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The right investment needs the right calculation models

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Due to low interest rates, more and more investors are pushing into the real estate markets. There are currently more and more offers for investors in the real estate portals. But there is always a risk involved, as is repeatedly shown.

At first glance, the property seems to be a good investment. At least this is how the offer is presented to the investor. On closer analysis, however, the yield calculation turns out to be more of a theoretical model. Because often – consciously or out of ignorance – essential factors, which must flow into the yield calculation, are ignored.

To find out which possibilities and potentials the purchase of a property brings, an investment calculation is the basis. All the necessary calculations can be carried out using three pillars: the investment pillar, the financing pillar and the operating pillar.

The investment pillar includes all costs associated with the purchase and revaluation of the property. Additional purchase costs include brokers, notaries, taxes, authorities and offices. It is important to specify these costs because the costs of the property can be written off for tax purposes. If individual items are missing, the tax burden increases. This means that the investor is penalized twice.

The financing pillar not only covers the individual loan modules, but also the respective conditions and additional costs, which may vary depending on the type of financing. In addition, equity capital is used to fully reflect the financing.

The operational pillar includes all income and costs of the property. To be able to analyze whether the investment is worthwhile, only the net cold rents are relevant. On the cost side, property management, maintenance, potential loss of rent as well as interest and repayments must be taken into account.

Whether an investment is worthwhile also depends on the possibilities that an investor has. Since it is valued differently for tax purposes, these factors must also be taken into account. And since hardly anyone can pay the purchase price in full, there are different individual conditions for loans, depending on the creditworthiness and equity.

The return often communicated in the exposés is a value that does not reflect the individual situation of the investor. Usually the real estate evenly does not carry itself, but the investor must still pay properly from his own fortune after the purchase.

If one considers a real estate investment with all mentioned factors, the communicated yield of 4.5 % often melts miserably together. However, the experienced investor will not be satisfied with this. The result can be significantly optimized. For example, by upgrading the property through expansion, renovation and legally permissible rent adjustments.

Want to make more out of your money? If you would like to invest in real estate, please contact us. We will be happy to advise you.

 

 

Foto: © Suat Gürsözlü

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