July 8, 2020
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Finance

How do you evaluate a real estate investment?

What is the rate of return on a property? In this report you will find out how to calculate the profitability of a property. You will then be able to assess whether the investment you are making can guarantee the economic return you have set for yourself.

The Right Investment for You

  • Real estate investment has always been a favorite among Spanish.
  • In the past, investment in property was considered the safest investment. Today, thanks to the market crisis and property tax (IMU) things have changed.
  • You no longer buy a property just to enjoy its fruits during the holiday periods, but you buy it to make it an income.
  • Many of our clients are owners of properties that are put to income. For this reason, very often, they ask us for help in identifying a new real estate investment.
  • To make an investment successful and profitable, however, it is not enough to make general and personal assumptions.
  • It is necessary to calculate the profitability of a property to ensure that you make a purchase that can guarantee the expected results in the years to come.
  • To do this type of reasoning it is essential to know how to correctly calculate the profitability rate of a property.

In this report we will explain why the rate of Real Estate Returns is so important when deciding to make an investment. You will also understand how to calculate the rate of return and how you will have to compare it for the choice of your property to buy.

Purchase of real estate for investment purposes

The biggest mistake that we have seen most in recent years is that related to the inaccurate choice of buying a property.Investing in real estate has the same importance as a financial investment. Like all investments, relying on chance, luck, or purely personal evaluations will not help you choose better.

When buying a property with the aim of obtaining an economic return, it is essential to make the necessary evaluations in advance. We are talking about short-term and long-term economic evaluations.

The greater the degree of accuracy of these assessments, the greater the accuracy in forecasting the real estate return

Very often, relying on real estate agents alone is not the best solution. A real estate agent’s interests are not necessarily in line with yours. This aspect, very often, is forgotten by many people, who then find themselves with properties not perfectly in line with their initial expectations.

  • What we want to say is that when it comes to real estate investment it is always advisable to verify that the property can really be a source of income, and not an expense
  • In all those cases where this does not occur, it does not make sense to continue to keep the property in your investment portfolio. This is much better to divest in the shortest time and perhaps make a new, more profitable investment.

How to evaluate the profitability of a property?

At this point you will have understood that only you, or your consultant, can objectively evaluate the profitability of the property you are about to buy.

It is true that real estate agents usually research a series of information before proposing a property to the client. They analyze, for example, the current attractiveness of the rental of the property and the potential changes expected in the surrounding neighborhood.