Buying a house as an investment

In this article, we want to draw your attention to the importance of buying a house as an investment, with convincing reasons, useful tips, and the formula so that you can calculate that possible return on your investment.

Until the recent economic crisis, one of the traditional sectors in which any large or small saver of our country – invested with the security of obtaining a guaranteed income – has been the purchase of properties.

But during these last years, and with the fall of the prices of flats and premises, many have come to raise if it really is profitable to buy a property as an investment.

From DeLuxEstates, we are going to explain a few reasons why today it is very interesting to invest in housing or other types of properties.

4 convincing reasons to buy a property as an investment

Profitability as investment product:

From the financial point of view, when we make an investment, this should be translated into results that provide the best and most secure profitability. Well, to the positive numbers of the annual statistics for 2016, since the beginning of this year, the figures provided by different sources of the sector continue to add positive points regarding the annual profitability offered by properties, premises, parking spaces and real estate and offices facilities, which fluctuate between 5.3 % and 8.5 %.

As you can see, we speak of percentages much higher than those offered by other insurance products such as the ten year benchmark bonds, which offer a return of 1.4 %, or the fixed term of banking products that at most offer 3 %.

In the big cities, premises, offices and garages, the properties are giving the best returns.

Specifically Malaga is one of the cities that heads the list of rentability rent per property that stands at 6.8 % per year, according to recently published by one of the most important real estate portals in Spain.

If you want to get the highest profitability safely, the option to buy for rent offers you the best possibilities.

Enriching the heritage:

Purchases of real estate for investment have meant in recent months 28 % of total sales, according to data provided by Banco de España.

When well-known entrepreneurs such as Amancio Ortega and his team of advisors invest in brick, a large part of their profits for two years, it seems to be a clear sign that directs where to direct the money to obtain profitable investments.

If you have good financial possibilities, and want to obtain a good and safe rentability, the experts advise investing in properties between 150 and 180 meters in central areas or residential developments, well valued cities, offering security, comfort and services to potential tenants.

The houses with more meters have a lower demand, and below the mentioned meters the profitability is reduced.

A good conjunctural moment to buy real estate

The good moment still offered by the real estate market, coupled with the gradual opening of credit, is a compelling reason to buy a house as an investment to obtain profitability, as if it is about acquiring the usual house at the same time as it begins to generate wealth.

On the one hand, there is the recovery of sales that have been increasing steadily for more than two years, and although you can still find bargains, the figures that closed last year, according to the National Statistics Institute, is a percentage increase in the price of homes by 4.7 %, a trend that consolidates in the first quarter of this year, which pushes buyers to take advantage of the latest opportunities, until they are exhausted.

On the other hand, and although the number of guarantees required by banks when granting mortgages has increased, credit gradually flows back into financial institutions.

Efficiency, cost:

If you are looking for a house to make it your usual home, or to set up your business, you have to know that rental prices continue to maintain a trend well above the increase, compared to those raised by the buying and selling market, you must add a possible contract review that in a short space of time will imply a safe rise.

Doing one’s sums, and if you have enough savings to consider a purchase, do not hesitate, and go for one of the many opportunities that can still be found to match your needs and budget.

This option is really affordable for any saver that has a minimum of 20 % or 30 % of the capital in hand, over the total price of the chosen property, and a mortgage repayment capacity of 40 % over the total monthly fixed income.

In this way, you will begin to guarantee a small heritage, instead of watching how your income disappears month by month without obtaining a tranquility for the future.

In this sense, all the experts recommend to make a first acquisition according to the available budget, choosing homes of between 40 and 60 meters, occasionally if it is new or second hand, whose rehabilitation can help to balance the figures more, for later, maybe to consider other possibilities.

Do you want to know how to calculate the profitability of your investment when buying a house?

Here’s a simple formula to know how profitable your investment is:

First you have to divide the possible price that you could obtain for the annual rent, between the price that you are asked for the purchase, and multiply it by one hundred.

For example, if the sale price is 350,000 euros, and the monthly rent that you intend to obtain is 1,200, the profitability would be:

12 x 1,200 = 14,400

14,400 : 350,000 = 0.041

0.041 X 100 = 4.11 % profitability.

Tips on buying a house as an investment

To invest successfully in housing, it is very important to perform a good analysis, studying well the growth expectations of the area in which you plan to buy, and their real possibilities of revaluation.

Therefore a good relationship between the most attractive price and the possibilities for revaluation must be established.

The possibilities of price negotiation are always very limited in central and very attractive areas in which supply is scarce, so it may be a good option to resort to the search in residential areas with a high potential for revaluation, because of its location, proximity to important points of collective interest.

Another important point when purchasing housing as an investment is to take into account another series of expenses that can influence both the annual amount to be reimbursed, if acquired with mortgage, and in the case of calculating the final profitability obtained, if it is an acquisition for your lease.

We refer specifically to the expenses added to the purchase such as property tax, community of neighbors or works, all expenses that can vary the figures, and you must know and value from the outset.

We also believe it is very important to recommend that housing purchased as an investment to be leased should be in the vicinity of the investor’s residence, since its management is more profitable and comfortable in that it does not require large movements or the obligatory contracting of third parties – deal with possible incidents, signatures or contract expirations.

If you want a more personalized advice to buy an investment house in Malaga or Costa del Sol, DeLuxEstates puts at your disposal all our experience as professional experts in the real estate world.

 

 

 

 

 

Posted on 10/05/2017