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How to get the maximum return on a real estate investment.

Posted by Michel B. on 24/08/2019

The housing market is very active and prices continue their upward trend. But the climbs are not homogeneous and go through neighborhoods. This can lead to investing in housing with the idea of ​​obtaining great benefits. We give you some tips and guidelines that you should keep in mind.

It is necessary to remember that price increases alone may not be enough. If we think about revaluation, we must add the expenses and taxes of the purchase and subsequent sale. This indicates that, first of all, you have to assess and analyze the area to see its potential rise.

How much should be revalued to obtain effective capital gains?
To reach that conclusion, the expenses and taxes of the purchase must be taken into account: VAT of 10%, if it is new or ITP if it is second-hand. And in this case it depends on each Autonomous Community (and ranges between 6 and 10%). And you must add all the costs of having a property: community fee, IBI, electricity, water, and so on.

And those of the sale, of course: municipal capital gain and pay for the profits obtained as an increase in equity in the IRPF. Having done these calculations, you will be able to know if you have really made a profit, because it is possible that, even if you sell more expensive than you bought, you do not obtain real profits.

Not worth everything when buying
This point is fundamental especially if the idea is to allocate housing for rent

What to buy and where
Taking into account all of the above, it’s time to analyze what to buy and where. The apartments in areas with good communications, good services and facilities, will be rented better than those in isolated or problematic areas. Likewise, the areas where large business centers, companies and university training centers are located will always be in demand.

What type of housing is advisable?
It depends on the objective. If we talk about typologies of 1 and 2 bedrooms, the target is more temporary. The most demanded house is between 2 and 3 bedrooms. Although we do not forget the typologies of 3 and 4, which can attract a more permanent audience. And if they are well distributed and close to university centers, they can be addressed to students.

Housing status
It is also necessary to analyze the distribution and reform needs. And at this point we must see:

It can be bought to reform, cheaper, but it is necessary that the acquisition price be low enough and the reform affordable, so that the desired profitability can be obtained.
Already refurbished For the operation to be profitable, it is recommended that the house be in good condition. If delivered with furniture, that are aseptic, not those that remain in the habitual residence or those of the grandmother.
Elevator and garage. They always add value to housing.
Additional services. Higher endowments (swimming pool, gym, community rooms, movie theaters …) allow for higher rentals. Therefore, although the purchase value of the home is higher than another that does not have these services, the profitability will be somewhat higher and will have more demand.

How to know if it is profitable?
And we come to the most important aspect of a rented home. To calculate the profitability of the gross income, the expenses of the housing must be deducted, both those associated with the sale and purchase of the property, such as the community, the IBI, the insurance, the expenses of the reforms, including the Mortgage if I had it. Obviously, all of them with a detailed invoice in the name of the owners. Because these expenses can be deducted when making the Income Statement.

And with all this, the search for the dream investment begins

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