10. 06. 2025 ETF or real estate – what pays off more?

100,000 euros available. But where to put it? Into a condominium with rental potential or into a broadly diversified MSCI World ETF? Sooner or later, anyone considering investing will be faced with this decision – with long-term consequences for wealth accumulation and retirement.

Real estate offers tangible value, tax advantages and the opportunity to generate regular income through renting. ETFs, on the other hand, score points with low entry barriers, high flexibility and global diversification. Both forms of investment have strengths – but also weaknesses. But which strategy suits you as an investor?

The question “Real estate or ETF?” is no longer just a math problem. It’s about personal goals, the willingness to tie up capital over long periods of time, the cost-income ratio and individual life planning. For some, their first condominium is the gateway to financial independence, for others the ETF custody account is the lean solution for securing their pension.

As a real estate agent specializing in investments in Dresden and the surrounding area, VIAREALIS® provides an overview of the real estate market in this article – not financial or investment advice, but objective information for classification. We show what is important when investing in real estate, which factors make the difference – and how a property can be sensibly integrated into an investment portfolio.

The most important facts in brief

• Real estate and ETFs are different asset classes: Real estate offers tangible assets and rental income, while ETFs offer flexible and broadly diversified investments with high liquidity.
• Capital requirements and commitment differ: real estate often requires more equity and management effort, ETFs are easy to trade and manage passively.
• Risks and opportunities vary: Real estate is less volatile, but is subject to location and maintenance risks. ETFs are market-dependent and more volatile, but offer growth potential.
• Diversification is crucial: a mixture of both forms of investment can reduce risks and increase opportunities.

Real estate as a capital investment – substance, stability, tax advantages

Real estate is considered a stable asset that offers protection, especially in times of economic uncertainty. Anyone investing in a condominium or apartment building – for example in Dresden – benefits from:

• Long-term appreciation potential in sought-after locations
• Regular rental income as a reliable source of income
• Tax advantages through depreciation and income-related expenses

This combination makes real estate particularly attractive for investors. Unlike many financial products, it is a tangible asset that often also has emotional value.

For a more in-depth look, we recommend our article:
Owner-occupied vs. investment – which is right for you?

Of course, the purchase of real estate is associated with challenges. Getting started usually requires solid construction financing or sufficient equity. There are also ongoing costs for maintenance, administration and insurance. A careful choice of location is crucial to ensure sustainable value growth and good rentability.

With the support of an experienced real estate agent like VIAREALIS®, many of these challenges can be mastered professionally. We provide you with individual advice, broker exclusive properties and give you access to projects with long-term value appreciation potential.

Real estate disadvantage or just expense? Realistic insights for private investors

Real estate is considered a stable capital investment, but acquiring and managing it comes with challenges. It is important to look at the potential disadvantages realistically in order to make informed decisions.

Typical challenges for private investors:

• High capital requirement: The purchase usually requires a considerable equity ratio or solid construction financing.
• Running costs: In addition to financing, expenses are incurred for maintenance, administration, insurance and building up reserves.
• Location risk: The location is decisive for rental yields and value appreciation – wrong decisions can have long-term financial consequences.
• Administrative expenses: Letting, tenant search, contract management and repairs take up time and nerves.

Effort and costs at a glance

Cost type	Description	Average share of investment
Equity	At least 20-30% of the purchase price	20-30%
Incidental purchase costs	Notary, land transfer tax, estate agent fees	10-15%
Ongoing maintenance	Repairs, renovations	approx. 1-2% of the property value annually
Administrative costs	Property management, tenant management	approx. 0.5-1% annually
Accumulation of reserves	For future major repairs	variable

Why Dresden for your real estate investment?

Dresden is one of the most dynamic real estate markets in Germany. The city combines strong economic development with a high quality of life and growing demand for modern living space. New construction projects in particular offer opportunities for investors, with long-term increases in value and attractive rental yields. Anyone looking to buy a property in Dresden benefits from an excellent mix of infrastructure, culture and a growing job market.

You can find out more about the advantages of the location and current new-build projects on our website: New build Dresden – exclusive projects and opportunities.

ETF as a capital investment – opportunities, diversification and simplicity

ETFs (Exchange Traded Funds) are investment funds that are traded on the stock exchange and invest in numerous shares, bonds or other securities. For many investors, ETFs are an attractive alternative or supplement to traditional real estate investments because they offer a number of important advantages.

Advantages of ETFs at a glance:

• Broad diversification: By investing in hundreds to thousands of companies worldwide, ETFs minimize the risk of individual defaults.
• High liquidity: ETFs can be bought and sold at any time during trading hours – unlike real estate, which often takes months to sell.
• Low costs: ETFs have comparatively low management fees, especially when compared to actively managed funds or direct real estate costs.
• Simple handling: With a custody account, almost any investor can invest easily and digitally.

Possible disadvantages

Despite their advantages, ETFs also harbor risks. They are market-dependent and can fluctuate significantly in times of crisis, which is generally less pronounced with real estate. Furthermore, investors in ETFs do not own a physical asset – their investment is purely financial.

Choosing the right ETF is particularly important for investors. For example, there are pure equity ETFs, bond ETFs or specialized real estate ETFs (REITs). The choice strongly influences return and risk.

ETFs are particularly suitable for investors who value flexibility and ease of use and are prepared to accept market fluctuations. They are often a good building block in a portfolio to take advantage of broad market opportunities.

Sample calculation: Real estate vs. ETF – Realistic comparison

Real estate:

• Purchase price: 300,000 euros
• Equity: 50,000 euros (remainder is financed)
• Service charges: 12 % (36,000 euros)
• Total investment (incl. ancillary costs): 336,000 euros (of which 86,000 euros equity + ancillary costs, remainder borrowed capital)
• Rental yield: 3 % net on the purchase price = 9,000 euros per year (net, before running costs)
• Increase in value: 2 % p.a. assumed
• Running costs: 1.5 % p.a. on the purchase price = 4,500 euros per year
• Cash flow: 9,000 euros rental income – 4,500 euros running costs = 4,500 euros net per year
• Increase in value: After 20 years: 300,000 euros × 1.02²⁰ ≈ 445,800 euros

Financing:

• Assumption: EUR 250,000 borrowed capital, interest rate 3.5% p.a., repayment 2% p.a.
• Monthly installment: approx. 1,145 euros
• After 20 years: Residual loan approx. 130,000 euros (depending on repayment plan)
• Rental income over 20 years: EUR 4,500 net × 20 = EUR 90,000 (after running costs)
• Total return:
  • Value of the property after 20 years: 445,800 euros
  • Minus residual loan: approx. 130,000 euros
  • Plus rental income (net): 90,000 euros
  • Realized assets: 445,800 – 130,000 + 90,000 = 405,800 euros
  • Investment: 86,000 euros (equity + ancillary costs)
  • Leverage effect: a significantly larger amount of assets was moved with relatively little equity.

ETF:

• Investment sum: 50,000 euros
• Annual return: 7 % p.a. (historical average)
• Fees: 0.5 % p.a.
• Final assets after 20 years: approx. 193,000 euros (after deduction of fees)

Result of the sample calculation

Investment	Initial investment	Value after 20 years	Rental income/cash flow	Ongoing costs/fees	Leverage effect
Real estate	86,000 € (equity + ancillary costs)	445,800 € (value)	90,000 € (net)	90,000 € (current, incl. interest)	Yes
ETF	50.000 €	193.000 €	–	10,000 € (fees)	No

Explanation:
The property achieves a considerable net worth through the combination of value appreciation, rental income and leverage, even though only a fraction of the purchase price was invested as equity. Although the running costs are high, they are compensated by the rental income and the increase in value.
The ETF generates a solid return, but no rental income and no leverage effect – and the investment amount remains limited to the real equity.

REITs – Real estate investing with more flexibility but less control

Would you like to profit from the real estate market, but are put off by the thought of the expense of direct ownership and real estate prices? Then REITs (Real Estate Investment Trusts) may be an exciting alternative for you. REITs are listed real estate funds that are traded on the stock exchange like an ETF – so you invest in real estate without having to be a landlord yourself or worry about maintenance and management.

REITs give you access to a broadly diversified portfolio of commercial, office or residential properties – spread across different locations and sectors. Although this does not provide the tangible security of real walls, it does offer you a simple, liquid way to participate in the real estate market. In addition, many REITs pay regular dividends, which can be an attractive source of income.

But it is precisely when you are interested in a long-term, stable capital investment that the advantage of direct real estate investment becomes apparent. VIAREALIS® is at your side with individual advice. After all, real estate not only offers returns, but also substance and the opportunity to actively shape your investment.

New pillars for wealth – diversification as a basic principle of successful investors

Diversification is one of the most important principles in asset accumulation. Instead of putting all funds into a single form of investment, it is advisable to spread the risk widely. This makes it easier to balance out fluctuations in individual areas.

The classic three-pillar model of capital investment

1. Liquidity: Cash and short-term investments that serve as a security reserve.
2. Tangible assets: These include real estate in particular, which offers long-term stability as a tangible asset.
3. Securities: equities, bonds and, in particular, ETFs, which offer growth opportunities and diversification.

Real estate forms the tangible asset pillar in the portfolio. They are often less volatile than equities and offer an ongoing source of income through rental income. ETFs and other securities complement these with high liquidity and growth potential.

Why diversification is important

No investment is free from risk. Real estate, for example, can suffer from location problems, while stock markets are subject to fluctuations. A balanced mix helps to offset losses in one area with gains in another.

Understanding correlations

Real estate and stock markets often react differently to economic developments. This low correlation is valuable for investors because it stabilizes the portfolio.

Diversification is therefore not a luxury, but a necessity for robust wealth accumulation.

Combination strategy: using real estate and ETFs together

For many investors, the decision between real estate and ETFs is not a question of either-or, but of a sensible combination. A balanced portfolio composition uses the advantages of both asset classes and can minimize risks.

Advantages of a combination

• Stability through tangible assets: Real estate offers tangible values and regular rental income that stabilize the portfolio even in turbulent stock market times.
• Flexibility through ETFs: ETFs enable simple, cost-effective diversification and quick access to liquid funds.
• Risk diversification: Different asset classes react differently to economic developments.
• Long-term wealth accumulation: While real estate creates substance, ETFs can offer growth and returns.

Typical portfolio allocations

Strategy	Real estate share	ETF share
Conservative	60 %	40 %
Balanced	50 %	50 %
Growth-oriented	30 %	70 %

The ideal mix depends on personal goals, risk tolerance and liquidity requirements.

When does a combination make sense?

• If you want stable rental income but also want to participate in the stock market.
• If you want to build up long-term assets and remain flexible at the same time.
• If you want to spread risks and not be dependent on one asset class.

A combination of real estate and ETF can create synergies and make your investment more robust.

Personal factors that influence your decision

The question “Real estate or ETF?” cannot be answered by figures alone. Personal circumstances, individual goals and preferences play an equally important role – often even the decisive one. An investment should suit your life, your risk profile and your plans for the future, so that you are happy and successful in the long term.

Time and commitment – How much would you like to invest?

Real estate is not a “set-and-forget” investment. Ownership means responsibility: you are the landlord, contact person for tenants, have to organize maintenance and coordinate repairs. This also includes managing rental contracts and potential conflicts. This commitment requires time, organizational skills and possibly also a certain interest in the real estate market.

In contrast, ETFs are largely passive. After buying one or more ETFs, you can manage your portfolio with minimal effort, set up automatic savings plans or simply wait and see how your investment performs. For many investors who don’t have the time or inclination for active management, this is a major advantage.

Tip: If you are prepared to actively look after your investment or find a reliable partner for property management, real estate can be very rewarding. If your focus is more on flexibility and low effort, ETFs are usually more suitable.

Liquidity requirements – How quickly do you need your capital?

ETFs offer a high level of liquidity. You can buy or sell shares at almost any time during trading hours. This allows you to flexibly adjust your portfolio, for example in the event of market changes or personal needs.

Real estate, on the other hand, is an illiquid investment. The sale of an apartment or house usually takes several months or even years. Especially in difficult economic times, it can take longer to find a suitable buyer. There are also incidental sales costs such as estate agent fees and taxes.

Practical example: Anyone planning a major purchase or an unexpected expense should ensure that some of their assets are in readily available investments. Real estate is less suitable for releasing money in the short term.

Risk tolerance – How do you deal with fluctuations?

ETFs are dependent on the stock market and are subject to price fluctuations. In times of stock market turbulence, values can fall sharply in the short term. Anyone who is unsettled by this or has to sell during a crisis runs the risk of realizing losses.

Real estate is considered a more stable form of investment. Prices generally change more slowly and are less volatile. However, they are not free of risks: location factors, vacancies, rent losses or unexpected repair costs can reduce returns.

Important: Knowing your own risk tolerance is essential. Are you prepared to endure fluctuations and focus on long-term value growth? Or do you prefer a more stable, albeit lower-yielding investment?

Emotional factor – tangibility and identification

Many investors value real estate because of its physical character. Owning your own house or apartment offers security, a home and also a piece of identity. Ownership can create a strong emotional bond and convey a sense of stability and independence.

ETFs, on the other hand, are abstract: they represent shares in companies and markets, but not a specific object. For some investors, this is liberating, as they do not have to take responsibility for an object. Others miss the “tangible value”.

Life planning and personal goals

Long-term life planning has a considerable influence on the choice of investment. For example, anyone who moves frequently or needs to be flexible in their job will tend to view a property as a capital investment critically. The cost of administration and limited mobility can be a hindrance.

Buying real estate is often more attractive for people who are settled, starting a family or planning to use the property themselves later on. They combine investment and living and create an asset at the same time.

Age also plays a role: younger investors can cope with greater fluctuations and focus on long-term growth – ETFs can make sense here. Older investors tend to focus on stable income and security, which makes real estate more attractive.

Summary

The decision between ETF or real estate is individual and complex. Those who can devote time and commitment to real estate management and value tangible assets will find it an attractive investment. Those looking for flexibility, liquidity and broad diversification are well served by ETFs.

It is worth reflecting honestly on these factors and not basing your decision solely on financial figures. This way, your investment will not only generate a high return, but also fit in with your life.

Buying real estate with VIAREALIS®: A strong partner at your side

Buying a property as an investment is an important decision that requires careful planning and professional support. VIAREALIS® is at your side as an experienced real estate agent in Dresden and the surrounding area – with local market knowledge and an individual consulting approach.

Personal advice instead of mass processing

We understand that every property and every investor is unique. That’s why we take the time to listen to your goals, wishes and general conditions. Our advice is transparent and tailored to your needs – without pressure or hidden costs.

Access to exclusive real estate and projects

Thanks to our close network and regional expertise, we offer you access to high-quality new-build projects and existing properties that are not always available on the open market. This allows you to find exactly the right property to suit your investment strategy.

Support with financing and letting

In addition to pure brokerage, we also assist you with important questions relating to financing, funding opportunities and letting. In this way, you can optimally secure your investment and take advantage of all opportunities.

Long-term support

Real estate is a long-term investment. VIAREALIS® remains your point of contact even after the purchase – for example in the search for suitable tenants or for management issues.

Conclusion: ETF vs real estate – or both?

The decision between real estate and ETFs as an investment is complex and depends on numerous factors. Both forms of investment offer different advantages and risks, which should be carefully weighed up.

Real estate scores points with its tangible asset value, regular rental income and tax advantages. At the same time, they require more capital and commitment and entail specific risks, such as the choice of location or maintenance costs.

ETFs, on the other hand, offer a simple, flexible and cost-effective way of investing in the financial markets on a broadly diversified basis. Their high liquidity and growth potential make them attractive to many investors, but they also entail fluctuation risks.

Ultimately, there is no one-size-fits-all answer as to which is better. The right choice depends on your personal goals, your risk tolerance, your time budget and your life situation. It often makes sense to combine both asset classes in order to reap the benefits and spread the risks.

VIAREALIS supports you competently in all questions concerning real estate as an investment – as an experienced real estate agent, but without financial or investment advice. Our strength lies in offering you well-founded information and individual solutions for the real estate market.

Frequently asked questions about ETF vs real estate

Is it better to invest only in ETFs?

Many investors choose to invest purely in equity ETFs because they achieve broad diversification across different sectors and high liquidity. The advantage of an ETF portfolio is that it is relatively easy to manage and requires very little time. Nevertheless, you should bear in mind that this form of investment is strongly influenced by market fluctuations and can therefore be volatile. A combination with physical assets, i.e. buying a property, can spread the risk sensibly and offer more stability. Whether it makes sense to invest exclusively in ETFs therefore depends on your individual risk tolerance, your investment goals and your level of commitment. If you want to find out more about the advantages of real estate as an investment for retirement provision, read our article: Owner-occupied property vs. capital investment – Which is better for retirement?

Do shares bring in more money than real estate?

Shares can often generate attractive returns through price gains and dividends, but they are usually more volatile than real estate. Anyone looking to buy a property benefits not only from the potential increase in value but also from regular rental income from a rented apartment. A comparison of returns often shows that shares usually offer higher growth opportunities, while real estate provides a more stable income. For many investors, a combination of both forms of investment makes sense, as they cover different opportunities and risks. Ultimately, the decision depends on whether you prefer a flexible investment with strong fluctuations or a solid asset with tangible walls.

Which investment brings the highest return?

In the long term, equities and in particular broadly diversified equity ETFs have historically generated the highest returns. Real estate can also be lucrative, especially if it delivers good returns through a combination of value appreciation and continuous rent. However, the actual return depends heavily on the location, standard of the property and current real estate prices. It is also important that you consider not only the return, but also aspects such as security, liquidity and personal expenditure when investing. A well-balanced portfolio that combines real estate and ETFs often achieves the best overall results.

What are good returns on real estate?

For residential properties, net rental yields of between 3% and 5% are considered solid and realistic. The level of yield is significantly influenced by the location, quality and standard of the property as well as its rentability. Good properties offer a combination of sustainable rental income and potential for value appreciation. However, you should always include running costs such as maintenance and loan financing in the calculation. This is the only way to make a realistic assessment of the return on an investment in real estate.

For whom are ETFs useful and for whom real estate?

ETFs are particularly suitable for investors who want to remain flexible, invest small amounts of capital and value broad diversification. They require little administrative effort and can be traded quickly, which makes them an attractive form of investment for many. Buying a property, on the other hand, is particularly worthwhile for investors who value physical assets, are looking for regular rent as a source of income and are prepared to invest for the long term. Real estate also offers the opportunity to actively influence the walls and often also has an emotional value. Which form of investment makes sense for you depends largely on your personal goals, your capital and your willingness to take risks.