Direct vs. indirect

Four common routes

Direct ownership is what the rest of this masterclass has been about: buy the property, hold the title, collect the rent, file the Steuererklärung. Maximum control. Maximum AfA leverage at the investor's personal tax rate. Maximum operational burden and concentration risk.

Listed real estate companies, Immobilien-AGs. Public companies (Vonovia, LEG Immobilien, TAG Immobilien, others) own and operate residential portfolios at large scale. Shares are bought and sold on stock exchanges. The investor gets diversified exposure to professional real estate management, with full daily liquidity. The trade-offs: dividends are taxed as investment income (subject to Abgeltungssteuer); no personal AfA deduction; share prices correlate with broader equity markets more closely than direct property does. Germany also has a small dedicated G-REIT regime under the REITG, with regulatory requirements that have kept the German REIT market modest in size.

Open-ended real estate funds, offene Immobilienfonds. Pool capital from many investors and own diversified commercial or residential property portfolios. Daily or near-daily pricing, with statutory minimum holding periods and redemption notice periods (under the KAGB, retail investors face a 24-month minimum hold and a 12-month redemption notice). The liquidity is real but not immediate. The 2008 and 2022 cycles produced episodes of redemption suspensions that affected several large funds, worth understanding as part of the risk profile.

Closed-end real estate funds, geschlossene Fonds (now structured as AIFs under KAGB). Pool capital for a specific project or portfolio, with capital locked for the fund's life (typically eight to fifteen years). No interim liquidity. Higher fees than open-end equivalents. Tax structures vary, some pass through certain deductions, others do not. The fee load and the structural complexity make these products demanding to evaluate.

Crowdfunding platforms, Exporo, Bergfürst, and others. Aggregate small investments into specific real estate projects, typically as mezzanine debt rather than equity ownership. Returns are stated as fixed interest rates. The risk profile is closer to subordinated lending than to property ownership: limited upside, full exposure to project failure, less senior than the bank in any restructuring. The marketing often emphasises the property-like aspects; the fine print describes the debt-like risk.

What you give up and what you get

The most important comparison is what changes when ownership moves from direct to indirect.

Direct typically retains: AfA pass-through at personal tax rate; full leverage access at residential mortgage terms; control over property selection, tenant choices, and exit timing; Spekulationsfrist path to tax-free capital gains after ten years.

Indirect typically retains: liquidity (varies by structure); diversification across multiple properties; professional management; lower minimum investment; no operational burden.

Indirect typically loses: personal AfA deduction; access to cheap residential leverage at the personal level; Spekulationsfrist exemption (capital gains on indirect holdings are taxed as investment income, generally under Abgeltungssteuer); ability to select specific properties.

In after-tax terms for a higher-bracket investor with the appetite and capacity for direct ownership, the indirect routes typically produce lower outcomes, because the tax advantages that compound across a direct ownership are not replicated in the indirect structures. For investors who cannot or do not want to commit to direct ownership, indirect routes provide real estate exposure that direct ownership does not. Neither is universally better; they answer different questions.

Where each route tends to fit

Direct tends to fit investors with sufficient equity, time horizon, appetite for operational involvement, and high enough marginal tax bracket to capture the AfA benefit.

Listed Immobilien-AGs tend to fit investors who want diversified exposure with full liquidity and are comfortable with equity-market correlation in the share price.

Open-end funds tend to fit investors prioritising broad property exposure with periodic but not daily liquidity needs.

Closed-end funds and crowdfunding sit in a more specialised space where evaluating the specific product's terms, fee structure, and risk-return profile is more important than the category itself.

What this lesson is not

A ranking. Each route serves different investor profiles and different goals. The category that performs best in a comparison table depends entirely on what is being compared and what matters to the comparing investor.

What comes next

The final lessons turn the perspective inward, from the strategy itself to which kind of investor is making it work. Four reader profiles, each with different math, horizons, and sensible next moves, starting with which investor are you.