Retirement planning through real estate — How does it work?
It is now an open secret that the state pension is by no means as secure as many people would like it to be. The chances are that you will need additional insurance so as not to have to live in poverty in old age. Real estate is one way to protect yourself for old age. Anyone who invests early and wisely can look forward to old age more calmly.
Retirement plan for the self-employed
The group of self-employed people in particular is suffering from the uncertainty that they may not have enough to live on in old age. Recent surveys show that almost two thirds of self-employed people have concerns when they think about their retirement provision. Pension levels have fallen significantly since 1990. According to forecasts, the pension level will only be 43 percent in 2030. In concrete terms, this means that many pensioners will have to make do with less money in the future. In the opinion of many experts, various reforms, such as the 2010 Agenda, and also demographic change, are to blame. As a result of the aging of society, fewer and fewer people are paying into the pension fund, while more and more people have to live off pension funds. This development is particularly critical for self-employed people, who often only pay in small sums and therefore face major problems in old age.
Real estate — investment for old age
Many people invest their money in stocks. For you as an investor, however, this entails some risks that you need to know about. The stock market is always subject to fluctuations and unfortunately there is no guarantee that you will actually make a profit in the end. In the worst case scenario, you could even lose all your money on the stock market. This uncertainty only makes the stock market a good retirement plan to a limited extent. A safer alternative to this is the real estate market. Whether as a private home or as a capital investment, investing in real estate is worthwhile. Deutsche Bank forecasts that the value of condominiums and houses will continue to rise over the next few years. Prices have risen by an average of 95 percent since 2009. This trend is likely to continue over the next few years. Deutsche Bank has found that apartment prices rose by an average of 15 percent in Frankfurt alone. With such a price development, it is worthwhile to enter the real estate market.
Own home or capital investment?
It can sound tempting to use a small house as your own home. Unfortunately, there are also many pitfalls here. As a house owner, you are legally obliged to take care of the snow in front of the property in winter, for example. True to the motto “ownership obliges”, you must be aware of your rights and obligations. Depending on the property, you will also have to invest a large amount of money. You also miss out on income from tenants if you move in yourself. Experts speak here of so-called opportunity costs. If something happens to your home, such as a fire, you may lack the capital to repair the damage. Condominiums also have disadvantages for you, as you will have to reckon with additional costs due to property management.
Which property to buy?
What makes a property a good investment? The situation is more critical today than ever before. Living space is particularly scarce in big cities, where there are many work opportunities. Prices are rising rapidly as a result. Investors often talk about so-called A-cities, meaning cities in Germany that are both nationally and internationally significant and important for trade and culture. These include cities such as Hamburg, Cologne or Berlin. Here you can increasingly expect that your property will increase in value over the years. So if you decide to invest in real estate, you should carefully consider in advance which region you want to invest in. The better the situation, the better the profit forecast.
Using real estate to provide for old age
Everyone today needs to think about their retirement provision. For many citizens, their pension will barely be enough to be able to lead a comfortable life in old age. Real estate is a good way to make private provisions in order to be able to live free of deprivation in old age. However, it is crucial that the situation is right. Large cities such as Cologne, Hamburg or Berlin attract students and immigrants, which increases the value of real estate every year. If you invest early, you can benefit from this development right now.
