If you are thinking of investing in property you will have to cross- examine and process a lot of different information so that you can make the right choice. The proper combination of information and research will make all the difference between a “good” investment and an “incredible” one. You cannot rely on the old philosophy of investment being solely on the “area, area, area” You have to calculate the return of your investment and further ask yourself whether the risk that you are taking (in the event of a loan) is worth it. Is the return of this investment greater than maybe another type of investment?
The return of an investment is calculated by taking into consideration a year’s monthly income as well as the long term increase in property value
MONTHLY INCOME AND PROPERTY VALUE INCREASE
How can you calculate the rent you would earn before you buy a property and how can you calculate the value of a property in 5 10 or 15 years from now, and take the right investment decision? Even more crucial is the way you will analyse and estimate all this information. A method to calculate the efficiency of a property, is the following:
Cost of purchase 380,000 Euro
Yearly rental income 32,000 Euro
Percentage of return 8,5%
8,5% annual return is surely better than that what you would of gained if you had deposited your money in a banking account. This however is a very unsophisticated
thought and can lead to a bad investment of our capital.
Having examined the annual return, however we must keep in mind that the profit does not go into our pocket. From this amount we will have to pay taxes and perhaps expenses of maintenance of the property.
Cost of purchase 380,000 Euro
Yearly rental Income 32,000 Euro
Approximate Annual taxes 11,000 Euro
Yearly maintenance cost 1,500 Euro
General expenses 500 Euro
Net Annual income from rent 19,000
Net yearly return 5%
The 5% net annual return is a little more than what you would have got if you had deposited your capital in a closed banking account. Does this mean that our investment possibly isn't very good? If we believed that, then again we have made the wrong calculations. Besides the yearly rent income we were supposed to calculate the increase of value of real estate as well, in order to see that your investment is in your best interest.
In other words, if we decide to sell our property in 10, 15 or 25 years from now, how much do we expect to get? Will we have gained enough in order to constitute our investments purchase on an average annual basis
What properties will be commercially coveted when we decide to sell. Does our investment property fall into this category? We have to predict the future and the tendencies of the real estate market in order to invest property, because our investment is a long term one.
Tampaki Properties agents have for the last 5 years been active in the most developing markets of the world and they know the developments very well, they know the tendencies and future of the real estate market. We are the only consultants that can advise you properly and professionally.