Buying an 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? -asked.
– 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 businesses . 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.
An apartment of 80 meters, stratum 5 or 6 in El Poblado in Medellín, or in the west or south of Cali, has a value of $ 250 million. They deliver it to you with 10% = $ 25 million. Buying on blueprints makes the apartment 30% ($ 75 million) – Purchase price $ 175 million. 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 $ 200 million. 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
In Colombia Today, investment in offices, warehouses, stores are giving a higher return. These properties have monthly fees that are around 0.8% and 1.0%, while housing leases range between 0.5% and 0.6%. Although nothing in the real estate business is guaranteed, the truth is that at this time commercial real estate is producing greater profitability.
This is a different business. The calculation you must do is simple: the lease must pay the total mortgage loan installments and 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.
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 $ 150 million, it could be rented between $ 1.5 million and $ 1.7 million, depending on the location and services.
Plus Alternate expenses the monthly profit would be 35% of the value of the rent.
Administration and monthly services are paid by the tenant.
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 an apartment 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. An apartment with a good view, three bedrooms, close to educational centers and low maintenance costs tends to be a better investment.