Real estate How do you recognize a good real estate investment opportunity?

[greenieS]

Real estate is the most recommended investment, considered safe, somewhere in the middle of the spectrum of investment instruments, between government securities and deposits (safe area with minimal risks, but also low gains) and stocks and bonds (speculative area, riskier but with higher earnings).

And because it offers both security and slightly higher earnings, many of our clients would like to make an investment in real estate, and recognize "from a post office" a good investment opportunity.

How to calculate the gross Yield

The yield or "yield" obtained from renting is one of the most commonly used analytical tools for assessing the attractiveness of a real estate investment.

Analysts' opinions are somewhat divided on the minimum yield required for a property to be considered a "profitable investment". But he caught the idea that buying a home would be attractive if it offers an investment return of at least 7% per annum on rent. Basically, this equates to a return on investment in 14 years and 3.6 months.

Is this a profitable investment for you?

So how do we calculate the return on an investment and what does an opportunity look like? The variables to be taken into account will be the purchase price and the rent you can charge for the property.

Let's do a summary calculation:

For a two-bedroom apartment that has an average price of 75,000 euros, if it is located in a big city and has a parking space included, and depending on the area where it is located, you can ask around 550 euros per month. The return on this investment will be about 8.8% per year, and the investment can be recovered in about 11 years.

But this is the raw Yield! What we need to do is refine our calculation with all investment expenses in mind. This way we will find out what the Net Yield is.

How to calculate Net Yield
Here is the calculation formula:

NET YIELD = Annual Net Rent / Total Effective Investment

Annual Net Rent

Annual net rent = Gross annual rent - Direct costs - Indirect costs
Gross annual rent = Total rent received during a year (for months only)
Direct expenses = income taxes (at PF now ~ 6%) + property management (if applicable)
Indirect costs = Insurance + Maintenance + Repairs
Total Effective Investment

Total actual investment = Price paid + Related expenses
Price paid = Net amount paid on purchase.
Related expenses = VAT (if applicable) + Price of outbuildings (parking, storage, if applicable) + Furniture cost (minimum kitchen for rent) + Property transfer costs (notary, legal, agency commission, bank transfer, currency exchange) .

To find out the net yield you can get from a potential real estate investment, ask your agent for all the information - purchase price, maintenance costs, and area rentals for similar apartments to get as close as possible to reality. Base your decisions on truthful information about rental prices and the tourist potential of the area (if you opt for the second rental option).

 

[Deleted member 28127]

Most of these calculations are calculated with an expert when accomplishing any real estate buy or sell to determine the final price fixed by the real estate agency add to the buyer or the seller. Most of the countries apply VAT for such operation even if you receive the house as a gift from your parents you have to pay a VAT even more increased in case of the buy because most of the parents do as sell operation even they do not receive any dime from their children to pay lower VAT and I do not know why this is more expensive in case of gift and not buy/sell operation.

 

[Good-Guy]

Since there are a lots of real estate opportunities in the world, it would be really difficult to select the right kind of opportunity. I think this could be really hard for those who are not that much experienced when it comes to real estate business. Therefore, it is crucial to seek the opinions of people who are much more experienced than you. Apart from that, I do agree with you that you must calculate the profits and you must estimate the benefits of buying property yourself. You must calculate and properly evaluate the risks as well. The sale and purchase of property could be tricky.

 

[sincerem]

Even if we recover the amount invested after 22 years, is still a profit at the end. I believe in long term profit, and real estate is capable of bringing in such kind profit. But we need to map out plans to consider the better options to go into, and not just opting in to any one without better calculations to acknowledge the best option to choose and make consistent profit over long period of time. When it comes to real estate building is more profitable for me, because you'll earn consistently if you set it aside for lease or rent instead of waiting too long for your land to gain value.

 

[Sotherefore]

A lot of people don't even put all these things into consideration, they will just like to acquire a property in a good location may be the Urban centre and set up everything, at least if they are purchasing a property in the Urban settlement it will be profitable because of the high rate of migration of people from the rural settlement to the Urban settlement, the house can be rented out for people for money, land that has been bought some years back can be sold for profit in the Urban settlements because the value will definitely be high.

 

[cmoneyspinner]

When my late husband worked in real estate, for investment properties he looked for what was called a “bread and butter property” (usually a 3 bedroom with 1 and ½ baths, and a garage). These are single-family homes that are very easy to rent. In Texas, they have an expression called “the price of the dirt”. That means your rental property may not be in “tip top” condition, but because of where it is located, you don't have to charge a lower amount for the rent. Tenants are willing to pay because the property is located near good schools, grocery shopping is convenient, public transportation is easily accessible, etc. If you already know how to research the market value of your property to see if you're being offered a good price, then your next step is to check out the neighborhood very thoroughly. Nobody wants to rent a good house in a bad neighborhood!

 

[eldavis]

Since there are a lots of real estate opportunities in the world, it would be really difficult to select the right kind of opportunity. I think this could be really hard for those who are not that much experienced when it comes to real estate business. Therefore, it is crucial to seek the opinions of people who are much more experienced than you. Apart from that, I do agree with you that you must calculate the profits and you must estimate the benefits of buying property yourself. You must calculate and properly evaluate the risks as well. The sale and purchase of property could be tricky.

Well said, real estate is a very sensitive business and any little mistake can cost you alot, it would be best to either go through an agent or enlist the help of someone with the experience.

 

[kayode10]

There are some criteria as you need to look into before you can decide to buy a real estate properties if you don't want to lose.

Location is the king when it comes to real estate. The property you are going to buy must be at the right location so as to recoup back your investment within short time.

it is very important to also know the track record of those who want to sell the house. It is the track record that will help you to determine the kind of person who wants to sell the house.

It is important to also do due diligence and avoid emotion while dealing with the client

 

[Alexandoy]

To be frank, I have no experience in real estate investment except my first lot that I bought and later sold. Our own home is also considered a real estate investment but other than that I have no more to say. Real estate investment is only for the moneyed people because whether you admit it or not that investment for real estate is huge. You cannot invest $1,000 unless you are a stockholder only to buy stocks of a real estate developer or maybe you can put your money in scam sites but that is an exception. With recognizing an investment opportunity, you have to be careful because that is the territory of scammers. They can show you their computation to convince you to invest in their project.

Anyway, my take on the opportunity is to focus on the property and check the cost versus the potential profit within a year. That can give you a start in the assessment.

 

[Setho]

If you will want to invest in a couple of real estate investment then there are some things that you should not miss checking them out. The most important thing is to check how valuable that property is going to be in the next few years. As a real estate agent or as a property owner you are definitely not going to want to buy a property that you will not be able to sell in the next future or even if you want to sell you will be forced to cut at a loss. You should also check how close the facility is to social amenities like road and water supply