Real estate is in demand. In
this article
we wrote how to buy real estate in 7 steps. But how can you finance this? You can finance real estate in several ways. Which way suits you and your personal situation depends on several factors. For that, you will really need to seek advice. We’re going to share with you some general information that can get you started on financing your real estate, but for details and a customized plan: Holla at your financial planner!
The preparation
Before delving further into opportunities to start investing in real estate as well, it is important that you prepare well. Something to do with being eloquent. Luck favors the prepared. Write down for yourself the following information:
- What is your income?
- What is your personal situation, are you single, married, children?
- Do you currently own a home for sale, and if so, what is the current WOZ and market value and what is the amount of your mortgage? And at what interest rate did you provide your mortgage?
- Do you have savings, if so, how much?
- Make sure you have done a return calculation so you know what amounts and you are dealing with.
- Contact parties that can help you rent out your property. Make sure you know which neighborhood you want to hit in and what rent you can handle.
- Make sure you are aware of all the rules surrounding taxation. Getting surprises afterwards with these friends is shit. There are currently proposals to tax real estate more heavily. What the exact outcome will be remains to be seen.
Luck favors the prepared, so prepare well!
Briefly, there are a few ways to finance real estate(you are looking for money to purchase a property yourself). There are also opportunities to invest in real estate(you invest money with another party and benefit from dividends, for example). We put below
some
(So many people, so many desires, so many options.
Psst: what you really need to know before considering real estate as an investment? Read it here!
Financing real estate
There are several ways you can expose your money to real estate. This does not immediately mean that you must also buy a property. You can, but there are several roads that lead to Rome. In short, you can invest in real estate by:
- Purchasing real estate yourself
- Investing in real estate through funds or ETFs
- Funding real estate projects through crowdfunding
Below we further explain the 3 options.
The common way.
The most common route is to apply for a rental mortgage with a bag of your own money. This can be done at many banks and parties. In the Netherlands, for example, you have Rabo, RNHB, NIBC, ING, NN, Lloyds Bank and others who can help you with real estate financing.
For a first real estate investment, it’s smart to get advice through the “usual route. This means you have to put in quite a bit of your own money, so it’s a long haul, but the more of your own money = the less risk. In the case of vacancy, you pay the financing yourself, and the higher it is the more cost. Occasional vacancy is a real scenario; take this into account in your return calculation as well! Also, you may have to sell your investment at an unfortunate time, for whatever reason. Suppose you bought your property at a good time for a ton, but at the time you have to sell it’s only worth 80 thousand euros, you’ll be glad it doesn’t have higher financing on it, because then you’ll have to dig deep.
Domivest
For most lenders, it is important that you can show that you have income in Box 1, or income from work. So if you have a steady job then you have an edge. But there are also solutions for those without permanent jobs, such as start-up entrepreneurs. Domivest is a party that looks at assets in Box 3 for financing. This includes: savings and assets already accumulated, such as a surplus value on another property such as your own home. This is particularly interesting if you already have real estate, and want to make your next purchase.
Note!
The risk for a party like domivest is higher because they only look at your box 3 assets, this means that the interest rate is also higher than if you finance the investment through “the usual way,” for example.
RNHB
RNHB is a lender for both seasoned and first-time real estate investors. All they do is finance properties bought for rent. For this reason, they employ very many real estate specialists and their knowledge of the market is extraordinary. As a result, they often see the same opportunities as you, even if others don’t. If you want to finance a house or apartment outside the Randstad, for example, or in a neighborhood that is less popular now, but quite developing. Furthermore, you can co-finance renovations up to 25% of the principal. They understand that preserving, modernizing or transforming 1 home into a few studios may well improve your returns. By the way, with them you can borrow up to 80% of the market value in rented condition. If you apply to RNHB for financing, they will look at your income, but what we care about most is what you get out of your investment on a monthly basis.
Note!
RNHB only finances if you have a fixed income in Box 1.
Joint investment
What is also an option is to buy real estate with family or friends, for example. This allows you to divide your own deposit and makes it more quickly accessible to buy real estate. Create such a structure only with people you trust and make damn good agreements – black and white.
A loan
Okay, this is an odd headline, because we’ve been talking about financing for a couple of paragraphs, which is, of course, nothing more and nothing less than borrowing money. But this paragraph is about the following: suppose you have a steady job, a home of your own, a good brain, and the ambition to purchase real estate. But: you don’t have a fat savings account. You can then take out a so-called personal loan to fund your own deposit. There are quite a few crook ways to settle this, but we ourselves are not in favor of that. The goal of investing is to be better off, on every level. And that also means: no stress and sleeping well. A personal loan has terms that can be quite snappy.
Crowdfunding
Crowdfunding is the lending or investing of relatively small amounts of money by a large group of people to individuals or businesses. In crowdfunding, parties put money seekers and lenders in contact with each other. This can be an interesting option when you can’t get financing at the bank, or because you have to put in a lot of your own money which you don’t have. The money you raise through crowdfunding, you have to pay back plús the interest. Crowdfunding allows you to “tailor” the loan you apply for because platforms are often less strict than banks, for example. You can even get an entire property financed through crowdfunding. You can also sometimes split your loan into a repayment portion and a repayment-free portion, making your cash flow higher. Through crowdfunding, it can be interesting to arrange financing when you want to buy a property, refurbish it and sell it again quickly (this is called flipping). The bank often won’t finance such a thing because they benefit from a long-term loan (they earn from the interest you pay).
Tip: Are you familiar with Collin Crowdfund? Through this party, you can invest yourself in real estate projects.
Investing in real estate
Shares of Wereldhave or Vastned
If you buy Wereldhave or Vastned shares, for example, you are investing in a real estate fund. Wereldhave invests its invested assets in large real estate, mainly in the Netherlands, Belgium and France. You can buy Wereldhave or Vastned shares through DEGIRO or through Saxo.
ETFs
You can also invest in a basket of real estate stocks, or: an ETFs that tracks an index of real estate companies. One example is European Real Estate Dividend ETF from iShares. This ETF tracks 52 real estate companies in the EU. Read all about ETFs here.
Funds: SynVest
Synvest manages mutual funds in stocks, bonds, and … yes: real estate! You can invest in an investment fund at Synvest from as little as €100, with the money invested in German real estate. Synvest invests this money mainly in supermarkets and housing, and pays a monthly advance dividend of 6.2%. The annual average return has been 8.3% since inception in 2011. In short, the advance return means: suppose you put in €10,000, you will receive a monthly payment of 6.2% on this amount. That’s €620 in passive income. In addition, you benefit from property value appreciation. But beware! The latter aspect also works the other way! If real estate in Germany becomes worth less, so does your deposit.
Funds: CORUM
Founded in 2011, CORUM has offices in Paris, Amsterdam, Vienna, London, Dublin, Lisbon, Geneva and Singapore. With over 3 billion euros in assets under management, CORUM has become one of the market leaders in investment solutions in 9 years. What they do? Real estate funds. You invest money in this fund, and they invest all the money from the fund. The funds invest in the office, retail, industrial, hotel, logistics and healthcare sectors across 16 countries worldwide. The nice thing about CORUM is that the dividend is paid monthly, the acquired dividend can be easily reinvested and from 50 euros per month onwards, it can be invested periodically. This allows you to get in at a low cost and compound nicely due to the dividends paid out. The nice thing about CORUM is its low-threshold nature, preferring to explore first with €50 rather than going full in right away, what about you? Find out more about CORUM here.
Funds: ReInvest24
Reinvest24 has been working within real estate (property development, sales and management) since 2005. With the creation of the platform Reinvest24, the company aims to make real estate investment accessible to all. The first real estate projects were offered in 2018 and several successful projects have been completed since then. Based in Estonia, the company has projects in Latvia, Moldova, Spain and Germany in addition to its home country.
There are two ways to invest your money in a project. At the “primary market” are the new projects, here each share costs 1 euro each by default and the minimum investment is 100 euros. Once the project is full, the investment becomes final and you will be paid interest the following month. If a project is “full bullet” then you get the interest deposited at the end of the term. In the “secondary market,” you can buy shares from fellow investors, from projects that have been running for some time. Here there is no minimum investment, but the shares cost more.
Weetje! ReInvest24 is a party where many women from the Elfin community invest. Find out more about ReInvest24 here.
Conclusion
Real estate can be a valuable investment, but it also carries risks. Don’t yet have enough of your own money to buy a property yourself? Then consider – if you want to profit from real estate – investing through a party such as Collin Crowdfund, Corum or Reinvest24. Investing in a real estate ETFs is also a good option. Also read this article on how to invest in real estate with little money.
