Farmland as an Investment: you need to pay attention to

applies in Principle to real estate as a capital investment, the price-to-earnings must be correct ratio – in a similar way in the case of shares, the price-to-

Farmland as an Investment: you need to pay attention to

applies in Principle to real estate as a capital investment, the price-to-earnings must be correct ratio – in a similar way in the case of shares, the price-to-earnings ratio. For a tenement of the Quotient of the purchase price and the annual rental income meant ("Mietmultiplikator is in order").

location, location, location

The Mietmultiplikator expresses how many years it will take until the Investment is amortised. The yield is calculated as the reciprocal value of it. An example: Suppose a multi-family house will cost a Million euros and generated € 50,000 in rental income in the year. The multiplier is calculated with the 20 and the rate of return with a five percent. Real estate with a Mietmultiplikator about 20 is generally considered to be expensive, values significantly lower than favorable. In addition, the location is, of course, an important factor of influence on the attractiveness and hence the valuation of the property.

The now already long-lasting phase of low interest rates was reflected mainly in a strong increase in residential property prices, is less clear in the case of commercial real estate. Investors plus, bulwiengesa AG, www.deutschlandinzahlen.de prices for residential real estate in Germany: especially in the last ten years, it came up in German residential real estate to price hikes. The values are indexed in the year 1990 to 100. However, the previously unchecked rise in real estate prices, there is increasing risks. Already in 2014, the Deutsche Bundesbank pointed out that the prices for residential property have risen more than suggested by the economic and demographic Fundamentals, and in the large cities, on average, probably 25 percent deviate. Since then, it has continued developing dynamically. Purchases should be approached with extreme caution.

in addition to capital-intensive direct investments, which are also used in the absence of experience for only a few investors, you can create, for example, about classical real estate funds the assets in the property value of real estate. Alternatively, indirect investments in real estate, shares or ETFs on offer. The ETF savings plan comparison of FOCUS Online (display) you will Find the right ETF savings plan, in comparison

Expertise, Expertise, Expertise

Rising prices for agricultural land can be observed. To be able to arable land or forest, but economic sense to use, especially a certain minimum size, the necessary infrastructure and excellent expertise is required. Investors plus, Federal Statistical office of Germany, agriculture and forestry, fisheries, purchasing values of agricultural land: The development of the average prices of agricultural land (without use of the inventory, in Euro per hectare) shows up, although the number of sales or purchases has, in the last ten years, even decreased slightly. Added to that, this asset class is due to the capital requirements for only a few private investors via direct investment are available. Possible control of pre-emption rights and approvals must be observed. Most investments in agricultural would for more experienced investors probably still operated are eligible.

One of the reasons for the increase in the price of agricultural land is that land for other purposes, such as renewable energies are lost. Drove prices upward in addition to the favorable financing conditions, the tendency that larger contiguous areas will be available for purchase. It attracts wealthy international investors, instead of arable land equal to all the farms buying up.

in addition to the possible, nominal value, the real should be at least equal to the preservation of Assets, investors can calculate with current income from the lease of the land in the range of one per cent (arable land) up to three percent (forest). As an Investment for private investors special funds, which focus on this investment theme, and here again, the relevant cost structures are exactly the light. It is also important to note that in Eastern Europe even experienced managers invested in projects, which ended in costly litigation.

conclusion

In real estate as a long-term investment, especially the price-earnings should vote ratio relative to the respective location. Of arable land and forest, only experienced investors, and only on projects that have adequate space and the necessary infrastructure for an economically meaningful use participate.

Both in real estate as well as farmland and forest could indirectly provide equity investment access to the asset classes. However, it is not just equity investments that are exposed to company-specific and market risks and the are actually values not comparable with that of the originally described kind. This applies in particular to the idea of "asset protection" outside of short-term corporate and market risks.

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*The contribution of "farmland as an Investment: you must make sure it is" from investors plus. Contact with the executives here.

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Updated Date: 16 June 2020, 07:28

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