Whether the home as an investment is “good” or “bad” can not be decided flat rate. The rating can not be based solely on the level of return, factors such as the availability of money and above all the risk are important criteria for investment decisions.
Basically, the purchase or construction of a property is a relatively secure investment. Even within 20 or 30 years, residential properties rarely lose value drastically. Anyone who additionally carries out necessary repairs and carries out renovations ensures that the value is maintained. In metropolitan areas around or in big cities such as Munich, Stuttgart, Hamburg or similar cities, even an increase in the value of the property and thus increase in the value of the entire property can be expected.
The disadvantage of this investment
The disadvantage of this investment: the money is not directly available. The sale of the home takes some time, so if you urgently need liquid funds, you may have to take an expensive intermediate loan. In terms of availability, a call money account in this case is certainly the better choice.
The return on the home
Another important point is the return. Those who buy shares usually achieve these by selling them at a higher price than the purchase price. In the real estate sector, things are different. You can rarely sell houses or apartments with an effective profit.
The yield arises here by rent payments. In the case of the home of course, you do not take rent, after all, you inhabit the object itself. So you have no return?
Just because you have no rental income does not mean that your house will not bring you any money. From now on, you do not have to pay yourself anymore. Exactly these accrued rent payments are now your return.
Invoice based on a practical example
You buy a house worth 500,000 euros with 150 square meters of living space and finance your property without credit. Look now on the internet for the rent index, for example, you realize that the square meter costs in your neighborhood 10 euros. As a result, almost 1,500 euros per month are avoided. That you would never rent an apartment of 150 square meters is irrelevant to the calculation of your return. Calculated annually take 18,000 euros, which corresponds to an investment of 500,000 euros, a return of 3.6 percent.
It should be mentioned that this is a very simplified calculation. Of course, you would need to include potential brokerage costs, the depreciation of your home over time, or lending rates.
One main reason to invest in real estate is inflation. This may also be regarded as a return. Let’s say you have 20,000 euros. You can buy exactly one car from it. But now you want to buy some new tires that cost 2,000 euros. Consequently, you invest your money at an interest rate of 10 percent. After a year, you have 22,000 euros in the account. However, since inflation was a staggering 20 percent, the car now costs 24,000 euros and the tires 2,400 euros.
Suppose you buy a small apartment for this 20,000 euros. Within one year, this suffers no loss of value. The inflation is again 20 percent. Now you can easily sell your apartment for 24,000 euros. Although you did not make a profit in this case, you kept your money safe from inflation.
So we can state that the home is a low-risk and relatively inflation-proof investment. In return, the return is generally lower than for investments in the stock market. But when you buy or build a house, you are not just investing in real assets. The emotional connection can not outweigh any money in the world, you should always keep this in mind.