KlickOwn - Glossary

GLOSSARY

Maximum transparency for you
We ensure maximum transparency for you. Do you know what the terms issuer, retention or bond exactly mean? Whenever you make a decision regarding real estate and investments, you will come across technical terms that are not always easy to understand. That's why we have prepared the following collection of knowledge for you. This provides you with a summary and explains the most important industry terms. Simple, direct and transparent — as with our investments, we want to make it easy for you to obtain specific information on the subject of real estate and investments. Because only in this way will you be able to make a self-determined and competent decision. Not only in the area of crowd investing.
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Ancillary purchase costs
Ancillary purchase costs are those costs that are added to the purchase price of a property. If the costs amount to up to 15% of the purchase price, they should not be neglected in the calculation. In principle, ancillary acquisition costs consist of the land transfer tax, the notary and land registry fees as well as any brokerage fees that may have to be paid. The real estate transfer tax rate is not uniform in Germany and varies from state to state in the range of 3.5 - 6.5 %. The absolute amount of this tax therefore depends on the assessment basis, i.e. the value of the property. Next on the list are notary and land registry fees. Since purchase contracts in Germany must be notarised and a corresponding entry must be made at the land registry and tax office, the appointment of a notary is essential. The costs for this amount to approximately 2% of the purchase price. If an estate agent is also commissioned, additional costs will logically be incurred. The brokerage court is not regulated by law and depends on the region, the property itself and the current market situation. In principle, however, a level of 3.5 - 8 % can be expected here. In addition to these main components, travel and travel expenses for acceptance, consulting and viewing appointments can also be incurred. The consultation or commissioning of experts also generates costs. For example, such experts examine the property thoroughly or accompany construction and renovation measures. In most cases they are charged by the hour, but a lump sum can also be agreed.
BaFin
BaFin is the abbreviation for “Bundesanstalt für Finanzdienstleistungsaufsicht“. It is the German regulator for the financial services sector. With headquarters in Frankfurt am Main and Bonn, the main objective of BaFin is to ensure a functioning, stable and integral financial system. BaFin operates in the public interest and, with its market supervision, enforces standards of conduct that maintain the confidence of investors, bank customers and insurance holders in the financial system. BaFin supervises and controls banks, financial service providers, insurers and securities trading in order to ensure fair and transparent conditions in the markets. It also ensures that listed stock corporations and their shareholders comply with their publication and prospectus obligations. Market manipulation, insider trading and other risks to the German financial system are identified and limited at national and international level. In this way, BaFin creates stability and trust. BaFin`s areas of activity are divided into so-called operational pillars: Particularly in order to combat money laundering, credit institutions are required under Section 24c of the German Banking Act (KWG) to maintain an automated retrieval system for account master data, which BaFin can access at any time. In analogy to banking supervision, the BaFin, as insurance supervisor, monitors insurance companies when they commence and maintain their business activities on the basis of the Insurance Supervision Act (VAG). BaFin ensures the functionality of the German markets for securities and derivatives in accordance with the German Securities Trading Act (WpHG). This includes in particular the prevention of insider trading and other cases of abuse. BaFin is financed exclusively by fees and allocations from the supervised institutions and companies and is therefore independent of the federal budget. Various committees support, advise and monitor BaFin in its work.
Closure statement
The declaration of completion is important for owners of residential property, among other things, if they wish to sell it. The certificate or declaration of closure is important for owners of residential property, among other things, if they want to sell it. However, such certificates do not necessarily mean the sale of a residential property or its conversion into condominiums. First of all, the certificate is an instrument for defining residential property more precisely in terms of space. The owner of residential property can use such a certificate and its entry in the land register to ensure clearer relationships with regard to his or her ownership. Such a certificate/declaration states that all apartments in a building are identified by numbers and are completely separated from each other in terms of construction. If these criteria are met, the certificate of completion declares that each apartment can be considered a self-contained and independent unit. A declaration of closure can be issued following an application by a property owner. The legal basis for such a declaration is provided by § 3 paragraph 2 and § 7 paragraph 4 of the German Condominium Act (Wohnungseigentumsgesetz, WoEigG). The certificate is only valid for living space or for all premises that serve the purpose of housekeeping (kitchen, bathroom). A room within the apartment that is permanently used as an office is also taken into account. Anyone planning to construct a building in which condominiums are to be built is well advised to act with foresight. As early as the planning stage, care should be taken to ensure that the individual apartments and also the special property (garage, cellar, bicycle and pram room, hobby room) meet the criteria for a declaration of closure. Otherwise there may be high costs for structural improvements later on, which can be saved by good planning. The following is recorded in the declaration of closure: - Which flat it is - That the apartment is lockable - That it has at least one WC and one bathroom - That there is at least one kitchen/kitchenette in the apartment - Is separated from other residential property - Has a separate access to the outside or to a staircase This information legally transforms a dwelling into a clearly demarcated, completely self-sufficient housing unit, about whose size and independence there is no doubt. The owner can thus sell the apartment more easily than if there were disputes about where an apartment begins structurally and where it ends. Together with a partition plan, the certificate of completion is a prerequisite for dividing a building into condominiums or partial ownership.
Conveyance notice
A priority notice of conveyance is usually a provisional legal means of securing a right in German real estate law, i.e. the area of law which regulates legal relationships relating to real estate. The right in question here is in particular the right of ownership of a property or a right equivalent to property. The priority notice of conveyance is often linked to the fulfilment of certain conditions, such as the payment of a sum of money. It protects the right of the beneficiary, provided that he has fulfilled his obligations. The priority notice of conveyance is a special type of priority notice, which is to be understood as a registered means of security in the land register. The priority notice is regulated in the property law of the German Civil Code (BGB) and can be found in the paragraphs §§ 883 - 888 BGB. By entering a prior notice in the land register, the beneficiary is entitled to a change in the land register. This may be a deletion notice or the conveyance notice considered here. In practice, a priority notice of conveyance is only entered in the land register of a real estate by means of a notarial deed and the associated assignment of the land registry. Once the entry has been made, the beneficiary of the priority notice of conveyance, for example a house buyer, has the right to dispose of the property. From a legal point of view, this is to be distinguished in Germany from the relationship under the law of obligations, which results from a purchase contract, for example. German civil law separates, so to speak, the law of obligations and property law from each other. In this respect, it is advantageous to secure the right in rem in addition to the (contractual) regulation under the law of obligations. In addition to the regulations from the law of obligations and the law of property, the regulations from the Land Register Code (GBO) are also important for the registration of a priority notice of conveyance. As a rule, priority notices of conveyance - as described above - are used to secure the purchaser`s claims against third parties. In reality, this safeguarding protects against claims from a forced sale, for example. If the original owner suddenly or unexpectedly becomes insolvent after the conclusion of the purchase contract, the creditors of the original owner may, under certain circumstances, demand the compulsory auction of the property that has actually already been sold. The claims of the purchaser could be protected here by a priority notice. During the notarial recording of the contract and the associated registration of the priority notice of conveyance, fees are naturally incurred for the notary and the land registry. However, these are usually relatively low. If one adds possible commissions for an estate agent and the real estate transfer tax, however, in practice costs of at least 10% of the purchase price are expected. If the original owner unexpectedly disposes of the property and the future buyer suffers disadvantages as a result, the decisive factor is when the notice of conveyance became effective. The effectiveness of the notice of conveyance is only given when the requirements from the contract (e.g. purchase contract) are fulfilled and the notice of conveyance has been entered in the land register by the notary and the land registry. In this respect, the real estate buyer is interested in a speedy processing of the registration in the case of a transfer of ownership or a house purchase.
Crowd Investing
At the core of crowd investing is the investment in individuals, groups or projects. In return, the so-called "microinvestors" (crowd) receive shares in the respective company or project. If the company or project is sold at a later date and generates large profits, the investors can profit financially from their investment. Moreover, thanks to the small size of the investment, private individuals can participate in the crowd investing process without taking a disproportionate economic risk. Nevertheless, it should not be forgotten that crowd investing is still a form of venture capital, which does not necessarily have to yield a high return. Similar to crowdlending, the risk of the model is that, in the event of a loss, the entire assets of the investment will be lost. Losses include failed projects or companies that file for insolvency.
Diversification
Diversification refers to the spreading of the price risk of financial products. In principle, every financial product is subject to a price risk, as it is impossible to predict with certainty how the change in value will behave in the future. There is therefore the risk of incurring losses if the price trend is negative. The idea of diversification is now to spread this risk over several financial products. For example, in a stock portfolio consisting of several different stocks, the price risk is therefore lower. This is because, on the one hand, the loss caused by a fall in price is less significant in a large portfolio. On the other hand, it is possible that the price of another share in the portfolio might rise, for example, thus levelling out the losses. The risk is thus spread over the number of shares in the portfolio. The correlations between the individual stocks are important for diversification. A correlation refers to a mutual relationship between two securities. In principle, such a correlation can be of varying strength and of a positive or negative nature. A positive correlation is said to exist when, for example, the prices of two different shares move in the same direction (both prices rise). In the case of a negative correlation, the prices go in different directions (one price rises, the other falls). If the portfolio now contains stocks with exclusively positive correlation, a cluster is formed. This is because the correlation increases the negative effect on the share prices and the prices fall even more. A diversified stock portfolio therefore consists of negatively correlated stocks. Here, the different share price movements can balance each other out and thus minimize the risk.
Dividend
A dividend is defined to be the profit participation of shareholders in a stock corporation in accordance with their previously acquired shares in the form of shares. While the dividend is an absolute amount, which in Germany is usually paid out annually, the distribution yield puts the income in a percentage relation to the purchase price of the share. The distribution yield is therefore a useful indicator for investors, especially when comparing different investment opportunities. There are basically three types of dividend. Firstly, the distribution can be transferred directly to the shareholder as a credit. This is referred to as a cash dividend. At the same time, a distribution in the form of additional shares is also possible, with which the shareholder`s deposit is increased. This is a stock dividend. If a company decides not to pay a dividend, this is not necessarily due to a lack of profits. Instead, it may also be a strategic decision to use the balance sheet surpluses for other purposes, such as new investments with higher returns expected in the future instead of an immediate payment of the dividend. Whether and how the dividend is ultimately paid out depends on the respective corporate policy.
Existing property
A property which has been completely built and has been used for some time is called an existing property. It differs from a newly built property in that it is much older. However, even a newly built property becomes an existing property over time. This can be explained by the life cycle of a property, also known as the lifecycle, which divides a real estate project into the phases of planning, realization, use and exploitation. While the first two phases are the planning and construction of the property, the utilisation phase is the main life cycle of a property, in which a new building becomes an existing property. This is because a large part of the total life cycle costs is invested here, as existing properties in particular need to be renovated and modernised due to wear and tear. The utilisation phase is followed by the realisation phase, in which the property can either be demolished or revitalised. Especially for small investors with little capital, existing real estate can be worthwhile. This is because their purchase price is often lower than that of newly built properties. Furthermore, the selling price of the former can rise quickly in times of a property boom, provided the property is in a good location and in good condition. Most of the properties near the city or in the city centre are existing properties and are therefore particularly attractive as they have a good infrastructure. From a tax point of view, investors can benefit from the so-called speculation period: This stipulates that private individuals do not have to pay tax on the capital gain from the property if it is sold after ten years. If it was used privately in the year of sale and in the two years before, the capital gain is always tax-free. Commercial persons, on the other hand, must always pay tax on the capital gain.
Fungibility
Only fungible financial products can be traded on the stock exchange, such as shares and bonds. Fungible goods, commodities or other trading objects are defined as those that have the property of being easily exchangeable, replaceable or arbitrarily usable. This applies to securities such as shares and bonds or foreign exchange. All securities of a class have the same characteristics with regard to their nature. For example, shares are interchangeable with other shares if they have the same number of units, a single issuer and identical rights and par values. For example, if a securities account holder wishes to transfer 30 bearer shares of AG X to another securities account, the bank can transfer 30 arbitrary bearer shares of AG X from the collective custody for all creditors. It does not have to assign exactly these 30 shares to a securities account in a binding manner. The economy benefits from fungible securities because they ensure smooth trading on the stock exchange. This enables the stock exchange to fulfil its function as an economic barometer. Fungibility is what makes markets function. Objects or securitised rights can be transferred from one owner to another without any problems and reasonable prices can be achieved. Standardisation and the definition of formal requirements ensure that the goods and securities can be traded several times at high speed within a certain period of time. The exchange of goods and capital on the markets contributes to economic value creation. Due to its specificity and high degree of uniqueness, one property cannot be exchanged for another without further ado. Closed-end investment funds, dormant partnerships and other corporate investments have a high fungibility risk. These investments can only be sold under predetermined, highly restrictive conditions. There is therefore no fully functioning market for these investments. Investors can at most sell them with a time delay and are forced to accept potentially high discounts on the secondary market. As a rule, open-ended investment funds are permanently tradable, but this can be limited by the capital management company. If an investment fund contains non-fungible properties, this may result in the temporary suspension of redemption of fund units and investors may not be able to dispose of their money. The transferability of investments may also be made difficult by high legal hurdles. The state has made the transfer of properties subject to strict formalities, such as a written contract, notarisation or entry in the land register. The same applies to other financial investments such as bank deposits or shares in partnerships.
Investment properties
Many people cherish the great dream of owning their own home: their own house in which they can live for the rest of their lives, for which they do not have to pay rent and which they can bequeath to their children. For many, the term real estate is closely linked to this dream, but it goes far beyond the form of owner-occupation. Another possible use for real estate is to use it as an investment or investment property to earn money. A comparatively new and growing offer for direct capital investment is crowd investing for real estate. Here, small investors can invest in selected real estate projects, which are offered through specialized crowd investing platforms. In detail, this can be a new construction project, but also the revitalisation or refinancing of existing properties. Five points make this innovative form of capital investment so interesting for the broad mass of private investors: - Direct access to attractive properties: The investor decides for himself and knows exactly what his money is used for. - Low minimum investment amount: Direct investments were previously associated with high minimum investment amounts in the five-digit range - Crowd investing enables access even with small sums. - High transparency: A large amount of information about the project, the developer and the financing structure gives investors a particularly good overview. - Attractive returns: Due to the lean online processing and the elimination of high administrative costs, capital can generate higher returns. - Simple investment: Investing via an online platform is possible with just a few clicks; all contracts are concluded online in a legally compliant manner. What is generally appreciated about real estate is its relative stability of value. Although real estate markets can be very volatile, developments are usually slower than on the stock market, for example. Even the bursting of a real estate bubble is in most cases announced by its emergence. Real estate is tangible; it is not a theoretical interest in or right to something, but real objects. In addition, unlike precious metals or the like, they have not only an abstract but also a concrete value, for example the possibility to live in them. The combination of this advantage and the stability of value mentioned above is also not a matter of course. In contrast to real estate, cars lose a good third of their value within the first year after factory delivery or sale. The direct investment in real estate often has the disadvantage that one cannot spread one`s investments well with little capital expenditure. Therefore, one may under certain circumstances "put all one`s eggs in one basket". The problem with funds is the other way round: Since you do not manage them yourself, you have no control over how they are managed and are less able to assess developments. In addition, some funds have the characteristic of being traded on the stock exchange. Although this is not a disadvantage in principle, it can become one, as it takes away another piece of value security: The price and thus the value of the shares is more flexible and is determined not only by the volume of the fund but also by the demand on the stock exchange. As a result, the investor has less security, as there may also be more rapid losses in value. Crowd investing for real estate offers unique advantages here: In contrast to the above-mentioned offers, there is the possibility of both investing directly in real estate and, with a small capital outlay, spreading one`s investment across various projects, thus ensuring the necessary diversification.
Issuer
The buyer of a share is defined as an investor and benefits from the success of the company in the form of interest or a dividend. The issuing of securities - such as shares - enables an economic entity to raise money for investments or to increase its equity. By issuing shares, the company becomes a stock corporation. Usually the issuer is a company, but states or central banks can also act as issuers. The issuer`s obligations to the investor, which are laid down in the Stock Exchange Act, include the provision of important information by the management and the publication of the balance sheet, annual report and other interim reports. The shares can be issued by the stock corporation itself (self-issuance) or with the help of a bank or a consortium of banks (third-party issuance): In the case of self-issuance, the issuer takes over the entire issuing process in its own name, bears the full issuing risk - i.e. ensuring the successful placement of the entire issue - and is responsible for the complete processing itself. This process requires a great deal of expertise and is therefore usually reserved for credit institutions. A third-party issue, on the other hand, is when a bank or consortium of banks carries out the securities issue, and the bank also has an accompanying and advisory function. The third-party issuer - i.e. the credit institution - then acts as the first buyer and assumes the issuing risk, and a commission is payable for the company. This distinction applies regardless of whether the issue is made on the stock exchange or over-the-counter. A prerequisite for the listing of an issuer is that the market value of the shares must be at least € 1,250,000 or 10,000 shares. Furthermore, the company must have been in existence for at least three years. A further requirement is the existence of an admission or sales prospectus.
Land Register
A land register of a property contains several sections in which information can be entered. While the first section always contains the owner or the person entitled to inherit, the second and third sections contain rights, burdens and restrictions. The priority notice of conveyance is entered in the second section of the land register. In reality, the rank of the priority notice is determined by the date of registration. Thus, if no other rights have been entered in the land register with priority, the beneficiary is entitled to the cancellation of all rights entered with priority which affect him.
Market value
The market value (also known as market value) determines the expected realisable sales price of a property on the entire market on a certain key date. In accordance with German § 194 BauGB, this is determined on the basis of normal business transactions, without taking into account unusual or personal circumstances or emotional value (also affection price). Rather, it is imperative to take into account the current market situation at the time of the valuation. If the valuation takes place in a non-functioning market, for example in a circle of acquaintances, the demand is too limited and the value is automatically distorted. In Germany, the determination of the market value of a real estate is based on the Real Estate Valuation Ordinance (ImmoWertV). This regulation standardizes several procedures for determining the value. § 15 ImmoWertV regulates the comparative value procedure. According to this regulation, the market value of a plot of land is determined on the basis of as many achieved purchase prices of similar properties as possible. Location and size as well as condition are important factors here. The income capitalisation value method (§§ 17-20 ImmoWertV) is used primarily for rented or commercially used properties. The focus of this method is on the profitability of the property. The land value of the property and the net income are taken into account. The net income represents the income that can be generated from the property at normal market conditions less the operating costs. Alternatively, the asset value method (§§ 21-23 ImmoWertV) is used. This method is only used if the other two methods do not produce meaningful results. However, this procedure can also be used to confirm the results. The asset value method is based on the cost of production when determining the market value. First, the land value of the property is added to the building value (normal production costs of the building assets minus the reduction in age value). The sum is then supplemented with the market adjustment factor to reflect the different real estate markets in different regions.
Payment service provider
A payment service provider is used for transactions of funds and is authorised to provide payment services. In doing so, they mainly take over the technical processing of various payment procedures such as payment by credit card or direct debit. This means that the payments are accepted, authenticated and generally held in trust using a secure account system. In most cases, a payment service provider is the third party within a purchase transaction, which handles the processing of payments and makes the work of merchants easier. Electronic payment transactions with online platforms in particular are based on precise processes that enable monetary transactions on the net. On the one hand, an online company, for example, has an interest in determining the creditworthiness and solvency of the customer. On the other hand, it is important to manage the payments made securely and to allocate the transaction to a specific customer.
Securities Information Sheet (SIS)
The Securities Information Sheet (SIS), serves as a short information brochure for investments. According to German regulation, the provider of the investment is legally obliged to have its SIS assessed by the German Federal Financial Supervisory Authority (BaFin) before it may be published. If there is no swarm financing in accordance with German law when the investment is acquired, the provider is obliged to prepare both a sales prospectus and a separate SIS for each investment, to submit both to BaFin and subsequently to make them available to the public. In this way, interested parties can obtain information about the characteristics of the investment, examine various offers transparently and compare them directly with each other. If, for example, an investment is offered online without a SIS having been prepared and checked by BaFin beforehand, this constitutes an administrative offence. Even if the SIS is not complete, a prohibition on the part of BaFin follows. In addition, a fine of up to € 500,000 must be expected.
Security Token
Security tokens are token-based assets and are clearly advertised as such. Regulatory authorities therefore treat them as traditional securities. For example, companies are required to prepare a so-called securities prospectus. Before they can issue security tokens, the supervisory authorities must approve this. The issuing of security tokens is then called Security Token Offerings or STO. So the big difference between Security Token and Utility Token is the following: While utility tokens usually serve a block-chain use case, security tokens are regulated capital investments such as company shares. The main difference to conventional assets is their token structure. This results in decisive advantages: Issuers do not need to certify tokens, and are therefore independent of settlement agencies such as Clearstream etc. Any existing security, whether it is a share, bond or certificate, can be issued as a security token. The decisive difference to a traditional share is therefore the change of medium, from certificate to token, and the switch to a block-chain infrastructure from electronic securities registers and clearing houses to a settlement infrastructure.
Utility Token
Utility tokens are digital vouchers that entitle their owner to any kind of access on a platform. In most cases, companies link utility tokens to specific services, such as the activation of functions within an app. According to the US Securities and Exchange Commission (SEC), utility tokens may not have any financial incentive. This means that the issuer may not offer investors any kind of yield.
Value enhancement
The value of a property is influenced by many factors. Especially since real estate is one of the most stable investment opportunities there is. Factors such as location, supply and demand, the equipment as well as the age and condition of the property can affect the value of a property. The location factor is divided into macro and micro location. Macro location refers to the entire city or region. This involves looking at the current economic situation and future prospects of the city. If, for example, the city gains an increase in population or creates new jobs, this has a positive effect on the macro location. The micro location is understood to be the local residential environment and the local infrastructure. The social infrastructure such as kindergartens, schools, doctors and cultural institutions also have an impact on the value of the property. The supply and demand factor on the market also affects a property. A high supply and low demand causes the price to fall, while a high demand and low supply causes the price to rise. This is often the case in conurbations. The third factor, the equipment of the property, depends on many characteristics. It is common to divide properties into a simple, upscale or luxury class. The heating system is particularly relevant. When property owners renew the heating system, the value often increases rapidly. Often the quality of the materials used is also taken into account for evaluation. The condition of the property is a very decisive value criterion. For example, particularly good thermal insulation can increase the value. Even simple modernisation of the property, such as replacing doors and windows or repairing wall damage and cracks, can increase the value of the property considerably.
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