This is an edited, translated version of an article that originally appeared on September 18, 2022.
The 32-year-old Paul Müller owns 70 properties, which are worth around 10.5 million euros, or around $10.3 million.
His first properties were two small, neighboring apartments in Leipzig, in eastern Germany, which he bought in 2017 in a deal that came to 80,000 euros, or around $77,900.
Müller added that he didn’t have much capital behind him when he started investing in real estate despite making “good money” working as a consultant for PwC.
Müller said he had 5,000 euros in savings, but he added that he was able to borrow another 5,000 euros from colleagues.
“So I started with 10,000 euros of capital and financed the rest through a bank,” he said.
In 2019, Müller quit his job and briefly moved to a real-estate company before becoming a self-employed real-estate investor in 2020.
“Investing privately in real estate made me feel like I had a small business already,” Müller said, adding that he was initally solely responsible for the financing, price negotiations, and management of his properties.
Müller said that about half of his portfolio consisted of “buy-and-hold” properties. These are properties that he purchases then rents out to try and make a profit.
The other half of his portfolio contains “fix-and-flip” properties. This is a strategy where he purchases a property, renovates it, and then sells it at a higher price.
“I think if you want to invest in real estate alongside your job, it makes sense to start with a buy-and-hold strategy because it involves less effort and less risk to begin with,” Müller said.
With fix-and-flip, you have to know more about the market and the work is much more time-consuming, he said.
“But the big advantage with this strategy is that you can quickly build up your capital, which you can then use to buy more properties for your portfolio,” Müller said.
He also said that with fix-and-flip, “you can generate significantly higher sums in a short time.”
Renting the properties out, on the other hand, “could make you a larger passive income in the future, or an annuity that you can draw from it,” Müller said.
When looking for properties, investors in buy-and-hold properties look primarily at yield, which they calculate by dividing rental income per year by the purchase price, Müller said.
“With buy-and-hold, the rent has to be greater than any loans plus management and maintenance costs,” he said.
If you’re left with a surplus after this, then the property is profitable, he continued.
It’s similar with fix-and-flip projects, he said.
Müller said he looked primarily at the total potential profit he could make through these properties. “I make a rough calculation before any viewings,” he said.
He adds the purchase price to closing, renovation, financing, and marketing costs. He then subtracts the total of this from the potential sale price, with the difference leaving the profit or loss.
“If I can’t get to 15% while using a conservative calculation, then I don’t buy it,” Müller said, adding that he always tries to get 20 to 30%.
“I’m very rational about real-estate investing,” Müller said. “If the numbers are right, it’s a good investment.”
He said there were also ways to cut down on the workload.
“I have two properties under short-term leases where I’ve handed over everything to a service provider. I really don’t do anything there anymore. It’s completely passive,” he said, adding that he gives them 23% of the rental income to pay for this service.
With the aparment blocks he owns, he said he used property managers to take care of a lot of the work.
“There’s usually also a janitor on-site who takes care of minor maintenance issues. My job is really just to see if everything is OK,” Müller said.
Müller said his goal now is to increase his team from five to 50 employees and expand into the US.
This post originally appeared on Business Insider Deutschland and has been translated from German.
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