Residential real estate for direct rental
The development of rents in Germany needs no repetition, as the topic is omnipresent in the daily press and news. Especially, the question between “living for rent” versus “living in your own property” is often up for discussion. What about paying off and making a profit? In the course of rentals, tenants and, with regard to new buildings and, in some cases, refurbishments, the state pay off the property through tax breaks. The resale proceeds are the profit that remains for the property owner.
Commercial real estate for capital investment
In contrast to the protection of rights of private tenants, the protection of commercial tenants is low. For commercial rents, the dynamics of supply and demand are unhindered. However, commercial leasing is strongly subject to the economic cycle. If a location becomes unprofitable or a wave of bankruptcies hits an economy – such as during the COVID-19 crisis, the principle of supply and demand works against commercial property owners. Furthermore, the investment volume in commercial real estate is usually not manageable by a private investor. Communities of investors with their own momentum are formed. Here you will find an overview of the advantages and disadvantages.
Real estate funds
In contrast to direct real estate investment, fund shares are highly fungible and do not cause a permanent capital commitment like individual projects. On the other hand, as a fund investor, you are at best indirectly involved in decision-making processes and your tax options are limited. On the positive side, real estate funds can carry out projects of any size by pooling capital. Given the tight situation on the housing market from the tenants’ point of view, large-scale residential construction can be expected in the major cities. Projects with target dimensions, with hundreds and thousands of housing units need financing on a large scale and can only be financed individually by billionaires. Through real estate funds, you participate in profitable projects that would not be accessible to you otherwise.
