In response to a question posed by a listener to VRT Radio 2’s consumer affairs programme ‘WinWin’, the financial expert Chirs Sugira says that you don’t necessarily need to have a fortune on you savings account in order to be able to invest in real estate. "To buy your own home you do need a large amount in savings, there are also other ways to invest in real estate”.
Real estate remains a popular investment. However, in order to buy a first house or flat you need to have saved a substantial amount, often tens of thousands of euro.
"Banks usually require those purchasing a new home to have saved 10% of the asking price. This is why it can be interesting to look at other ways to invest in real estate”.
Real estate shares
Chris Sugira suggests taking at look on the stock market. “You can take a look at the stock market and buy shares in real estate. Some real estate shares are available for as little as 100 euro. For example, you can invest in healthcare real estate, in companies that buy and manage healthcare facilities. Office real estate is another option, although this is more market sensitive. A growing number of people are teleworking and this can affect the rental income of office real estate. Commercial properties, such as shopping centres, are also struggling due to the popularity of online shops."
“The disadvantage here is that you really have to do your homework. You have to do research on the company whose shares you wish to buy in advance. In so doing you can sift out the less reliable companies. You will also need to follow the price evolution of the shares you intend to purchase.’
“Only invest money you can afford to lose and never put all your eggs in one basket. Always spread your risks”.
Real Estate Fund versus Exchange Traded Fund
“An easier option is to invest in a Real Estate Fund. You can do this through your bank, which makes it a little easier for yourself. The bank selects and manages a selection of Belgian and foreign real estate shares on your behalf. You do pay a fee for this though”, Chris Sugira saysd.
Another option is to invest in a passive fund on your own by purchasing an ETF. "This is a fund with a very large basket of real estate shares. You pay less for an ETF than you would for a property fund managed by a bank, but the disadvantage is that there may be some bad eggs.”
Private markets
Chris Sugira says that another option is to invest on the private market. “Here you invest in real estate companies that are not listed on the stock exchange”.
“In the past, this was only possible for very wealthy people, with at least 100,000 euro to invest. However nowadays, there are more and more options that allow you to invest from as little as 10,000 euro. Of course, that's still a lot of money. There is also at least one Fintech player (a company that uses innovative technologies ed.) on the market that even provides the opportunity to invest from as little as 1 euro. However, these are more often than not infrastructure funds with companies that build things like toll roads and airports”.
“The price of this kind of share fluctuates less on the stock market and as such is more predictable. However, in addition to management fees, you also will have to pay performance fees to those managing the fund if it performs well. Furthermore, such a fund is much less tradable. You can buy and sell an ETF whenever you want, but private shares can only be bought and sold at fixed times.”
Bricks and mortar
What if you would rather buy bricks and mortar? “There are other ways to buy property without going for a house or flat. For example, you could buy a lock-up garage. However, you will need to do your homework and check whether there is demand for locked garages to rent in that area. You will also have to pay tax on your rental income."