greenieS
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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).
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).