Back

5 Strategies That Will Work Well in 2022

If done properly, apartment investment (real estate investment) can be both profitable and help diversify your existing investment portfolio.

However, many new investors are unsure where and how to invest in real estate. Here are some of the best methods for making money with properties.

Best Ways to Invest in Real Estate:

  1. Apartment Investment: Long-Term Rental Properties

Owning rental apartments can be a great opportunity for investors who have the patience to manage tenants and handle ongoing renovation work. While it’s very easy to rent out average-sized apartments in prime locations, this strategy requires significant capital. Not only do you need to cover the costs of purchasing the property, but having liquidity to fund maintenance costs and cover vacant months is also essential.

Besides apartments and houses, commercial real estate (such as retail spaces and warehouses) can also be considered, though they require more expertise than residential apartment investments.

Advantages:

  • Provides regular income
  • Properties are likely to appreciate over time
  • You can maximize your capital using leverage (by financing purchases with loans, allowing you to acquire multiple properties at once, with tenants covering the loan payments)

Disadvantages:

  • Managing tenants can be exhausting
  • Tenants will likely cause wear and tear on the property
  • No income during vacancy periods

Tip: If possible, specialize in luxury properties. High-quality properties in high-demand locations tend to appreciate much faster than average apartments, and potential tenants can be more easily targeted with the help of a suitable real estate broker.

  1. Short-Term Property Rental

Lakás befektetés: rövid távú kiadás

You can rent out your apartments, even by the room, through platforms like Airbnb. You don’t need to commit to long-term tenants, as Airbnb filters potential tenants to some extent, and the company’s host guarantee offers protection against damages.

Naturally, the greatest income comes if you manage the tasks yourself and maintain the property, but there are numerous service providers you can choose from who will handle these duties.

Advantages:

  • Can generate continuous high income
  • Not dependent on a single tenant

Disadvantages:

  • Possible lockdowns or travel restrictions may cause significant losses
  • Faster depreciation of the property
  1. Apartment Investment: House Flipping

Partly popularized by home renovation reality TV shows, this strategy involves purchasing an undervalued, dilapidated apartment, renovating it, and then selling it for a significant profit. Of course, it’s much more complex than it seems on TV, but it certainly works for many investors.

Advantages:

  • High returns are possible
  • Capital is tied up for a shorter time

Disadvantages:

  • Requires a constant contractor team
  • Interior designer is also helpful
  • Requires very accurate financial estimates
  • Knowledge of property valuation is necessary
  1. Apartment Investment Through Online Real Estate Platforms

Real estate investment platforms cater to those who want to invest in larger commercial or residential property deals with others. Investments are made through online platforms, also known as real estate crowdfunding. While some capital is still required, it is much less than what would be needed for directly purchasing properties.

Online platforms connect investors looking to fund projects with real estate developers, allowing you to invest in properties together with others.

Advantages:

  • You can invest in a single project or a portfolio of projects
  • Geographic diversification (properties can be accessed from anywhere in the world)

Disadvantages:

  • Less liquidity
  • High management fees
  1. Real Estate Investment Trusts (REITs)

Real estate investment trusts are recommended for investors who want to deal with real estate in their portfolio without engaging in traditional property transactions.

The goal of REITs is to buy properties using funds provided by investors, properties that generate favorable rental income and also appreciate in value, thus increasing the trust’s assets.

Most REITs reduce investor risk by purchasing properties across different market segments and locations, selected by experts. These typically include office, retail, and logistics properties, which the fund manager rents out.

In this case, investors realize returns from the capital gains of investment units.

Advantages:

  • Regular dividends
  • No need to deal with physical properties

Disadvantages:

  • Leverage (loans) associated with traditional rental properties cannot be applied

Real Estate is Still One of the Best Investments

According to research published last December, real estate accounts for 67.5% of the material wealth of Hungarian households. Although there was a strong market slowdown at the start of the COVID-19 pandemic, investors returned to the market a year later, despite somewhat volatile conditions.

Whether used to generate rental income or sold for profit at the right time, real estate is always a part of a solid investment portfolio.

Would you like to contact an expert? Feel free to reach out to our colleagues and see what opportunities they offer for luxury apartments in Budapest.