Real estate investing requires a lot of thought and analysis. Are you looking for a profitable rental property? Then you need to consider several factors, including location, price, energy performance, and property liquidity. Here are some essential tips to make your purchase a success!
1) Property Location
Location is the most crucial criterion to consider. The location of a property has a significant impact on its rentability. Town centers remain highly sought after due to their proximity to amenities such as public transportation, retail, schools, and medical centers. Many tenants look for homes in strategic locations. Therefore, downtown areas are always in demand.
However, there is something else that is important besides amenities. That is green space. Since the Corona crisis, tenants have adopted different selection criteria. Commuting distance is not as critical as it used to be, as many people work from home. As a result, properties near large cities have become more attractive.
2) Purchase Price and Rental Yield
Are you purchasing real estate as an investment? If so, it is vital to analyze the yield in advance. If the purchase price is too high relative to the rental yield, you risk making an unattractive investment.
Newly built properties are more expensive than used properties anyway since there is usually VAT tax that must be paid at the time of purchase. However, even if an older property is cheaper than a new one, it is essential to analyze the costs of renovation work (which vary depending on the property’s condition). Therefore, before purchasing an investment property, it is advisable to calculate the purchase price plus write-off costs, construction costs, overhead costs, and rent.
The formula to calculate the gross return on an investment property is: rent x 12 (months)/purchase price + writing costs + construction costs.
Do you want to calculate the net return? Then deduct property taxes, insurance, and re-rental fees from the annual rent.
Invest in a property that is in line with the current rental market.
In other words, you need to buy a property that is in demand in the current real estate market and meets the needs of many potential tenants. As already mentioned, it will be much easier to find tenants in the liquid property. In this way, vacancies can be avoided, and yield can be optimized.
4) Surface Area: Choose a Larger Building
The surface area of a building and its location are complementary. For example, it makes more sense to buy a studio in an area where many students and expatriates are looking for a small space for a short period. This also applies to furnished housing rentals, which are more in demand in the center than in other areas.
Since the Corona Crisis, there has been a growing demand for larger properties with rooms double as offices and outdoor space (terrace, garden). Want to invest in a property where the average tenant will stay longer? Then opt for a multi-bedroom flat.
Large 3 or 4-bedroom apartments were not very popular, but they have become more popular with the advent of cohousing.
If possible, investment properties with various dwelling types are naturally ideal. In this way, multiple kinds of flats can be placed under one roof.
In short, do you plan to invest in real estate in 2022? Then choose a house with nice living areas and outdoor space, close to all amenities and green spaces, and with low rent.
Let us know if these few tips have helped you and don’t hesitate to share your real estate tips with us in the comments below!