Are you currently considering selling your property at a profit due to the continuing high property prices? Are you wondering what will happen to the sale proceeds and what a smart follow-on investment could look like? We explain possible investment alternatives and tell you when it makes sense to reinvest in property.
Anyone who owns property generally regards it as a safe form of investment. But when property prices are high, many owners wonder whether selling for a considerable profit might not be a better option. Whether it currently makes sense to sell your property or not will depend on your subsequent plans. What will happen to the proceeds? Where can you safely invest the money so that your assets increase? We explain the key steps and investment options.
The first thing you should do is analyse your property. What is its actual market value? Are you planning any major refurbishments in the near to medium term? This particularly applies to older buildings whose heating technology may need to be replaced in accordance with new energy regulations, for example. You should also take a close look at the financial viability of this: are rental incomes expected to grow and how much net profit will be left in view of the planned investments over the next few years? And last but not least, the committed equity also plays a major role, because sometimes the money can achieve higher returns elsewhere.
If you have decided to sell following this analysis, you also need to consider the tax implications. Are you affected by real estate gains tax or not? If so, it is best to ask your local municipality how much this will amount to. Timing is, of course, also crucial for the success of a sale. In addition to your personal circumstances, the market situation plays a major role in this and will determine the ultimate profit.
Once your property has been sold, the proceeds can be allocated to new forms of investment. We recommend seeking professional advice regarding your investment strategy. This will allow you to reinvest your profits in a diversified manner and assess your options. If you would like to reinvest your assets in property, you have two options: direct and indirect investment.
In the case of direct investment, the sale proceeds are directly invested in a new property. You therefore buy a specific property and generate rental income. But why should you sell a rented property in order to buy a new property? Depending on the location and type of property, it may well make sense to invest in a newer property or one that can be put to a wider range of uses. As well as houses and apartment buildings, commercial properties such as office blocks, hotels or retail units, for example, are also suitable as direct investments.
In the case of indirect investment, you do not buy a specific property, but invest in property shares, bonds or crowdfunding. You therefore indirectly reinvest your capital in the property market.
If you no longer want to invest your assets in the property market, there are alternatives on the financial market, such as shares, bonds and funds. You should always seek advice on these options, however, because investing not only requires specialist knowledge of the property and financial markets, but also a great deal of experience. Your own bank or another professional financial institution should be your first port of call for comprehensive investment advice.
Our new Engel & Völkers guide to investment alternatives will advise you on the right time to sell your house and what you need to consider when reinvesting your capital.
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