Ok, so you want to invest your money in Real Estate, but then you realize that you don’t understand that much how all of this works, and most of all, why is this good for your wealth. We get it, it sounds like a lot, but here’s the good news: it simpler than you think. Let’s start with the basics: assets are things you own that you can sell for money. So, in Real Estate investment, assets are properties like apartments, warehouses, parking lots, land and so on. Simple right? Now let’s understand how these investments are different from one another.

Apartments

Maybe the most common investment in Chile because of its high profitability and variety of products. Also, the business is as easy as it gets: you can rent it and receive a monthly cashflow. The financing aspect is also very attractive: when getting a mortgage loan for the apartment, you can pay the down payment in monthly installments. So basically, there’s no need for big savings, just a good creditworthiness.

Parking lots and Warehouses

These assets are a small format of what you could do with an apartment, but the great thing is that they do not need maintenance, nor major repair expenses, nor mortgage credit. A warehouse or a parking lot has a higher occupancy rate, so its profitability increases. This is since the supply is scarcer than a property, even in the same area. A great benefit obtained from these assets, as opposed to investing in an apartment, is that you can generate liquidity more quickly, that is, the waiting time to sell a warehouse or parking lot should not take you long, due to the high demand.

Land

The biggest difference between this type of property and the previous ones is the fact that lands are not for rent (at least not commonly), so you don’t get to receive monthly income from it. But! That doesn’t mean that investing in land is less profitable than investing in other properties, in fact, what you are betting on is on its appreciation and capital gain without moving a finger after you buy one. Buying land is like buying stocks: after 1 year, it probably has not really generated profitability for you. But after 5 years it does. Your land works the same way, but the difference is that the stocks are infinite, but the land is limited; it has life, and stocks don't (or at least not for now).

Can you say “unidad de fomento”?

You’ve probably heard Chileans talk about how great it is to invest your money in UF. Now it’s time for you to understand what the “$#% this is. UF stands for “Unidad de Fomento”, which translates literally to “promotion unit”. It was created in 1967 with the purpose of valuing savings according to inflation values, allowing the money saved in banks to maintain its purchasing power. In other words, when you invest in UF, the value of your money is readjusted with inflation and does not devalue as when you have it frozen in the bank. Everywhere in the world, when there is inflation and the value of money decreases, your savings have less value to buy what you want because they have lost part of their value over time. But in Chile, Real estate assets have the particularity that, since they are valued in UF, they do not devaluate with inflation. So, now that you understand what Real Estate assets are and what the “$”! UF means, we are ready to answer your most-likely next question: Why invest in real estate?