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29.07.2020

General

Concrete gold – a good investment even in times of crisis

The coronavirus continues to exert a firm grip on the world. In addition to health risks, many people are also deeply concerned about their financial future. And it’s no wonder, especially as many jobs are no longer quite as secure as they were before the crisis and stock markets around the world are like a rollercoaster ride. At times like these, it is all the more worthwhile to invest in “defensive assets,” such as government bonds and real estate. If you want to avoid paying penalty interest on your savings but don’t like the volatility associated with owning real estate company stocks, you should definitely consider an investment in residential real estate. After all, people will always need a roof over their heads, even in times of crisis. Did you know that Germans refer to real estate as “Betongold” (English: “concrete gold”)? They clearly appreciate the security it offers.

Let the property work for you

Anyone who decides to invest in “concrete gold” in the form of a residential property needs to follow the number one golden rule, especially now: Location, Location, Location. This is the most important criterion for both owner-occupiers (who want to feel at home in their new neighborhood) and investors (who are looking for high rentability, attractive returns and the best resale value at exit). Excellent transport infrastructure and convenient shopping amenities, day-care centers, schools and restaurants all boost the quality of life in a property’s immediate surroundings – its microlocation – and help ensure your investment will not only retain but also increase its value both during and after the crisis.

What’s more, “concrete gold” is productive! Regardless of whether you decide to acquire a property directly or to invest indirectly via shares: real estate can actively add to the value of your assets thanks to a steady stream of rental income and increases in value over time. This is a key difference between real estate and other forms of investment, such as precious metals. Gold, for example, is also considered a safe investment in times of crisis. But ultimately, the investor only makes a profit if they are able to sell their precious metal at a higher price than they originally paid for it. Concrete gold, on the other hand, delivers a steady cash flow, not to mention the tax benefits achieved by renting it out. And if the apartment or house is to be sold at some point in the future, capital gains can usually be generated if the property has been well selected – and after 10 years, gains are even tax-free.

Who can benefit most from an investment in real estate stocks?

The advantage of investing in real estate stocks is obvious: the properties are professionally managed and individual stock owners have virtually nothing to worry about. In addition, it is possible to achieve a broad diversification of assets, for example by investing in a company that owns real estate in different countries and across a range of asset classes. However, potential stock buyers should definitely have a basic understanding of both the real estate and stock markets and should obtain comprehensive information about the companies, their balance sheets and their property portfolios. When assessing real estate companies, one key parameter to look out for is the net asset value (NAV). This refers to the market value of the properties owned by the company, minus its debts. However, NAV says next to nothing about the potential of the properties after the crisis.

Protect tangible assets

Of course, real estate cannot be sold as easily and as profitably during a crisis as during an economic boom. However, in view of double-digit losses on the stock markets, negative rates on government bonds and growing fears of inflation, investing in real estate appears to make a great deal of sense. After all, both the commercial and residential real estate markets have experienced strong excess demand for years. And this is not likely to simply disappear even in a (short) crisis. We would be delighted to help you find the optimal property for your investment.

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