According to the profitability report on property rentals, prepared by the real estate portal Idealista, the gross profitability of the purchase of a home as an investment for rental has grown slightly in Spain during the third quarter of 2019 compared to the same period last year.
This return on investment in housing for rental stood at 7.5%, compared to 7.4% a year ago, maintaining the upward trend that began in 2015. Since that year, the average price of a home has risen by around 12%.
Compared to other investment vehicles, such as sovereign bonds, the return on this investment in rental housing is notoriously higher. Thus, the 10-year Spanish Government Bonds are at approximately 0.2% return, compared to 7.5% of the investment in housing for rental.
Currently, the terms for mortgage loans for real estate investments are very favorable, if we compare them with previous years, and with low interest rates that help to maintain this high profitability.
There is no doubt that all indicators show that this is a good time to invest in housing for rent, although we recommend always doing so with caution, especially in the case of small investors.
Among other advantages of investing in housing for rental we can highlight that: 1) it is easier than investing in an investment fund or buying shares, 2) it is a physical asset that we can also enjoy, 3) it has low volatility because the already unlikely price-dropping i is always less abrupt than droppings in other markets and, finally, 4) because it is a source of recurring income that generates income each month.
Knowing the market when buying a home as investment is essential. Our advisors are perfectly familiar with the Costa Blanca property market. What are the best areas to invest in? What type of property is most in demand for rental? How much are they willing to pay for rent? These are some of the doubts that buyers interested in investing for rent usually ask us. Once these doubts have been resolved, they allow investors to calculate the amount and the profitability of their investment.
Mortgages, taxes, community fees, or provisions for spills or other unforeseen events are some of the elements that cannot be missing in that calculation.