If you want to invest your money for the long term, you usually go for the purchase of a property.
However, there are some things to consider here, as not every investment property is lucrative and generates rental income. Because just for a good yield numerous factors are important, which means that investors must calculate correctly, in order to be able to find the suitable investment real estate.
At its best, an investment property can provide a long-term and lucrative source of income. For this to be the case, the purchase must be planned precisely and calculated correctly. Location factors are just as important, as well as the structural condition.
Finding the right investment property
A location with a future is the perfect choice.
A region or. An area where unemployment is low and the population is not shrinking is preferable. In addition, the property should not be located in a disreputable street and should have good transport links as well as contemporary floor plans. Furthermore, it is important to find out in advance which renovations are necessary, how outdated the building services are or whether there is any structural damage. Another point is the energy saving ordinance, which prescribes certain renovations. This could also become a cost trap.
Problem tenants who may be living in the building can also become problematic. This means that close attention should be paid to ensuring that there are no rent arrears and that any legal proceedings have to be conducted.
All these points must be taken into account when choosing the right investment property, so that the property does not become a cost pit. DWH Deutsche Werte Holding AG can be of assistance in this regard. The company has not only set itself the goal of fully integrating real estate companies, but also offers corporate investments. In addition, DWH has a competent team of lawyers, bankers and, of course, economists who can act so perfectly.
The rent multiplier provides information about the real estate price
As soon as an investment real estate is found, the economic efficiency should be examined naturally. Whether the property is cheap or expensive can be roughly calculated by the rent multiplier.
Multiplier = purchase price / annual cold rents
Example: If the investment property costs 500.000 euros and yields 25.000 euros in rent, the multiplier is 20. This figure is calculated from the fact that with 20 cold rents the purchase price would be covered. Brings the annual rent only 12.500 euros, the multiplier would be 40.
Of course, the multiplier, which only shows gross figures, only provides a rough guide, but it should not be underestimated nonetheless.
Who would like to compute however the actual net yield, should dedicate itself to the net ratios.
Net yield (in %) = (annual rent – management costs)*100 / (purchase price + incidental purchase costs)
However, everyone should be aware that there are also numerous risks that can arise when buying an investment property.
Tax aspects of an investment property
Not only the rental income but also the tax aspects can influence the return on a property used as an investment.
For example, the interest on the loan can be claimed against tax. Repayment amounts, on the other hand, cannot be deducted from tax. The interest on the loan, however, reduces income and can thus be claimed, thus reducing the tax burden. Of course, the tax savings decrease over time, as the interest portion continues to decrease, while the redemption portion increases significantly.
Furthermore, investment properties can be claimed within the framework of the AfA, as the deduction for wear and tear. However, there are different types of depreciation.
But be careful! Anyone who leaves rental property to family or relatives at a lower price must accept significant losses of tax deductibility. In particular, if the rent is less than 66 percent of the otherwise local rent, this can only be taken into account proportionally in the AfA.
Even if you want to buy a property as a speculative object, you should remember that the taxman also earns money. For there is a ten-year speculation period, which is either observed or enormous costs await the speculator.
Speculation period for real estate
With the ten-year speculation period, the capital gains must be taxed in the year in which they are earned – at the individual income tax rate, of course.
But also the depreciations granted up to this point are considered as profit and thus also have to be taxed.
Example: The real estate is sold after some years with a profit of 50.000 euros sold. The depreciation during the holding period was 30.000 euros. This means that now 80.000 euro profit must be taxed.
To avoid this high profit should hold the investment property longer than 10 years.
Who would like itself to buy thus an investment real estate, should concern itself exactly with planning and calculation, in order to save on the one hand costs and make on the other hand also really profit. In any case, before buying the question should be asked whether you yourself would like to live in this house.
It is not a question of whether you move in, but whether you would feel comfortable in this house, the surroundings and the standard from the tenant's point of view. If you can put yourself in the position of a prospective tenant, you are guaranteed to be on the right side and can quickly determine whether the investment property is the right one.
However, if this self-test gives you doubts, you should definitely think again about whether this is really the right real estate. In case of need, the family should be asked whether they would move into the house, if you yourself may have too high demands.