is becoming apparent that despite the consequences of the pandemic, there will continue to be strong demand for office space in the future, although the requirements for this space will be different than in the past. Those who seek the advice of an experienced investment broker who has a close eye on current trends in this asset class can also find suitable properties for an above-average profitable investment here.

Are you looking for your first investment property? And would you like to generate an attractive return without taking too much risk? Then contact us! We will be happy to advise you and help you find a suitable property!

Notes

For the sake of readability, the generic masculine is used in this text. Female and other gender identities are explicitly included, as far as it is necessary for the statement.

Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific case.