# Real Estate Investing Basics: Returns & Risks > Source: https://www.investbay.com/en/learn/the-basics-of-real-estate-investing · Part of InvestBay (https://www.investbay.com) · See /llms.txt for an overview. [How it works](https://www.investbay.com/en/news?how-it-works) # The basics of real estate investing: returns, risks and how to start 11. July 2023 · Updated 2. October 2026 Many of us feel instinctively that real estate is a good investment. It is worth looking at what actually lies behind that feeling – where the returns come from, what the risks are, and why property has long been out of reach for most individual investors. Over the last three decades, real estate has matured into an institutional asset class. Pension funds and insurance companies invest in it, and for many larger investors it has become a third pillar alongside equities and bonds. Until recently, this was mostly reserved for institutions and people able to buy a whole property. [Fractional property investment](https://www.investbay.com/en/fractional-property-investment) has changed that: individual investors can now buy shares in a specific property. This guide explains how it all works. ## How real estate generates returns Real estate offers two sources of return, each driven by slightly different factors. ### Rental income (income yield) The first part of the total return is the rent that a tenant – or a guest, in the case of a hotel or holiday rental – pays to the owner. **Residential property.** Demand for standard housing, and therefore rent levels, is partly driven by the job market and the wider economy. A stronger economy brings more jobs, often population growth, and higher salaries – and people can afford to pay more in rent. Prague is a good example: economic growth, a rising population and low unemployment have pushed up wages and disposable incomes. Residential and holiday properties have one specific advantage: rental contracts are short – a year at most, or just days or weeks for holiday guests. Landlords can therefore adjust rents regularly to reflect inflation and market conditions. The flip side is that occupancy and rents can also fall quickly when demand weakens. **Holiday property.** Demand for holiday rentals depends on tourism, which in turn is shaped by many factors: weather, destination marketing, attractions nearby, wage growth in the countries tourists come from, exchange rates, accessibility and even work-from-home policies. When you hold shares in a property rather than the whole building, you receive a proportional part of the income it generates. [See how it works on InvestBay](https://www.investbay.com/en/how-it-works). ### Capital value appreciation The second part of the total return is the change in the property's market value over time. This is more closely linked to the capital markets, including interest rates and inflation. When inflation is present, it raises the cost of building a comparable property, which tends to push up the value of existing real estate – especially when interest rates are low. Values can also fall, for example when interest rates rise sharply or local demand weakens. ## Risk and return in real estate Real estate has a different risk and return profile from stocks and bonds. It is often described as sitting between the two – generally less volatile than stocks, but riskier than government bonds. In practice, this varies widely by property type, location and structure. Development projects carry higher risk and therefore aim for higher returns, while prime properties in prime locations sit lower on the risk curve, and investors accept lower expected returns in exchange. The same applies on InvestBay: the offer includes both operating resorts and development projects, and each property page sets out its own investment horizon, expected return and risks. How an investment is secured also matters. Each InvestBay investment is [secured by a lien over the property](https://www.investbay.com/en/learn/securing-the-investment-through-a-lien-over-the-property) – [read how your investment is protected](https://www.investbay.com/en/security). A lien reduces risk but does not remove it: like any investment, property investment can lose value. ## Real estate as a hedge against inflation Real estate can help protect your money against inflation, for two reasons. First, if interest rates remain relatively stable, property values tend to rise with general prices in the economy. Second, rents are typically increased in line with inflation, so rental income can keep pace with rising costs. This protection is not automatic – it depends on the market, the property and the interest-rate environment. ## Why residential and holiday properties in Europe ### Residential: build-to-rent and private rented sector Build-to-rent (BTR) and the private rented sector (PRS) have become increasingly sought-after asset classes in Europe. One reason is that offices and retail have fallen out of favour with many investors – offices because of remote and hybrid work, physical retail because of online shopping. ### Holiday lets: tourism-driven demand International tourism has recovered since the pandemic, supporting demand for holiday rentals across Europe. The sector has also attracted significant investment, particularly in technology and distribution, making it a more mature and transparent market – important for all investors, and especially for institutions trying to understand its risks and returns. This is the segment InvestBay focuses on: managed holiday resorts such as [Wyndham Portocolom in Mallorca](https://www.investbay.com/en/properties/wyndham-portocolom-2-mallorca), [Wyndham Residences Golf del Sur in Tenerife](https://www.investbay.com/en/properties/wyndham-residences-golf-del-sur-tenerife) or the [Almresort in Nassfeld](https://www.investbay.com/en/properties/almresort-nassfeld), where demand comes from tourism rather than the local job market – which also means income depends on how well the season goes. ### Limited supply All these trends affect demand. Rents and values, however, result from the interaction of demand and supply – and in many European cities and resorts the supply of new projects is limited, for example by strict planning rules. Where that is the case, limited supply can support rents and values over time. These trends are still developing, and whether they suit you depends on your own goals, investment horizon and risk tolerance. ## Real estate and portfolio diversification Real estate can play a meaningful role in diversifying a portfolio. It typically has a low correlation with stocks and bonds, which means its value does not necessarily fall – or rise – at the same time or in the same way. Adding real estate can therefore help reduce overall portfolio risk, and rental income can provide a regular – though not guaranteed – source of cash flow. Diversification works best when you spread money across several assets instead of tying it up in a single property. Fractional investing makes this practical: you can [invest in property with smaller amounts](https://www.investbay.com/en/invest-in-property-with-little-money) and split your money across several properties and countries. Use the [investment calculator](https://www.investbay.com/en/calculator) to see how different amounts and horizons play out. ## 5 barriers to investing in real estate Investing in real estate directly is demanding. These are the main barriers that keep most individual investors out: - **Capital requirements** – Buying a property requires substantial upfront capital: the purchase price or down payment, transaction and brokerage fees, and ongoing maintenance costs. This alone rules out many smaller investors. - **Market knowledge and risk management** – You need to understand local trends and property values, and managing a property requires specialist skills to handle tenants, maintenance and legal issues. - **Limited liquidity** – Property is less liquid than stocks or bonds. Selling takes time and involves extra costs such as legal fees and agent commissions, so you may not be able to access your money quickly. - **Legal and regulatory requirements** – Rent regulation, building codes and consumer protection law vary by country, and the investor is responsible for complying with all of them. - **Time and maintenance** – Finding tenants, organising repairs and dealing with day-to-day issues takes time and effort. ## How InvestBay lowers these barriers - **Capital** – Instead of buying a whole property, you buy shares in one, starting from €100. [How to invest in property with little money](https://www.investbay.com/en/invest-in-property-with-little-money) - **Market knowledge** – Projects go through a selection process before they are offered, and you choose from [specific, named properties](https://www.investbay.com/en/properties/) with published terms and [documents](https://www.investbay.com/en/documents). - **Liquidity** – Property remains a long-term investment, and selling your shares before the end of a project may be limited. Plan your horizon accordingly. - **Legal matters** – The purchase, contracts and lien are arranged for you. [Security](https://www.investbay.com/en/security) - **Time and maintenance** – Letting, management and maintenance are handled by professional operators. [Hassle-free ownership](https://www.investbay.com/en/learn/hassle-free-ownership). As an investor, you can still have a say in key decisions through [investor voting](https://www.investbay.com/en/learn/investor-voting). ## About InvestBay InvestBay is a platform for fractional real estate investment. Instead of buying a whole property, you buy shares in a specific holiday resort – in Mallorca, Tenerife, Bali, Cape Verde, Dubai, Croatia, Austria or the Czech Republic – and receive a proportional part of the income it generates, plus a share of any increase in value when the property is sold. Each investment is secured by a lien over the property, and investors can also get discounted stays in partner resorts. As of October 2026, InvestBay has 15 active projects. [More about us](https://www.investbay.com/en/about) ## Frequently asked questions ### How much do I need to start investing in real estate? Buying a property directly usually requires tens or hundreds of thousands of euros. With fractional investing on InvestBay, you can start from €100. ### How do I earn money from property shares? From your proportional part of the income the property generates, and from any increase in its value when it is sold. Neither is guaranteed. Estimate possible scenarios in the [calculator](https://www.investbay.com/en/calculator). ### Is real estate investing risky? Yes, every investment carries risk. Rental income can fall, property values can decline, development projects can be delayed, exchange rates can move against you and selling can take time. Spreading money across several properties and choosing a horizon that suits you helps manage that risk, but does not remove it. ## Next steps [Browse current properties](https://www.investbay.com/en/properties/) · [Book a free consultation](https://www.investbay.com/en/consultation) · [Create a free account](https://portal.investbay.com/sign-up) *Investing involves risk. Returns may be lower than expected, and you may lose part or all of the amount invested. Past performance and expected returns are not a reliable indicator of future results, and returns are not guaranteed. This article is for information only and does not constitute investment advice.* Share this post ## Properties to invest into ### Almresort Gartnerkofel Nassfeld Available now Austria estimated annual appreciation: 6–8 % length of investment: 7 years ### Wyndham Portocolom 2 Mallorca Available now Spain estimated annual appreciation: 9.00 % length of investment: 5 years ### Element Residence Bali - tranche 1 Available now Indonesia estimated annual appreciation: 10.00 % length of investment: 7 years [View more](https://www.investbay.com/en/properties/) ## Recent articles ### Where to invest €4,000? Options by goal and risk [Read article](https://www.investbay.com/en/blog/where-to-invest-4000-eur) ### InvestBay's portfolio has entered a new phase 03 June 2026 [Read article](https://www.investbay.com/en/blog/investbay-s-portfolio-has-entered-a-new-phase) ### How to build the ideal investment portfolio – and why it must not lack real estate 10 September 2025 [Read article](https://www.investbay.com/en/blog/the-ideal-investment-portfolio-a-step-by-step-example-and-tips) Investing [View all articles](https://www.investbay.com/en/news)