Investment property apartment building

Profit Potential

Multi-family houses are very popular among people who invest their wealth in real estate. For decades, the residential asset class has been considered the preferred option in the real estate sector. Metropolitan areas and large cities (especially the so-called A and B cities) are regarded as attractive investment locations, as housing demand is often particularly high and good rental prospects promise reliable returns.

However, investors should also consider C and D cities, where purchase prices are on average lower but where solid returns can still often be achieved. Well-founded advice regarding the various locations and their potential is essential.

Cash Flow

Many European metropolitan areas offer a steady rental income. This is why now is the ideal time to invest in rental properties. Some investors choose an apartment building primarily because of the cash flow. For others, capital appreciation is the priority and they intend to sell the property again after a few years.

Easy maintenance

When planning a real estate investment, one should also consider how much administrative effort will be involved. While maintaining several apartments in different locations — perhaps even in different cities — can be cost and labor-intensive, managing an entire apartment building with the same number of units is generally easier.

A competent property management company can be a great help in minimizing administrative effort. Engaging such a company for a single property is the most cost-efficient option.

Potential tax benefits

Investing in real estate often offers attractive tax benefits. In comparison to individual apartments, apartment buildings offer greater flexibility, since, for example, energy-efficient renovations can be carried out without the approval of a homeowners’ association. These can be tax deductible and have a positive effect on the property’s value and on tenant satisfaction.

Of course, the extent to which this is possible depends on the size, condition, and location of the investment property. In addition, a distinction is made between commercial and residential properties. We recommend working with a competent tax advisor.

Value Development of Apartment Buildings

The value development of apartment buildings is influenced by various factors. Macroeconomic factors play a central role: The general interest rate level determines financing costs and therefore the demand for real estate. Demographic developments and migration patterns also affect long-term demand.

Local factors in particular are crucial for value development, such as infrastructure, urban development, or new construction projects in the vicinity of the apartment building. Likewise, the local labor market and economic structure have a significant impact on the demand for residential and commercial space.

The structural condition, age and quality of the property’s fittings are also highly relevant in terms of value development. Energy-efficient renovations and modern equipment increase value. The tenant structure and vacancy rate also affect returns and thus the market value. In the case of mixed-use buildings, the mix of business sectors and the creditworthiness of commercial tenants also play a role.

In addition, regulatory influences such as preservation statutes or changes in rental law can impair return expectations and thus value development.

Many different factors come together when investing in a multi-family house, which are often difficult to keep track of. Our local advisors know the areas and their particularities best. They will be happy to support you in planning your real estate investment.