4 real estate investment strategies you should know about

The European real estate market is in a state of upheaval. Amidst escalating market volatility, increasing inflation and rising interest rates, beginners and real estate investors actively seek the best investment strategies that withstand depreciation for the real estate asset class. But how can investors find investment opportunities that withstand inflation without hassle and ensure a return on investment in today’s disrupted market?

In this article, we delve into four types of real estate investment strategies that have recently gained popularity in the European ‌real estate industry. Investors, real estate agents, and financial advisors make sure not to miss out on these market developments!

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1. The rising potential of single-family rentals (SFR) in Europe

Within the context of the rental investment market, single-family homes denote independent residential properties. These typically encompass several housing types, such as detached houses, townhouses, and terraced homes, leased to individual households. This stands in contrast to 'multi-family' properties, which typically consist of blocks of flats, often purpose-built for rental purposes.

According to The Business Research Company, single-family rental (SFR) investments have increased worldwide over the past few years. The global construction market value for single-family housing (individual houses) is expected to reach $981.26 billion in 2027.

The substantial interest in investing in single-family rentals looks like it is unlikely to be a short-term phenomenon but is instead leading to the introduction of creative approaches to address specific rental needs. This momentum crosses borders, as evidenced by the increase in European single-family housing projects.

2. Build-to-rent (BTR) challenges traditional investments in real estate assets

Build-to-rent (BTR) refers to developing purpose-built rental properties prioritising renter comfort, convenience, and community engagement. This model challenges traditional property investment strategies by offering homes and holistic living experiences.

Build-to-rent properties are designed with the needs and desires of modern renters in mind, often featuring a wide range of amenities, professional management, and have a focus on fostering a sense of community. Institutional investors usually tackle BTR projects through joint ventures with operating partners (i.e. developers and property managers) or crowdfunding.

Build-to-rent presents a compelling opportunity for those seeking passive income while positively impacting the housing market. According to the British Property Federation, for example, the supply of BTR units in the UK increased by over 400% since 2015. Back in December 2015, there were around 50,000 units either completed, under construction or planned –– as of Q2 2023, that number is now 253,000.

3. Tackling socio-economic challenges with sales and leaseback

A sales-leaseback transaction (also called “sales and leaseback” or “leaseback sales”) typically involves a property owner selling their property to an investor or buyer and then immediately leasing it back from the new owner. In this arrangement, the seller becomes the tenant, and the buyer becomes the landlord.

Sales leaseback has recently gained popularity and attention, especially in countries like Germany, where the median age is high (47.8 years old in 2022) and is increasing quickly. Other countries face similar challenges, such as Italy, where the median age (46.5 as of 2022) is only about a year below Germany’s.

As countries worldwide experience demographic shifts towards ageing populations and their financial and housing needs evolve, sales and leaseback transactions are emerging as an exciting alternative that offers distinct advantages. The relevance of sales and leaseback transactions is poised to grow, providing a valuable tool for older individuals to navigate their retirement years more comfortably and securely.

Sales and leaseback transactions offer sellers and buyers/investors a win-win proposition. Sellers can unlock cash flow, maintain operational control, and anticipate expenses, while buyers benefit from stable rental income, reduced risk, and potential capital appreciation.

4. Real estate leasing supports access to home ownership

Real estate leasing, sometimes called rent-to-own or rent-to-buy, is a housing arrangement that serves as a stepping stone to homeownership for many individuals. This innovative approach allows aspiring homeowners to rent a property with the option to purchase it later, typically after a predetermined period.

Real estate leasing allows individuals to sidestep the direct dependence on securing mortgage approval since the leasing company buys the investment property. Aspiring homeowners get the opportunity to live in a home they intend to eventually own while they work on improving their credit scores. At the same time, they are saving for a down payment and addressing other financial barriers that stand in the way of traditional mortgage payments.

Residential real estate investment in 2024 and beyond: redefining the way we sell, buy, invest, live and rent

The above real estate strategies stand as proactive responses to the demographic shifts and evolving housing needs that currently define the real estate landscape in Europe. By exploring innovative avenues such as alternative housing models and new capital gain strategies, investors are not merely capitalising on opportunities – they are actively addressing critical societal challenges and helping reshape the way we buy, sell, rent, live and invest.

In a world where the intersection of residential housing, investment, and society grows increasingly intricate, the investment strategies presented in this article are more than just financial tools – they are vehicles of change. With the necessary tools and knowledge, institutional investors can drive innovation most efficiently and make optimal investment decisions.

In our ebook, you'll discover further investment strategies and gain insights into their challenges and opportunities. Additionally, explore interesting metrics and perspectives from real estate thought leaders in France and Germany. Download our free ebook now: