Wondering how your wealth can not only survive but grow over the next few decades? Long-term investments in real estate provide a proven answer to economic uncertainty. Discover the strategies that will help you lay the foundation for tomorrow, today.
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The topic briefly and concisely
Stable returns: Long-term real estate investments offer an average return of 4-5% and provide effective protection against inflation.
Location is crucial: Demographic data shows growth in urban centres and an increasing demand for smaller apartments.
Take advantage of tax benefits: The depreciation allowance (AfA) and the tax-free sale after 10 years significantly increase the net return.
In a world of short-term trends and volatile markets, many investors seek stability. Long-term investments in real estate are more than just an investment strategy; they are a fundamental building block for sustainable wealth creation. This approach not only safeguards against inflation but also enables solid capital growth through consistent rental income and value appreciation. We show you how to lay the foundations for your financial success with data-driven decisions and a clear plan, while minimising risks strategically. Understand the mechanisms that make 'concrete gold' a profitable and secure investment.
The Foundation: Why Long-Term Strategies Win in Real Estate Investment
Short-term speculation in financial markets is often characterised by high volatility. Long-term investments in real estate, on the other hand, have historically proven to be stable in value, with prices rising over the last 20 years even in declining regions. A well-chosen property as an investment yields an average return of 4 to 5% per year.
In contrast to stocks, real estate offers lower susceptibility to fluctuations and effectively protects against inflation. Rents and property values tend to rise with the general rate of inflation, securing the real value of your capital. This stability makes real estate a core component of diversified portfolios for stabilisation. The focus here is not on quick profits, but on the continuous accumulation of wealth through rental income and value appreciation over decades. This solid foundation is crucial before delving into specific market analyses.
Site Selection 2.0: Using Demographic Data as a Compass
The right location is the decisive factor for the success of your long-term investment. Demographic change is clearly mapping out the future. While some rural regions could experience a population decline of up to 20% by 2040, urban centres and their suburbs continue to grow. The demand in metropolises like Berlin or Munich has increased rental prices by up to 50% over the last ten years.
However, a deeper analysis reveals new opportunities. The number of households in Germany remains stable despite the declining population, as the number of single and two-person households grows. This leads to increasing demand for smaller, accessible apartments. Investors who focus on 1- to 2-bedroom apartments in well-connected B and C cities can often achieve higher returns than in the already expensive A-locations. A data-driven analysis, such as that offered by Auctoa for real estate investors, is essential to identify these profitable niches. Analysis of the population structure is therefore a key component for risk assessment.
Actively managing risks: A plan for every market phase
Every investment carries risks, but with long-term real estate investments, these can be calculated. The three main areas of risk are market risks, location-specific factors, and financial risks. Market risks include economic fluctuations, which are cushioned by the structural shortage of housing in Germany – about 400,000 homes are needed annually.
Financial risks, such as the sharp rise in interest rates since 2021, have a significant impact on calculations. Solid risk management is therefore not an optional extra, but a core component of successful investment strategies. Here are proven approaches:
Careful tenant selection: Stable rental agreements secure cash flow and reduce administrative effort.
Professional appraisals: A neutral assessment before purchase uncovers hidden defects and ensures realistic pricing.
Maintenance reserves: Plan for 1-2% of the property's value annually for modernisations to maintain value.
Diversification: Invest in various locations or types of properties to avoid concentration risks.
Proactive management not only reduces risks but also improves the long-term performance of the portfolio. Understanding these risks is essential to fully exploit the tax benefits.
Tax optimisation: How the government co-finances your investment
One of the greatest advantages of real estate as a capital investment is the tax planning opportunities. The government actively supports landlords, primarily through depreciation (AfA). Through the AfA, you can annually deduct a portion of the building's acquisition costs from your taxes, significantly reducing your tax burden.
The amount of the linear AfA depends on the building year of the property:
New buildings (completed after 1.1.2023): 3% of the building costs annually over 33 years.
Existing buildings (built from 1925): 2% of the building costs annually over 50 years.
Older buildings (built before 1925): 2.5% of the building costs annually over 40 years.
In addition to the AfA, almost all ongoing costs can be deducted as advertising costs, including interest for financing, property taxes, management fees, and repairs. Another decisive advantage is the tax-free sale after a holding period of ten years. This regulation makes long-term investments especially attractive. To maximise these benefits, a solid financing structure is crucial.
Conclusion: Using a data-driven strategy for sustainable real estate wealth
Long-term investments in real estate are a proven method for building wealth, combining stability, inflation protection, and attractive returns. However, success does not come down to chance but rather to a strategic and data-driven approach. A return of 4-5% is realistic with careful selection. The analysis of demographic trends, proactive risk management, and taking advantage of tax benefits are the three pillars of a successful strategy.
In a market characterized by rising interest rates and regional differences, blanket recommendations can be dangerous. Do you need a quick, data-driven assessment of a property's true market value? The Auctoa ImmoGPT chat provides you with an initial orientation in seconds. The key to success lies in making informed decisions that go beyond gut feeling. Start today by building your wealth on a solid foundation.
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Additional useful links
Das Statistische Bundesamt bietet umfassende Informationen zu Baupreisen und dem Immobilienpreisindex in Deutschland.
Tabellen zu Haus- und Baulandpreisen sind ebenfalls beim Statistischen Bundesamt verfügbar.
Das Indikatorensystem zum Wohnimmobilienmarkt der Deutschen Bundesbank liefert wichtige Daten zur Marktentwicklung.
Eine Studie der KfW beleuchtet die Herausforderungen und Perspektiven für den deutschen Wohnungsmarkt.
Das ifo Institut informiert über das Geschäftsklima und den Wohnungsbau in Deutschland.
Das DIW Berlin analysiert die Entwicklung der Kaufpreise am Wohnungsmarkt und mögliche Wendepunkte.
Der VDP stellt seinen Immobilienpreisindex zur Verfügung, der die Preisentwicklung am Markt abbildet.
Die Wohnungsmarktbeobachtung bietet Einblicke in den Wohnungsmarkt auf Bundes- und Länderebene.
Wikipedia offers a general overview of the real estate industry.
FAQ
What is meant by long-term investments in real estate?
In real estate, a long-term investment typically refers to an investment horizon of at least ten years. This period is strategically chosen to benefit from increases in value and to take advantage of the speculation period for a tax-free sale.
What risks are involved in real estate investments?
The main risks include market risks (e.g. interest rate changes, economic fluctuations), location-specific risks (e.g. negative demographic changes), and property-specific risks (e.g. maintenance backlog, rental default). Therefore, good risk management is essential.
Can I deduct the interest on my mortgage from taxes?
Yes, if you rent out the property, you can claim the entire loan interest as a deductible expense in your tax return. This reduces your taxable income and lowers your tax burden.
Why is the location of the property so important?
The location determines the long-term value growth and rental potential of a property. A good macro-location (city, region) and micro-location (immediate surroundings, connectivity) ensure high demand from tenants and potential buyers, even if market conditions change.
What is depreciation (AfA)?
The AfA is a tax benefit for landlords. It allows them to depreciate the acquisition or production costs of the building (not the land) over a specified useful life. For new residential buildings, the AfA is, for example, 3% per year.
How can Auctoa help me with my investment?
Auctoa offers AI-powered real estate evaluations and data-driven analyses. Our tools, such as the ImmoGPT chat, help you quickly assess the fair market value of a property and make well-informed, objective decisions that go beyond mere intuition.
