Real Estate Investments: Become A Provider Of The Poor

"Deka prediction: Yields continue falling, but rents won't rise before 2011"

This headline was in the press today. Now you would ask: how is that? How can yields fall, are prices rising? Well, yes. Actually this is a very bizarre moment. The prices are rising because people do not know what to do with their cash. Sounds like a luxury problem. But this is true for everybody. What will you do with, let's say, 25,000 EUR?
If you give it to the bank, they might offer you 2.5% if you freeze it for 3 years. Hello? Yes. Sad but true. On top: after 3 years, you might find yourself in a huge inflation and your money is not much worth anymore. Real Estate investments are becoming more attractive. So, prices will rise.

A good indicator is always the gold price. Today it was 1,138 US-Dollars / ounce. Historially high (wanna see a chart of how gold has been doing since 2004? Click here). So what is happening with the rents? The article does not really say. I believe the rental development is not related to the finance crises, at least not that clearly. In Germany residetial rents are very regulated and you only make better money when you find a new tenant. That can take a while. Some tenants stay for 30 years. Yes, you can increase rent. Every 3 years up to 30% and not more than the average of the area. Difficult sometimes. And: contracts to not expire. But it is not impossible to get a fair price from the tenant. It also depends on what you provide.

My very personal tip: look around in the not so attractive areas. AAA-locations will never be good yield, but always good to re-sell. What do you want? A good yield? Stay away from triple-A. If you find a spot where people like to move to but hardly buy, this is your place. Try to find a place where the rents are okay, but nobody is really buying. Right now, the world does not seem to become richer in all part of society. The gap widens. If you like it or not: also poor people need a place to stay. The do pay rent, but not great ones. As long as you do not pay a high price, that is fine. Become a provider of flats for the non-rich. Dealing with them is non-contagious and gives you a great yield.

If you are interested where these places are in Berlin, write me an email and I will tell you :-)