Property Investment Strategies
German Real Estate – Investment Strategies
Clients often state that one of the most useful aspects of our service is the advice we can give on choosing the best investment strategies to meet your objectives.
Using our extensive property investment experience, we can help you decide what the right approach is for you and then find you the appropriate properties to match. Broadly, strategies fall into the following areas:
Strategy 1 – Low Capital Employed / Good Yield Potential
This strategy could apply to an investor who wishes to minimise the capital employed at the start of the investment but still enjoy an increase in rent, and therefore yield, in the short to medium term. Typically, properties in this category will be fully rented or near to fully rented with current yields around 10% but with prospects to increase to 12% or more once under effective management.
The location of the property will be in an average to good location and have potential for improvement in the medium term from inward investment, population increases, etc. Finance tends to be straightforward for these properties with expected loan-to-value rates of 70-80%.
Strategy 2 – Low Capital Employed / Stable Investment
This strategy could apply to an investor who may still wish to minimise the capital employed at the start of the investment and enjoy stable rents. Typically, properties in this category will be fully rented or near to fully rented with current yields of around 8-10% but with some prospects to increase this yield in line with market inflation.
The location of the property will be probably in a good to excellent location which should result in a steady increase in capital value. Finance tends to be straightforward to arrange for these well-located properties with expected loan-to-value rates of 70-80%.
Strategy 3 – Medium Capital Employed / High Yield & Capital Value Potential
This strategy could apply to an investor who wishes to utilise capital at the start of the investment and benefit from a significant uplift in rents, yield and capital value in the short to medium term. Typically, properties in this category will be around 30-60% rented, possibly due to recent inactive management. This type of property will not require any extensive renovation to reach a rentable condition, so when the property is fully let, the capital value will increase in proportion to the increased yield, which could be very significant.
The location of the property could be in an average to excellent location. Finance will often depend on the location and the level of occupancy with expected loan-to-value rates 50-70%.
Strategy 4 – High Capital Employed / Excellent Capital Value and Yield Potential
This strategy could apply to an investor who wishes to purchase with cash. Typically, properties in this category could be un-tenanted or with a low occupancy of around 10-30%, possibly due to recent inactive management or possibly due to some renovation being required. The property will typically be in a good to excellent location which would maximise the ability to find new tenants.
The property would probably not require extensive renovation as this is often uneconomic for foreign investors, but will require some further capital investment to bring the property up to a rentable standard. Once the property is fully tenanted, it could be presented for re-financing. At which point, most if not all the capital employed at the start of the project could feasibly be realised.
Comment:
Our focus is to create a positive monthly cash-flow so we do not make predictions on the capital growth. However, cash-flow positive investments are proven to increase steadily over the medium to long term and this should be the ultimate aim of your investment. To sum up, we find property that will minimise your risk, whilst providing good income for the period of holding under our effective management structure.