Investing in real estate: main ways and options
Real estate investment

Investing in real estate: main ways and options

Investing in real estate is considered a safe and stable investment. Find out why invest in real estate and how your real estate investments can give you a solid return.

For many people looking for a safe and efficient place to put their money, the question often arises as to whether it is worth investing money in real estate today. In fact, real estate investment has always been considered a guarantee of security and stability, and it is no coincidence that real estate has become one of the most popular ways of investing money worldwide. It must also be acknowledged that real estate investment is not only stable, but also offers a fairly solid return. Real estate properties can generate a steady income for an investor every month.

On the other hand, due to the high demand for funds, real estate investment has for a long time only been available to large corporate structures or investors with the capacity to commit large sums of money. This prevailing situation has severely limited the ability of ordinary people and small investors to participate in the real estate market. However, with the development of online technology, new ways of investing in real estate have emerged, which have made it possible for almost anyone to invest in this asset class.

Best real estate investments in Europe

Traditionally, real estate investment can be made directly or indirectly. Direct real estate investments are made by the investor himself through the acquisition or development of specific properties. In this case, the investor earns income from the sale or rental of the real estate. For example, if an investor wants to earn a capital gain, he/she refurbishes or otherwise adds value to the property he/she has bought and sells it at a higher price than he/she bought it for. On the other hand, if an investor wants to generate a steady stream of income on a periodic basis, he or she rents out the property.

Indirect investment in real estate means investing in real estate companies or projects they are developing. Indirect real estate investment is much more accessible to small investors and ordinary people as it requires much less money. Indirect real estate investment usually involves purchasing shares in real estate-related companies, units in real estate funds or financing real estate projects on dedicated financing platforms.

So, in principle, one of the following options is available for investing in real estate:

  • Property for rent
  • Development of real estate projects
  • Shares in companies or units in investment funds
  • Financing real estate projects

Renting real estate

Rental property is probably the most popular way of investing in real estate among small investors. In fact, it is not only residential property that can be rented out, but also a garage, commercial and office premises or even a parking space. However you look at it, this type of real estate investment requires quite a lot of initial capital and is therefore not affordable for all people.

Rental property generates a stable and continuous stream of passive income, with an average return of around 5-10%. It is worth noting that the final return on investment depends strongly on the location of the property itself. A property located in an attractive location can be rented at a significantly higher price, so when choosing a property for rent, attention should always be paid to the surrounding area, accessibility, environment and other quality of life criteria that are important to people.

Development of real estate projects

Developing a real estate project usually means carrying out the entire process from land acquisition to completion of construction work. Obviously, such activities require significant human and financial resources, which is why the development of real estate projects is usually not carried out by individual investors, but by companies set up for this purpose. Investments in real estate development projects usually only start from EUR 80-100 000 and the success of the project depends mainly on the performance of the whole project team. In general, real estate development is the most profitable and fastest paying real estate investment. In many cases, the return on investment can reach 30% or even more. On the other hand, real estate developers need to have a good understanding of the nuances of the real estate market, the construction process and technology, as well as financial and legal knowledge, which makes it an enormous task to organize these activities properly.

Investing in real estate companies and investment funds

Investing in real estate does not have to be directly linked to construction. Investments can also be made indirectly. One of the simplest ways to make such indirect investments is to buy securities in real estate funds or real estate-related companies. For example, real estate funds are managed by a professional manager who invests the money entrusted to him in real estate. Such real estate funds usually receive income from the rental or sale of real estate properties owned by the fund.

Companies that manage real estate projects operate in a very similar way to real estate funds. These companies typically own large portfolios of rental properties and properties under development. The managed portfolio earns money from the rental or sale of the properties once they have been developed. By acquiring shares in such a company, it is possible to earn money from the appreciation in the value of the shares or from dividends paid.

Financing real estate projects on investment platforms

Investing in real estate projects can also be done on dedicated investment platforms. So-called crowdfunding platforms act as intermediaries between investors and developers. Investors registered on the platform can lend their money to developers of property projects they like and earn interest on the money they pay. As collateral for the repayment of the loan, the project developer is usually required to pledge a property worth more than the loan. So, in essence, these types of investment platforms are investing in secured business loans.

It should be noted that real estate crowdfunding is one of the fastest growing investment methods across Europe. In most European countries, crowdfunding has already become a serious alternative to traditional, bank-based business financing. One of the biggest advantages of such real estate investment platforms is their extremely high accessibility. Until very recently, real estate investment was thought to require a large initial capital, but the platforms that have opened up have made the real estate market accessible to a much wider range of ordinary people. In other words, real estate investment has become accessible to everyone.

Best ways to start investing in property?

So, to invest in real estate, there are many different ways to invest these days. On the other hand, it must be acknowledged that in order to invest directly in real estate, you still need to have a relatively large initial capital. Small investors usually do not have sufficient funds, which makes it difficult for them to invest directly in real estate. But do not be discouraged, as modern technology offers excellent opportunities for investing in real estate indirectly. Real estate funds, company shares and crowdfunding of real estate projects are investment tools that make the real estate market accessible to everyone.

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