Is it profitable to buy an apartment or house for sale in Islamabad ? Does it compensate to put the savings of a lifetime in a flat?
Investing in a flat to rent will be one of the possibilities that many investors consider in the next year.
So you can advise your clients with knowledge of the cause, we wanted to analyze the profitability of the rental.
Buy a flat to rent: Profitability, under review
The first deduction that a stranger to the profession could make is that the lower the purchase price, the greater profitability. Nothing is further from reality. There are areas with very low prices in large cities that, precisely because of their shortcomings, make them unattractive for rent.
If any of your clients falls into this error, let them see that the area is always important, and not necessarily a cheap home is the best to invest we recommend considering Faisal Hills.
Which typology is the most interesting
It is also a very typical mistake to think that smaller homes are the most profitable. According to a data analysis, the most attractive typologies from the point of view of profitability are those between 180 and 250 m2. Above, profitability falls, and below, demand is scarcer.
However, the profitability of a home will depend (and much) on the area in which it is located. For example, in the city of Madrid, not the entire center is attractive. There are micro-areas where the rental profitability almost reaches 3.7%, while in other borders, it can fall to 2.15%.
How the profitability of a rental is calculated
The opacity of the market makes it difficult to have real-time data on the profitability of the rental. However, you can follow this little formula to know it:
Divide the annual money obtained by the rental of the home by its sale price. Thus, for example, if the house is rented for 12,000 euros per year (1,000 euros / month) and is worth 240,000 euros, it offers a gross return of 5%.
(12,000 / 240,000) x 100 = 5%
However, this formula leaves out a multitude of expenses that must also be taken into account, such as the share of the community of owners, the IBI, income taxes, possible home repairs, insurance and much more. .
Not forgetting that between tenant and tenant the house may be empty and therefore there is no income.
What profitability is adequate?
If we take into account the different scenarios of financial profitability, the figure may vary. The fixed term (which offers up to 3% in the best case), is not the same as the variable (with its risks, but which can reach up to 25%). In addition, we must not forget that there are expenses associated with the rental of a home, such as the necessary energy certificate, mandatory to buy or rent since 2013.
In any case it is considered that the purchase for rent has the extra added that enriches the assets of those who own it. And if not to tell personalities like Amancio Ortega! The owner of Inditex has invested a significant part of its 2015 earnings in brick.
Finally, note that the political changes we are experiencing will influence purchasing decisions. Even if the general budgets already approved are respected, there may be changes in the legislation that affect the interested parties.