According to a recent study published by The National Bureau of Economic Research ("The Rate of Return on Everything, 1870-2015" by Oscar Jorda, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick and Alan M. Taylor), residential real estate is "the best performing placement in modern history"; the actual yield reaches 7.05% against 6.89% on average for equities, 2.5% for bonds and 1% for the money market. Regarding the risk, the study shows that the yield spreads were more modest for real estate than for equities. Moreover, unlike the stock market, it is impossible to lose everything in real estate. It is therefore the best risk-adjusted investment with the highest Sharpe ratio (which measures the difference in profitability of an asset or portfolio relative to the rate of return of a risk-free investment divided by its volatility, the higher it is and the more performant the asset is). Of course, the value may decrease in extreme cases, but it will never be zero.
The prospect of high returns (but above all, higher than other asset classes) is not the only motivation to invest in real estate. Indeed, real estate investments have many advantages. Among them, we find the opportunity to build a long-lasting heritage, to benefit from sufficient coverage against inflation but also from tax deductions and above all, to create passive and complementary income through relocation. Yet, even if real estate attracts, only a minority of investors take the leap. The main reason is that for many, real estate investment is assimilated with huge sums of money deployed. But today, there are many ways to invest in a much more accessible way. Indeed, there is no need to invest large sums if one goes through real estate of small surfaces (types studios), in buildings with divided ownership or through crowdfunding real estate. In addition, nowadays, with a historic mortgage rate (around 1%), the cost is much lower. In addition, going through renovations, some tax savings can be made.
Let's take an example of a real estate investment made by Upsiders _ UpImmo for one of our clients: for a property with a final value (after renovations) estimated at CHF 265'000, and with CHF 53'000 of own funds Invested, the customer found himself with 30% of net returns on own funds following the tax savings !! Interesting, no?