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WIKI

Investment property

SHORT DESCRIPTION

An investment property is a property - i.e. an immovable asset such as land, a right equivalent to land or a building - which the buyer acquires for the purpose of capital investment. This distinguishes it from a residential or commercial property, which the buyer acquires in order to live in it himself or to do business there. In other words, an investment property is not used by the owner. The motive for the purchase is rather to invest money that the buyer does not need in the short term safely and profitably.

IN DETAIL

Compared to many investment alternatives, investment properties are characterised by comparatively high stability of value. For example, it is unlikely that a house will lose significant value within a year. However, this is the rule with shares in a company that reports surprisingly high losses. Moreover, the buyer of an investment property invests in a concrete, substantial asset and not in a share certificate. The buyer of an investment property usually receives ongoing income in the form of rent, lease or distributions from his investment. With an investment in precious metals, on the other hand, there is no such ongoing income. At the same time, the owner of an investment property benefits from a possible increase in value. This is particularly pronounced in areas where the demand for real estate is significantly higher than the supply. Investment properties also serve as a sensible diversification of portfolios by reducing the overall risk as an additional asset class - for example alongside shares, bonds or commodities. In this way, the buyer is better prepared for any crisis.

There are basically various ways for small investors to invest in an investment property. However, some of them involve considerable difficulties. In theory, they can buy a property directly as a direct investment and then rent or lease it out. However, the costs of doing so are usually so high that this option is out of the question for most small investors. An alternative is to invest in a real estate company that buys up existing properties, renovates them and sells them again at a higher price or keeps them and then increases the rents. However, some of these companies have recently made negative headlines due to allegations of rent control. Another option is to buy shares in real estate funds. Here, the buyer receives a certain share in a portfolio of properties. However, he cannot influence the selection of properties and must rely on the expertise of the fund managers. Another relatively new form of investment in investment properties is crowdinvesting.

With crowdinvesting, investors choose the property they want to invest in on a special crowdinvesting platform. Here, interested parties usually find a wealth of investment opportunities, which can be both existing properties and new construction projects. This allows investors to decide for themselves which property they want to invest in. Because he can usually acquire any share in the property, this form of investment is suitable for both small and large investment sums. Other advantages are the high level of transparency and the attractive returns that leading providers offer their customers.

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