What makes a real estate investment profitable

When investing in real estate. What makes a real estate investment profitable?  is a determining factor. We explain what return on real estate means, what forms of return exist, and what market-standard percentages are for renting out real estate. If you are considering investing in real estate, insight into return is essential.

Return on real estate: the basics

The return on real estate is the yield you receive in relation to your investment in a property. This is typically expressed as a percentage and can be calculated in two ways:

Gross initial yield (GIY): annual rental income divided by the purchase price (including buyer's costs).

Net yield: annual rental income minus all costs (management, maintenance, financing, taxes), divided by the invested equity.

Both forms provide an indication of the financial result, but the net return is the most representative of what you actually have left. This is especially true when you have not purchased a property entirely with your own funds. The costs of a rental mortgage and associated conditions affect your return.

What is a good return for your real estate investment?

What is considered a good return depends on your risk tolerance, the type of property, and the location. As a general guideline:

Gross return: 6% to 8% is considered healthy in the market.

Net return: 3% to 5% is common for marketable real estate.

The percentages mentioned above are guidelines. Factors such as the risk of vacancy or tenant non-payment determine the return achieved and therefore vary by situation.

Factors influencing the return

Various factors influence the final return on real estate:

Location of your property (supply and demand)

Rental income and occupancy rate

Maintenance costs and service charges

Taxes and tax treatment (such as Box 3)

Financing costs and interest rate

Increase or decrease in the value of the property

Anyone wishing to invest in real estate for a return must carefully calculate the real estate return in advance, including all associated costs. Also read how to calculate and increase the return on real estate for practical tips and insights.

Long-term return

A good real estate return is determined not only by rental income but also by long-term appreciation in value. Historically, real estate generally rises in line with inflation, with a positive influence on the total return.

Are you investing with debt? Then the leverage effect can increase the return on equity. Investing in real estate therefore also requires a long-term vision.

Real estate as part of your portfolio

Real estate can provide a stable return and inflation protection, making it a valuable addition to your investment portfolio. Real estate offers good diversification within your portfolio, whether through self-managed properties or an investment in an entrepreneur's real estate financing.

Further into real estate investment

Do you want to grow your assets? You can invest in commercial, residential or land through Anaya properties, where you, as the investor can get ROI.