Residential property investment in Spain can be a good option for private investors in the short and long term, as it can offer significant benefits. When choosing a property to invest in, it is important to investigate the areas with the greatest potential for profitability using the ROI formula, as well as the costs and benefits associated with the investment, both initial and periodic. We tell you!
If you are looking to invest in real estate assets, there are several investment opportunities that could be of interest to you. Although the rental market in Spain is not at its best, buying properties to make them profitable through rentals can be a good option.
Choosing the right real estate to invest:
When choosing a property to invest in, it is important to calculate the return on investment and make sure that the property is a good investment. On average, an annual return of 4% is considered a good investment in real estate. In addition, it is essential to investigate the areas with the greatest potential for profitability and to know the risks and benefits of investing in real estate.
If you are a private investor who wants to make a capital investment in real estate, buying properties for rent or resale can be very interesting in the short and long term. Although there are risks associated with investing in real estate, you can also reap significant benefits. In our article we explain how to buy a home as a foreigner, whether you are from an EU country or not.
What are the best areas to acquire investment real estate in Spain?
Among the best areas to invest in real estate in Spain are the Costa Brava and the Valencian/Alicante coast, especially for European and English buyers. In these places, the beach and the good weather are the main attractions for international buyers.
Even so, the best areas to purchase investment property in Spain can vary depending on various factors, such as the investor's budget, expected profitability, real estate market trends and geographic location.
In general, large cities such as Madrid, Barcelona, Valencia and Bilbao tend to be attractive areas for real estate investment due to their high demand for rentals and their potential for revaluation. There are also other cities and metropolitan areas that can offer interesting opportunities, such as Malaga, Seville, Alicante, Zaragoza, and the Costa del Sol in general.
In addition, some tourist areas, such as the Costa Brava, the Costa del Sol, the Canary and Balearic Islands, can also be attractive for real estate investment due to their high rental demand during the summer months.
How is the return or benefit of a real estate investment calculated?
Whether in a personal capacity or in companies, there are some basic calculations on which to make profitability estimates before the purchase of real estate assets. The ROI (return on investment) or ROY (Return on Yield) is a formula that measures the profitability of an investment in percentage terms, calculating the relationship between the profit obtained and the capital invested.
It is calculated by dividing the property's net annual income (rental income minus expenses) by the property's market value. The result is expressed as a percentage and the higher it is, the higher the return on investment.
It is a useful tool to determine if an investment is profitable or not, although other factors such as current inflation, the rise in rates and interest or the macroeconomic background that exists at a given moment and that can be due to market changes and fluctuations.
A positive ROI means that the investment has been profitable, while a negative ROI means that the investment has been loss-making. For more accurate results, the time that has elapsed since the investment must be considered and all costs and benefits associated with the investment must be taken into account.
What are the costs and benefits to consider when calculating the ROI of a particular real estate investment?
Real estate investment entails a series of expenses and taxes, both initial and periodic, that must be taken into account when calculating the profitability of the operation:
Initial expenses include the purchase price, taxes, fees and, where appropriate, necessary reforms.
The fixed expenses include the community fee, the IBI, insurance, maintenance expenses and the mortgage fee, if applicable. Supply costs are not usually included in the profitability calculation, since they are passed on to the customer.
The income can come from the rental (fixed annual of 12 installments or tourist and seasonal) or the sale of the property. In this sense, the buy-to-rent is a good long-term investment because the value of the property remains relatively stable and it is a tangible asset that is resistant to economic crises. However, if you are one of those who wants to go as far as possible, we recommend how building rental homes can be a successful real estate investment.
Finally, the ROI can also vary depending on the purpose of the investment (rental or sale).
Why choose Buy-to-Rent as a particular real estate investment strategy:
Buy-to-Rent: Refers to the strategy of buying a property with the aim of renting it out long-term and earning rental income. This strategy is based on the idea that the rental income will cover the costs of the mortgage, taxes and other expenses related to the property, while at the same time the value of the property is expected to increase over time.
One of the most popular options is investing in flats, especially in areas with the greatest potential for profitability in terms of real estate investment. You can also consider investing in commercial premises and other real estate in Spain.
Spain is a country that, as we know, needs to expand its residential stock to respond to the growing demand for real estate. and not just for sale. The new generations, average salaries and new family needs make the rental of residential homes a new market niche in which the acquisition of properties for subsequent rental can be a great attraction if what you want is short-term real estate profitability. term. In this sense, investment in flats would be at the top of the list, a search that is also focused on the areas with the greatest potential for profitability in terms of real estate investment. The acquisition of properties with the aim of obtaining an income through its rental is therefore at this time a real estate investment opportunity that may interest you and especially if you are a private investor or this is going to be your first investment action.
And what type of real estate product to opt for?
The most appropriate types of real estate to invest will depend on various factors, such as the investment objective, the available budget, the location, among others.
Apartments or flats: These are often a popular option for individual investors due to their relative accessibility and ease of rental, especially in urban areas.
Houses or chalets: they can be a good option for investors who are looking for more space and privacy, and are willing to invest more capital. They can also be attractive for seasonal or tourist rentals.
At Safire we help you: it is important that the investor carry out a detailed analysis of the area in which they wish to invest, including analysis of market trends, rental demand, housing prices, available supply and accessibility to services and public transport. And not only that, in the case of the acquisition of homes in need of reform, they can be a great attraction that is profitable in the long term. A property that, in our case, we already deliver with a reform project included and delivered down to the last detail so that you can make the last cent of your investment profitable. Talk later?