How to invest in real estate?

Now that we have covered the benefits of investing in real estate and how real estate can be a great addition to your portfolio by making it more diversified, stable and profitable. Let’s get a bit more pragmatic and look at all the different ways you can get started in real estate and where BRXS fits in:

• Real estate investment trusts (REITs)
• Real estate Crowdfunding
• Invest in a rentalk properties
• BRXS

‍REITs‍

A REIT is basically a company that acquires, sells and manages real estate properties. As an investor you can buy a share in a REIT and your capital is used to buy properties. In return, you as a shareholder will receive dividends coming from the rental income generated by all the properties in the REIT. REITs come in many different shapes, forms and flavours:

• You have those that are publicly traded on the stock exchange like Simon Property Group and can easily be bought through a brokerage platform; Others that are privately traded and less accessible as they usually require much higher investment amounts.
• Then you have the REITs focus on specific sectors like healthcare, malls, logistics centres, hotels, offices or some REITs that focus across multiple sectors.
  

So REITs offer an easy way to get access to real estate investing for those investors who want to remain very hands-off and prefer to have a very broad diversification across many real estate areas and geographies. Publicly traded REITs are also very liquid: you can easily buy and sell shares whenever the markets are open from your brokerage account.  When choosing a REIT, it is important to properly assess its attributes, just like you would research any company you would want to buy a stock in because they can vary in terms, returns, diversification, duration, and more.

While they have their advantages, it is also important to evaluate their drawbacks:

• Detached and low visibility: Large REITs often hold thousands of different assets in their portfolios, so it is often hard to know what you are exactly buying or the fees that affect your dividends. They are also continuously selling and buying properties, so what you invest in today, might not be what you are holding tomorrow.
• No control: you have no say in the properties that you would like to invest in. The managers of the REITs set and execute the strategy. So if you believe a neighbourhood is up and coming or a specific property is a great investment opportunity, you will not find a REIT that provides that strategy.
• Volatility: Publicly traded REITs are traded on the stock market, so they tend to fluctuate with the rise and fall of the stock market regardless of whether or not the value of the properties owned by the REIT have changed. So if the markets are bullish and demand for REITs are high, the price of the shares might be higher than the underlying property values, and consequently your yields are going to be lower than expected.
• Lower portfolio diversification: Another downside of their link with the stock market is a lower diversification for your portfolio. If the stock markets are down and your stock investments are suffering, this might also be the case for your REIT shares.

‍Real estate crowdfunding platforms

Crowdfunding platforms connect investors with real estate developers who want to finance their projects either through debt or equity. In return investors hope to receive regular distributions and/or share in the gains (or losses) at the end of the project. The platform is usually merely an intermediary and takes a fee on the distributions between investors and developers. 

These platforms have brought some democratisation and allow for a lot more input and control on the side of the investor to decide what they want to invest in: a country, city or neighbourhood that is appealing to them, a project that they see as a great opportunity or a real estate developer they believe in. Often the promised returns also look really good; in some cases going well above 10% per year. 

Be vigilant and remain mindful of the many pitfalls as high “promised” returns often come with a significant amount of risk: The platforms often take little responsibility and as an investor you depend on the trustworthiness and reliability of the developers. The timeline or feasibility of projects can change drastically negatively impacting your pay-outs, returns or even the reimbursement of your investment. On some platforms the developers are not even professional companies but individuals looking for financing to flip a property. So a good amount of research and due diligence is definitely necessary to avoid sleepless nights. 

Invest in a rental property

The good old-fashioned way of investing in real estate is by going at it completely yourself: sourcing a property, buying it, renovating it, managing and renting it out or selling it for a higher price. And as a result making a great return on your investment. It is definitely a proven method as many great investors in history have built their wealth and created financial independence through real estate. It is also something that resonates with many of us because we probably all know examples from people in our family, circle of friends and acquaintances in the neighbourhood that have had their success by owning and renting out one or more properties.

While the doing it yourself method provides you a lot of control, flexibility and freedom and it is definitely exciting, the reality is that for many of us it is just not very accessible and attainable for several reasons:

• Lots of money needed: Depending on the mortgage amount you are able to qualify for, you will normally still have to put down a huge sum. For example: if you purchase a house of €500’000 and are able to secure a mortgage at 80% of the value, you will still need to bring in €100’000. Even if you have been able to save such amounts, it would still be extremely risky from a diversification perspective, to put it all in one and the same property.  
• Time: Buying a property is not like buying a stock on your brokerage app which can be done in minutes. No, it takes months and requires a lot of dedication and effort on your part, sourcing properties, screening them, going to visit, run the numbers, negotiate and once accepted it would still takes months before you take actual ownership of the property. Also don’t forget about the potential renovations that you might need to org
• Complex: Above process is also not without hurdles and has quite a lot of complexities to it. In most cases, you will need to coordinate between a realtor, mortgage provider, technical inspector, taxation agent, insurance provider and notary and navigate all these parts of the process (and they come at a cost). Look, many people have done it before so it is certainly possible but it is far from easy and straightforward.

BRXS Properties

While the above ways each have their benefits and have worked for some, we started Brxs because we couldn’t really find ourselves in those options:

• REITs were too detached, offered too little control and transparency while not diversifying enough compared to our stock investments
• Crowdfunding platforms were often too opaque and felt very risky.
• Do it yourself seemed like the best way to go, but we just never had the time or money to really get started.

So we built BRXS Properties trying to get as close as possible to do it yourself, while reducing the barriers to get started. So with BRXS Properties, we allow users of our platform to invest in residential rental properties of your choice:

• Browse through the listed BRXS Properties properties. For each property, you can see all detailed information and financials. There is a calculator that estimates the property’s rental income and operational costs. By adjusting your investment amount, anticipated holding period, and your appreciation assumptions, you can get an idea on your expected returns. 
• Select the property you want to invest in and the number of brxs you want to purchase. More info on BRXS Properties note can be found here. After filling in a few more details about yourself, select your preferred payment method, complete the transaction, and, with that, you are now a BRXS Properties note holder!
• Earn: Every quarter, you will receive your payouts with respect to the BRXS-notes bought by you. In short, the quarterly payment is the net rental income over that quarter (All rental income minus costs), distributed across all investors in a given property. And over time you will also participate in the potential gains property value appreciation. 

What are the advantages?
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Earn two returns:

Earn rental income and potential appreciation of the property in the future. You can read more on the returns to expect here.‍

No hassle:

You can invest in minutes without any effort. BRXS Properties takes care of the properties’ maintenance, upkeep, and day-to-day business, working with tenants, keeping track of accounting, insurances, annual tax filings, etc. For this we charge a fee  hat we deduct from the rental income (more info on our fees here)‍

Start with little money (from €100):

No need to commit a large amount of money, you can start from as little as €100 and invest what works for you.‍

Personalised:

Each investment represents just one property. You know exactly what you are buying into, and have the opportunity to choose the specific property that interests you. ‍

Transparency:

You receive full insights on all property information which is available before making your investment. Once you own BRXS Properties notes in a property, you also receive a quarterly statement on that property with a detailed overview on all rental income and costs, so that you understand  and have full visibility on the quarterly payments that you receive.‍

Diversification:

‍Our platform offers multiple properties in which you can invest, and we will continue to add more properties in the future. This allows you to spread your investment and not have everything in one property.

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While we have made BRXS Properties to make real estate investing more accessible, attractive and transparent, It is important to understand that all BRXS Properties investments still come with risk just like all other forms of investing. The returns you make are variable and can be influenced both positively as negatively by factors such as the housing prices or property specific events like the insolvency of a tenant or an unexpected maintenance that falls outside the planned budget. You can read more about risks in the next article, our dedicated risk FAQ and also find a comprehensive overview of the most important risks in the AFM information document of each property.