13 Dec 2019

The main indicators to analyse real estate investment in order to obtain high profitability.


When analyzing a real estate investment and generating a return, it is important to know the indicators that will make a positive cash flow.
In this article, we are going to detail some factors that must be taken into account in order to obtain a good result.
Mortgage and home insurance.B

before acquiring a property It is important to know if it has high expenses that must be paid regularly.
• IBI (Real Estate Taxes)

Local tax that aggravates the value of ownership. Normally it is a data that can be requested before buying the house, but it can also be calculated, since the amount to be paid depends on the cadastral value (that is, the value that the city council defines for the property, multiplied by a percentage that ranges from 0.4 and 1.3% of the cadastral value. It is the city council themselves that decide, within this margin, what coefficient they apply to their local IBI.


Lease management expenses
It can be null if the owner is responsible for finding the tenants and all other arrangements. In the case of having more properties, the management of a company specializing in leases is recommended to facilitate management.


• Maintenance


It is recommended to ask the owner of the property, what have been the maintenance costs of recent years, to get an idea of the total cost, in addition, you must take into account the age of the property since the older the more rehabilitation and investment must be done.


Periodo of time that the property may be empty.


It is up to each investment to estimate how much your property may be empty, but it is recommended to consider 5% of the monthly rent and keep that amount every month until you have 3 months of mortgage and insurance covered.


• Notary and other expenses


The total investment also depends on the notary expenses and registration in the Property Registry, they will vary depending on the price of the property, taxes linked to the sale (VAT and ITP) and the appraisal expense of the house to obtain the mortgage .


In the case of being interested in making a real estate investment, it is very important to be well advised by real estate agents specialized in the industry.


From our experience and professionalism in the Balearic market, you can rely on Equus Mallorca to analyze a possible real estate investment and know, in advance, if it will be profitable in the short, medium term, before proceeding to the final purchase.