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Created on 13.06.2018

How can I invest in real estate?

Would you like to invest in real estate? This doesn’t mean spending millions of Swiss francs on buying residential property. Private investors have lots of opportunities open to them in terms of real estate investment. They often provide higher returns than leaving your money deposited in a savings account but also entail a certain degree of risk. Find out more about the characteristics of and differences between various types of real estate investment.

Buying a property is just one way of investing in real estate. It also has pros and cons – purchase and maintenance costs are high. So too is the risk involved. Buying Swiss real estate, in particular, is usually expensive and is not feasible for most people without taking out a mortgage. If you decide to resell the property, the selling price is rarely the same as what you paid for it – with any luck it may be higher, but there is also the risk that its value may have fallen. This may be due to rising financing costs, for example. The sale of apartments and houses can also be a long process. This means you do not know in advance how much money you can get back from your investment or how quickly. Then there are taxes that must be paid on the imputed rental value or when selling.

There’s also the matter of letting the property. This sometimes requires significant expenditure. Properties have to be managed and maintained. If you wish to successfully let an apartment and keep it long-term as an investment property, using a professional management company is recommended.

Indirect investment – a smart option

An alternative is indirect investment. In this case you do not purchase a single property directly but instead invest in a whole basket of real estate via shares and funds. Unlike direct investments, here you obtain a well diversified portfolio with a lower financial commitment.

When buying real estate shares, you benefit from lower volatility, for instance, compared to the price fluctuations on the SMI. However, the securities available and prices still depend on developments in the equity markets in the case of real estate shares too.

Real estate funds are another attractive option for investing in property. It is entirely up to you whether you wish to invest your money in apartments, houses, office buildings or shopping centers. A wide range of real estate funds are available. As the funds can be regularly traded, liquidity is higher than with direct investments. This means you have quicker access to your capital. The funds also differ in terms of their regional focus.

Crowdinvesting is an increasingly popular option. The principle is very similar to crowdfunding. But here investors finance real estate instead of projects. Several investors jointly purchase a co-ownership share in a property. The providers undertake to manage and let the property over an investment horizon of six to ten years. However, there are also risks here. For example, these include vacant properties, poor management and generally also foregoing a return as agency fees are also incurred for the projects. Selling costs also have to be taken into account (possible transfer-of-ownership costs).

Real estate can be a good addition to the portfolio of both private and institutional investors. You could, for example, hold a real estate fund and supplement your portfolio with selected real estate shares – but always make sure this does not result in cluster risks. If you have already achieved the dream of owning your own home, for example, additional real estate funds may create an imbalance towards property in your portfolio. Make sure you consider all the options beforehand and select the one that best meets your preferences and objectives.

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