But how profitable is an investment like this? The figures for the past few years look good. Firstly, because real estate purchases could be financed at an advantageous rate. And secondly, because the value of residential property has steadily increased. The resulting returns far exceeded the yield from secure investments such as government bonds. The performance of each investment varies significantly, however, depending on the location, the real estate market, and structural strengths and weaknesses.
Whether investing in residential property for rental purposes will remain worthwhile in future depends on several factors. "Anyone buying an apartment must be aware that real estate prices run in cycles," stresses Kathrin Strunk of the HEV. Real estate prices are quite high at the moment. But high real estate prices mean lower returns, as rents have not risen by as much as apartment prices have. Many analysts and market observers predict that after such a long boom, real estate prices are more likely to sink than to rise further in the near future. If real estate loses value, the "business plan" no longer looks so rosy. What’s more, if financing costs are higher in future than today, and if the income situation worsens at the same time – due to the economy or the state of the real estate market – this will of course have an impact on returns.
Another important question is the rental suitability of the real estate and its location. Central locations, many big cities, and attractive tourist spots have stable demand for apartments, leading to different answers than for economically underdeveloped, badly connected areas. Sometimes, it can be hard to work out what sort of tenants you should be targeting. Is a certain location or district more for families or for singles? Will it attract students, or households with high incomes? If your initial assumptions prove inaccurate, it’s a good idea to have a plan B – or to set aside sufficient reserves to help bridge a vacancy.