Leasing real estate can make a good source of income
June 20th, 2016
The broker scandals at the beginning of 2015 and the lowered deposit rates have directed even more investors towards the housing market than before – accounting for almost 50% of the transactions on the market several times. Due to the considerably higher rental costs and the affordable housing prices, those who decide to set foot on the market in time could acquire a return rate as high as 20%. Along with the rise of rentals, real estate pricings have also become notably higher, but because of the low interest rate environment, it can be still considered rentable to invest in real estate.
To calculate the amount of achievable returns, it’s certainly recommended to examine prices and rentals simultaneously, but other sorts of expenses needed for purchasing and letting should be taken into account as well. In the city centre of Budapest, despite the bigger prices, returns are generally smaller, however, investors are keen on buying properties in that area due to the fact that those can be leased quickly and with ease. Many of them look for a location to provide a short-term accommodation service, or to participate in the Airbnb-business. In comparison, suburban areas have higher return rates thanks to the lower buying prices, while a lack of potential lodgers make the process much riskier. The situation is similar on the countryside: leasing is a viable option primarily in cities that have universities – in the rest of the chief cities, a constant income is less possible because of the smaller presence of potential renters.
Buying properties with the goal of leasing them grants much higher returns compared to depositing funds, and the difference between these can grow even more in case of a possible valuation of housing. The currently available net returns are still multiples of the average deposit rates, while growing demands can cause a further rise in prices (although, at a slower pace compared to last year). It is also important to note that contrary to deposits, leasing properties cannot be considered a risk-free form of investment. The amount of income largely depends on the number of months the property could be leased for, and the ideal renter has to be found as well. In addition, the amount of future price valuation has to be estimated appropriately to decide if buying a flat or a house is a rentable investment.
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