Learn how to calculate the profitability of your real estate investment
If you invest your money in stone, you chose real estate as an investment to supplement your income and you want to calculate your income to assess your investment, you want to know if your investment is promising or not, but you do not know how to make these calculations, you are on the right article, we will show you how calculate the return on your real estate investment.
How to calculate the return on your rental investment ?
The calculation of your gross rental yield
This amount is important to calculate when you are looking to know the full cost of acquiring your propertyThis consists of adding the cost of purchase of your property with the amount of notary fees, as well as the price of work if you have planned to make some renovations in your new home, it will make you calculate the totality of your expenses to acquire this property, another term: the investment cost.
The formula for calculating your gross yield
The rental price of your property throughout the year / the purchase price of your property. To get a percentage, you need to multiply the rental price of your property x 100,
This result represents the percentage of profitability of your investment, it will allow you to know the rate of rents generated by your investment, this percentage does not represent the final rate of profitability, because this amount will have to decrease, you will see it decrease because of the charges and taxes that you will have to pay afterwards.
How to calculate the net return on your real estate investment?
To get the net rate of return on your investment, you need to calculate your accumulated expenses and taxes from your real estate investment, you will add them to the acquisition amount, this amount is the net profit generated by your real estate investment.
Calculate the profitability of your investment with the Larcher method
This method is used to calculate the return on your investment in a very precise way, without passing by the old method which one presented to you above, this method consists in calculating the amount of profitability, it is not on a duration of hiring of 12 months, but that of 9 months, this change is operated, because studies approved that the loads and the taxes represent 25% of the amount of hiring of your good, i.e. the equivalent of 3 months of hiring, you will find a percentage closer to the net profitability of your investment
The benefits of your real estate investments
We are going to present you some examples of housing that will be able to generate some benefits.
This type of housing pays the most than other types of housing, in general, it is the type of apartments most sought after by the largest number of profiles that seek housing, it is the kind of apartments that are rented throughout the year, but the only drawback is the short duration of rentals, generally, it is a temporary solution to tide you over, this frequent situation requires an effort of rehabilitation at each change of tenant, which will make you lower your rental yield.
Houses or apartments of type F4/F5
In terms of metrage, this type of housing is not the most buoyant among the others, but in terms of stability and change of tenants, it is rather stable, because the profile of tenants is generally families and generally the duration of rentals are almost long, another advantage is that of maintenance, these families who rent these houses for a long time preserve these homes, so when changing tenants, you will not have to make long work of restoration.
The apartments of type F2/F3
This profile encompasses the advantages of the other two types of housing mentioned above:
reasonable rental period,
not too many refurbishments.
This type of housing is the most suitable for investment, the risk rate is correct and it is a good investment initiative.
It can be distinguished that the reasons for the decline in yield are:
the location of your property,
the poor marketing of your property,
the poor condition of your property.