Buying a flat to rent, good or bad idea?

Many people jump headlong into rental investment. It may seem like a good idea, I personally do it, but many people are not aware of the stakes involved.

In this article I will explain a little about how I see things.

There are many factors to consider when deciding whether or not to buy a rental flat.

Here are some things you should keep in mind:

1. Location :

Where is the flat located? Is it in a desirable area that will be easy to rent? If not, it may be difficult to find tenants and you may end up losing money on the investment. I choose my flats to rent as if I were planning to move in. This is a rule I set for myself because if I don't feel like living there many people won't like it either. It's not a true truth but that's how I operate!

2. Maintenance costs :

Be sure to factor in the cost of any necessary repairs or maintenance to the property. These costs can add up quickly and reduce your profits.

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3. Financing options :

It is important to research different financing options before making a purchase.

Is it profitable to buy a flat to rent?

The answer to these questions depends on a number of factors, such as your budget, the type of property you want and its location, among others, but also the current state of the property market in your area and the rates at which houses are selling in your area, among other factors that affect the rate of inflation, etc., which we will discuss later in this article. So let's start with what is really meant by a real estate 'bubble'.

What are bubbles?

A bubble is a period in which prices rise much faster than the normal trend.

The same effect can be seen when a stock market crashes or when there is an economic crisis, for example, the Great Depression of 1929, when many people lost their savings and many businesses were forced to close, causing severe unemployment and economic hardship for millions of people around the world, This led to a dramatic increase in poverty levels and hunger around the world, even though it was a global financial crisis that triggered the Great Depression rather than any housing bubble (although many experts argue that the housing bubble that began in 2006 was directly linked to the sub-prime mortgage crisis).

Make sure that your region is not in a bubble situation, try not to buy too expensive! That's easy to say, as this kind of situation is often difficult to detect...

Why invest in rental property?

1) It can be worthwhile to own a property, even if it is only to rent it out.

To begin with, some myths need to be dispelled:

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-Rental properties are not always safer than shares or other assets because they are much less liquid;

They do not offer good tax benefits on their income or capital gains;

-You can't 'rent' your house!

It is true that the level of risk is higher when buying a rental property than when buying a share, but this does not mean that it is necessarily worse than other investments such as property, bonds or shares, which have similar risks but lower returns.

In fact, investing in real estate can make sense for several reasons:

If you want to diversify your portfolio and add some stability to your returns, real estate offers several advantages over traditional financial products:

-Returns on property investments are stable and predictable;

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-They are generally cheaper than financial products;

-Real estate can help protect against inflation by providing an "inflation hedge", although there is no guarantee that real estate can outperform inflation at any time;

-Investing in real estate offers better liquidity and access to funds than most financial products, making it easier to sell your investment quickly if necessary;

-It is possible to earn money with real estate even if interest rates rise (as long as rents remain constant);

-Owning a rental property gives you the opportunity to become a landlord, which can bring you great satisfaction.

How to make a successful rental investment?

1- Do your homework!

As we said before, investing in rental property is not an easy task, it takes time, effort and money to find out everything about the property you are buying (lift, heating, electrical system, swimming pool, parking spaces, etc.). It is therefore necessary to research the property and its features to ensure that you are buying something that suits your needs and will benefit you in the long run! You can't expect to buy a house without knowing what it's worth and what value you get for your money or whether you should wait for a better price or not!

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The first step is always to consult the seller (or owner) of the property, who is usually a real estate agent or broker specializing in property management, to ask questions about their property and whether they have other properties like yours in the same neighbourhood or in another area that might better suit your needs! This way, you can compare their property to yours, learn more about it and see if it meets all your requirements.

What profitability can you expect from a rental investment?

How can I find out the rental yield of my investment property?

The best way to do this is to calculate the rent that would be received if your property were let on a long-term basis at the current market value of the property and the expected vacancy rate in the area where your property is located; this will give you an idea of the return you can expect from letting your property for more than six months (short-term letting). The same formula can also be used to determine the rental yield of your property over a shorter period, for example three or five years, but you must then take into account the effect of capital growth on the value of the property over that period and whether the value of the property has increased by more than the amount invested in it (and therefore not subject to capital gains tax) or not (in which case there is likely to be a gain). You should always use your own judgement to determine what is reasonable and realistic.

Where to invest in rental property?

First, you need to assess the type of rental property you want to buy: a flat or a house? This is important because if you choose a flat for rental purposes, you will not get much extra income from its sale after 10 years (although this depends on the region), as is the case with a house; on the contrary, it will be sold at a much higher price than a flat when it has been rented out for a few years (this is called capitalisation). You can also buy a building if you are interested in commercial properties, but make sure that there are no existing leases that conflict with your plans and that you know what the local laws are regarding new tenants in buildings that have not been renovated for a long time, such as tenancies in old buildings where renovations are sometimes not allowed, etc.

Another factor to consider is whether you want to invest in a specific country or abroad, depending on your personal situation, needs and budget, and of course whether you plan to live in the property yourself or rent it out.

How to invest in rental property?

What is a rental property?

A rental property is a property that provides an income to its owner or another person (usually called a tenant). If you own the property, you can live in it while renting it out, as it is not usually taxed as real estate but only as personal property, which means that it is not subject to capital gains tax if it is sold later (provided you have held it for more than one year).

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If you let someone else use the property as a home, this is considered a business activity, and the profits from this activity are taxable if you earn them by letting the property (this means you have to pay tax on the profits). You need to make sure you understand this point, as it can make a considerable difference to the amount of tax you pay!

You should also be aware that if the property is not used by the tenant for more than 6 months, it becomes a 'dead asset' and the profits from rental income cannot be deducted from your personal income.

In conclusion

A real estate "bubble" is a period during which prices rise much faster than the normal trend.

When a stock market crashes, it means that it has lost so much value in a few seconds that it cannot recover.

Rental properties are in high demand and many real estate companies specialise in renting out properties, not only in holiday resorts but also in industrial buildings and commercial offices. To take advantage of this trend, you need to have some basic knowledge of the subject. You can buy a rental property for yourself or for someone else (usually your business partner or even your spouse or children). Before you make a decision, think about which properties are best suited to your financial situation and take the advice legal and fiscal policy.

Buying a property can be expensive and if you don't ask estate agents about the property you are looking for, you can get a better valuation!

Determining the rental yield of a property is only a rough indication. Rental yields vary according to location and it is not always clear whether a property will yield a reasonable return.

Buying a property is an excellent way to generate passive income.

A rental property is a property that provides an income to its owner or to another person (usually called a tenant). If you own the property, you can live in it while you rent it out, as it is not usually taxed as real estate but only as personal property, which means that it is not subject to capital gains tax if it is sold later (provided you have held it for more than one year). If you let someone else use the property as a home, this is considered a business activity, and the profits from this activity are taxable if you earn them by letting the property (this means you have to pay tax on the profits). You need to make sure you understand this point, as it can make a considerable difference to the amount of tax you pay!