Buying a apartment to rent, will it be a good business? Many people in the world have income as income, leases . Would you like to invest in real estate?
I like to talk about business. Especially, with good storytellers and good merchants. Listening to them has rewards, like this one, Sergio’s, a good idea of how to build heritage.
Sergio risked all his capital in a double real estate business. He bought a cash department and paid the initial fee of another. The first rented it. With that money he paid the mortgage loan, maintenance costs and taxes.
Was it a good deal?
– If I had left that capital in the bank, I would not have earned what I earned. The annual rate of return was 11%. Nobody pays you silver at 12%.
If you think Sergio’s bet was a high-risk move, you’re right. It was less volatile than buying stocks or cryptocurrencies. What surprises me was his vision for the future. That business was done in a time of “skinny cows” in real estate. Today, Sergio invests heavily in housing. You know why?
Good time to buy to rent?
The indicators show several good reasons to invest. For example, the low interest rates – which will probably be maintained for a few more months -, the high demand for leases, the high expectation of appreciation and the great attention of the government on the real estate sector.
It is time to take advantage.
In general, there are two types of real estate business (in addition to buying to live, which we talk about in this article ). One, more speculative than another. The other, with a long-term vision. Like everything, it depends on your resources at this time and of course, on the adrenaline that you are able to bear.
Business in blueprints
When buying on planes you perform several operations simultaneously. On the one hand, you will have time to pay the initial fee (if you do not already have it), you support the builder in your project and you will benefit from the valuation or increase in the price – a flat property has a lower price than a fully built one.
Suppose the department has a value of $ 150 thousand. At 18 months, just before the builder finishes the building, you decide to sell. You have only paid 10% of the value of the property. You sell for $ 165 thousand. The business looks like this: you invest $ 15,000 and you have a 100% return.
The secret is to sell on time, of course, and to look for a commercial product.
Buy to rent
This is a different business. The calculation you must do is simple: the lease must pay the total of the installments of the credit and the maintenance (or much of it). You must select a property of high demand in leases . The area and the number of bedrooms is essential in your decision. Today, Cercado de Lima, Pueblo Libre, Lince and San Miguel show the best indicators of profitability in leases (above 6% per year).
Also, you must decide the total value of the property and the value of the initial fee that you must pay. These two variables are the key to doing the investment well.
For example, if the apartment you want to buy has a value of S / 350,000, it could be rented between S / 1,400 and S / 2,000, depending on the location and services.
Applying for a 15-year loan, contributing 10% of the initial fee, would mean that you must pay a monthly (approximate) fee of S / 3,130. Very high. The business is for the rent to pay the fee. Therefore, you must increase the down payment to reduce the loan amount. Or, look for a less valuable asset.
The lease will allow you to buy your assets. But there is something else. The valorization. Attention with the properties that already reached their maximum price, there will be difficult to gain a high percentage of valuation.
Suppose that, in 15 years, the valuation will present cycles of rise, stagnation and slight decrease. If you sell, you can make this account: how many times did you earn the initial investment? Eight times?
The expectations you can have when investing in real estate are good. Sharpen the business senses. Find a department that is quick to rent, quick to sell. For example, a large area apartment with only one bedroom is a dream, but it is not very commercial. A apartment with a good view, three bedrooms, close to educational centers and low maintenance costs tends to be a better investment.