Real estate has traditionally been considered one of the most reliable asset classes for investment. However, purchasing an apartment or commercial property requires significant capital, making this market less accessible to private investors. In recent years, alternative methods for investing in real estate have emerged, including open-ended real estate funds (OIFs), crowdfunding, REITs, and crowdlending. These instruments allow investors to earn stable returns with lower initial investments. This article explores the key ways to invest in real estate in Europe, their advantages and disadvantages, and current yield rates.
1. Open-Ended Real Estate Funds (OIFs)
What Are They?
Open-ended real estate investment funds allow private investors to invest in a portfolio of commercial or residential properties without needing to purchase properties directly.
Advantages:
- Low entry threshold – investments start from €100-500.
- Diversification – funds invest in various asset classes (offices, warehouses, residential properties).
- Liquidity – fund shares can be sold at any time.
- No property management required.
Disadvantages:
- Management fees – annual fees range from 1-3%.
- Market fluctuations – share values may decline when real estate prices drop.
- Long-term investment horizon – recommended holding period is 5 years or more.
Returns:
- The average return on OIFs in Europe is 3-5% per year.
- The best-performing funds generate 6-8%.
Examples of Real Estate Funds:
- Deka Immobilien (Germany) – returns 3.5-4.5%.
- Union Investment Real Estate (Germany) – returns 4-5%.
- Schroders Real Estate Fund (UK) – returns 5-6%.
2. Real Estate Crowdfunding
What Is It?
Crowdfunding allows private investors to pool capital to finance development projects or acquire commercial properties. It enables investors to invest in specific properties without purchasing entire buildings.
Advantages:
- Low capital requirement – investments start from €100-1,000.
- High returns – 6-12% per year.
- Project selection – investors can choose specific projects.
Disadvantages:
- Developer bankruptcy risk.
- Low liquidity – investments cannot be withdrawn easily.
Popular Crowdfunding Platforms in Europe:
- EstateGuru (Europe) – returns 8-12%.
- Crowdestate (Europe) – returns 10-14%.
- Bulkestate (Latvia) – returns 9-12%.
3. REITs – Real Estate Investment Trusts
What Are They?
REITs (Real Estate Investment Trusts) are publicly traded companies that manage real estate properties and distribute dividends to investors.
Advantages:
- High liquidity – REIT shares trade on stock exchanges.
- Stable dividends – REITs must distribute 90% of profits to investors.
- Diverse portfolio – investments in residential, office, and retail spaces.
Disadvantages:
- Stock price volatility.
- Dividend taxation – tax rates range from 15-25%, depending on the country.
Returns:
- The average return is 5-10% per year.
- Top REITs generate 12-15%.
Popular REITs:
- Vonovia SE (Germany) – returns 4-6%.
- Unibail-Rodamco-Westfield (France) – returns 6-9%.
- Realty Income Corp. (USA) – returns 5-7%.
4. Crowdlending Secured by Real Estate
What Is It?
Crowdlending (P2P lending) allows investors to provide loans secured by real estate. Borrowers can be both private individuals and developers.
Advantages:
- High returns – 6-15% per year.
- Secured by real estate – reduces risk.
- Investment terms range from 6 to 36 months.
Disadvantages:
- Borrower default risk.
- Low liquidity – early withdrawal is not possible.
Popular Platforms:
- Mintos (Europe) – returns 10-12%.
- Bondora (Europe) – returns 8-14%.
- PeerBerry (Europe) – returns 7-10%.
Conclusion
For private investors looking to invest in real estate without purchasing properties directly, various instruments are available:
- Open-Ended Real Estate Funds (OIFs) – stable returns of 3-5%.
- Real Estate Crowdfunding – higher returns of 6-12%, but with increased risk.
- REITs – liquid investments with 5-10% annual dividends.
- Crowdlending – high-yield loans with 6-15% returns, but at higher risk.
The choice of an investment vehicle depends on the investor’s goals: stable passive income or high potential returns with associated risks. Evaluating investment duration, liquidity, and risk factors is essential for effective capital management.
