The instability of national currencies and stock markets encourages people to find ways to save capital and ideas on how to make money. The opportunity to invest in real estate allows you not only to save money, but also to earn. Real estate remains one of the most popular tools in this regard – residential and commercial properties remain in demand and can bring good profits. Today, finding real estate is quick and easy online. For example, if you are looking for an investment property for sale in Denmark (in Danish, “investeringsejendomme til salg”), then the Lokalebasen website will help you. All the details are here.
What objects and how to invest in real estate, the possible risks and benefits of this type of investment, you will learn in the article.
Types of Real Estate Investments
There are several methods for generating income from properties. Next, we will analyze how they make money on real estate.
Investments in Closed-End Mutual Funds
Closed-end mutual funds are created for collective investment in one or more projects, the profit of which is distributed in proportion to the invested funds. Real estate closed-end mutual funds are created to invest in construction with the subsequent sale or purchase of finished real estate for subsequent leases. The management company licensed by the Central Bank manages the purchase and maintenance of assets.
It is convenient to invest in a closed-end investment fund, since it is not necessary to have the amount necessary to buy an entire apartment. There are also a number of other benefits:
- The management company will independently take care of the investment, purchase, rent;
- Strict supervision of the Central Bank over the reporting of the closed-end investment fund and the activities of the management company, eliminating the risks of fraud or theft of funds;
- Regular dividends during the term of the Rent Closed Mutual Investment Fund.
The disadvantages here are related to the fact that the Management Company may make a mistake when choosing an object or during investment activities. For the services of the fund, a commission is taken from one to several percent of the invested funds, and it is also not completely known what income the investor will receive in the future, so the final profit may vary and be small.
Buying property for rent
Leasing residential or commercial real estate is a great solution if you don’t need to sell it right away. In any case, the price will grow over time, but at the same time, a person receives additional income from tenants. Such objects can also be bought at the construction stage, purchased ready-made and repaired in them. Instead of an immediate deal, the area is leased for a fixed period. In Denmark, you can find commercial real estate for sale (“erhvervsejendomme til salg”) on the same Lokalebasen site.
In most cases, the cost of restoring the state of the object after the tenants leave is covered by the increasing cost of the entire structure as a whole. Of course, there are times when tenants can significantly spoil the condition of the apartment. It is precisely because of the risk of damage to property that many investors try to sell apartments immediately after putting the house into operation or completing repairs. In addition, completely new apartments, in which no one has lived yet, are valued more than old ones.
However, with the right choice of tenants, the facility is able to generate consistent profits. And after the expiration of the lease, the premises can be sold without any problems.
Buying a home under construction for the purpose of selling
If a person expects to sell an apartment for more than the purchase price, then the ideal time to purchase is to buy the right to an apartment during construction work. After the start of sales, the price will grow by about 10% annually.
However, buying an apartment at the start is associated with a number of risks:
- The house may not be completed, and then the investor will lose part of the funds.
- The final price is affected by the quality of the work performed: as a result, housing may turn out to be simply unattractive for buyers.
- It is worth considering that construction work may deviate from the scheduled date, and the investor will be able to see the invested funds later than the desired time.
- When selling a finished apartment, the investor will have to compete with the developer, so he will either have to discount the price of apartments from the developer, or wait until the developer sells all its apartments.
But the price can also increase significantly. The opening of a metro station near the house will increase the average cost of apartments by more than 20%. Other infrastructure also affects the price. Perhaps, during the construction period, new schools, hospitals, and kindergartens were built in the area.
Acquisition of securities of construction companies
Earlier, it was said that investing in stocks or other securities is a riskier investment than buying real estate. But in the case of the purchase of developer securities, there are certain similarities – there is a correlation between the increase in property prices and share prices
If the developer creates excellent houses, delivers objects on time, and has no reputation problems, then apartments from him will grow in price. But if the developer treats their duties in bad faith or refuses to service the constructed objects in the future, apartments from him will grow in price slowly or even lose their value.
The same thing happens with the securities of developers. A company with attractive reporting and a reputation will gradually increase in value, and is also able to pay dividends and pay off bonds without any problems.
At the same time, the threshold for entering the securities market is low. For example, one share of the PIK construction company costs less than one thousand rubles. Even a beginner can start making money in the real estate market.
Conclusion
Summing up the material presented above, we can conclude that investing in real estate is a profitable tool, but you need to take into account the risks. And you need to be prepared that you won’t be able to get rich quickly on this, but getting a good income and protecting your own funds is complete.
