Ahmet Dagli
Investors have many different investment options open to them for their finances, and investing in real estate is just one of them. As part of our series of instructions on Investing for Beginners, we will take a look at how to invest in real estate to build your wealth:
So let's get started.
Real estate is often referred to as concrete gold because it generally means security and value retention. Investors are always on the lookout for inflation protection, especially in times when central banks are pursuing an expansionary monetary policy. Low fluctuations in value and attractive income distributions, e.g. via rental income, also motivate many investors to invest in real estate.
Investing in real estate can offer a number of benefits:
Source: VanEck.
Definition | Advantages | Disadvantages | |
Real estate (concrete gold) | Purchase of a house or flat as a home or to rent out |
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Real estate shares/REITs | Investment in shares of a company from the real estate sector |
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Real Estate Bonds | Acquisition of a corporate bond directly related to a property |
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Open end real estate funds | Purchase of fund shares invested in various real estate projects can be sold at any time |
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Closed end real estate funds | Purchase of fund shares that are invested in defined real estate projects and can only be sold under certain conditions |
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Crowdinvesting in real estate | Association of many private investors to invest in individual real estate projects. |
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Real Estate ETFs | Purchase of a diversified portfolio of real estate shares, which in turn can invest directly in real estate. |
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Investing in real estate is something many people associate with buying a property for investment purposes, such as a residential building or even a commercial rental property. But there are other options.
Although less well known, you can also make an investment in real estate through a mutual fund. There are many different varieties of real estate funds as well as Real Estate ETFs. With some of them, your investment may be tied up for a long time. For others, the minimum investment is very high.
Due to sharp price increases in the real estate market, it is almost impossible for most people to profit from this boom through direct investment. Real Estate ETF offers the opportunity of investing in real estate even with small amounts and has a much higher degree of flexibility compared to a traditional real estate purchase. Real Estate ETFs take advantage of easy access to the stock market to make investing in real estate easier, as opposed to the traditional purchase of a home or flat, which comes with much higher overhead costs. Purchase price negotiations, notarial certification, land register entry and even searching for tenants are not necessary.
To invest in real estate, passive Real Estate ETFs offer an attractive alternative to actively managed real estate funds. The reasons for this are that they charge higher fees, often tie up the invested capital for a long time, and may require an extremely high minimum investment. Compared to actively managed real estate funds, Real Estate ETFs are characterized by higher liquidity, flexibility and lower costs. You can also find out more about real estate on the external pages of the
online broker 1822direkt.Listed real estate shares include companies that invest in real estate primarily and whose shares are traded on the stock exchange. These real estate shares are often referred to as Real Estate Investment Trusts or REITs. You will often read terms like REIT funds or REIT ETFs or REIT investments in various financial journals.
A REIT is a company that owns one or more income-producing properties.
REITs are often exempt from paying taxes on operating profits to avoid double taxation for investors. When you buy a share in this type of company, you are effectively buying a share in a real estate portfolio.
Source: VanEck.
There are two types of REITs – listed REITs, also known as exchange-traded REITs, and unlisted REITs. Unlisted REITs are not listed on the stock exchange, but are one of the available investment options.
Listed real estate shares offer a number of advantages of investing in real estate compared to their unlisted alternatives:
Investing in real estate through listed real estate shares and Real Estate ETFs naturally brings risks, such as:
Investing in real estate can be so simple. For investors who do not want to take the time to search for the right real estate shares, there is an option to buy Real estate ETF (exchange traded fund) that invests in real estate shares.
This can provide investors with an easy entry point into real estate investing and diversify your assets and finances. Learn more on how you can invest in real estate with the VanEck Real Estate ETF: