2023-10-31 14:28:55
Real estate investment consists of investing in properties with the aim of achieving long-term benefits. In simple terms, it is about acquiring homes, premises, industrial warehouses and similar, to rent or sell them in the future at a higher price than the one purchased. In this order, real estate investment is considered an investment with long-term profitability, quite liquid, and with a very low level of risk. In general, it could be classified as a fairly conservative investment.
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⭐️ Featured mortgages
If you are thinking about investing in housing, you may be interested in taking out a mortgage, but first, to do so, it is interesting that you know what some of the most outstanding mortgages on the market:
Type of interest
3.57% TIN at 25 years
Opening commission
Does not have
Monthly fee
756,58 €
1.99% TIN the 1st year
Euribor + 0.6%
Opening commission
0.0€
Monthly fee
635,05 €
Characteristics of real estate investment
Between the characteristics of real estate investmenthighlights:
A nivel fiscal
In tax terms, real estate investment can provide significant benefits being a company, since its taxation compared to a normal buyer is significantly lower, being a great advantage when negotiating. In addition, the expenses of notary, appraisal, management, expenses in Property Registry and Tax on Documented Legal Acts (IAJD), maintenance are deductible. We must bear in mind that deductions may vary depending on the Autonomous Community in which you reside. It should be noted that, although the expenses described may vary depending on the person’s profile, the purchase amount, or the services contracted, the average extra cost price ranges between 6% and 20% of the value of the property. If we buy in cash, we will be able to dispense with expenses associated with the mortgage loan, such as the appraisal, the opening commission or bank connections. It is also important to know that, at the time of sale, the sales taxes for use will be two, the most important being the tax capital gain, and the remainder must be accounted to the corresponding city council as municipal capital gain. We will be exempt from both if the property is sold for a lower price than it was purchased. Otherwise, the first tax oscillates in a payment on the profit generated around 21%, and on the other hand, the municipal tax follows a specific formula for its calculation.
On a financial level
On the other hand, in financial terms, Real estate investment is the most relevant investment of our lives. That is, if we are not professionals in the sector, a typical family will be able to buy between 1 and 3 houses at most throughout their life. This is due to the high price of housing, requiring on average between 15 and 30 years to acquire your primary home.
Furthermore, not only will it be the most important purchase, but if we finance it, the home mortgage will most likely be the highest credit that any average person has access to.
However, if we are investors in the sector, the purchase of properties is a business that, when well executed, is, in addition to being profitable, quite safe. Brick has always been an active refuge in the Spanish economy and proof of this is the great demand that exists. In this sense, the only problem with this type of investment is the great need for capital, which is either provided with own resources or a part of it is financed in the form of a mortgage loan. This limits our leverage and operating capacity, which will also limit the margin of error in this type of investment.
Types of real estate investment
There are several types of real estate investment, although the best known are class investments:
Residential. Residential properties are those that are intended for rental, whether on a long-term or tourist basis.
Commercial. They are usually offices and premises that house SME businesses or large companies. These are rented, or sold.
Industrial. Its rental or sale occurs in a more wholesale environment than in the commercial typology, which is more oriented to the service and retail sector.
Speculative. It consists of acquiring a home, premises or industrial warehouse and keeping it idle until it is deemed appropriate to sell it.
Although it is true that real estate investments can be classified into more classes, those described are the ones that best reflect the intention of a significant bulk of investments in the sector.
Types of mortgage financing
With this, a decision must also be made that is also key during the formalization of the mortgage loan. In other words, we must choose the type of mortgage:
Variable Mortgage. This is a type of credit in which the financial institution offers a loan with a very low fixed interest rate (it usually ranges between 0.69% and 1.49%) and then adds an indicator that will be added to the initial rate mentioned. Usually, it is called as follows: 1% + EURIBOR. The EURIBOR in this case is the indicator by which a final interest rate will be applied. If the EURIBOR is at 2%, and following the previous example, our mortgage will be calculated at 3% until the next review.
Mixed Mortgage. In this modality, a series of years is combined in which the type of loan will be variable, and in the rest, fixed. Depending on the entity, there will be more or less flexibility when configuring it.
Fixed Mortgage. This product is the simplest and most conservative of those previously mentioned. If we take out the mortgage loan at 4%, that will be your reference interest rate until it expires. It does not depend on indicators nor does it undergo any change.
Therefore, the purchase and financing decision must be made cautiously and evaluating all possible factors. Choosing a real estate loan at a variable, mixed or fixed rate will mean determining that our investment is risk-loving, personalized or averse respectively.
How to correctly value a property, and finally launch into its purchase
A key aspect in our roadmap as an investor is to correctly value a property. Some of the most notable factors to take into account are:
Location. The social environment is important and that we have public transportation, supermarkets or basic services close to our home.
Size. The useful ones are those that can be used and the built ones include the space that the entire house occupies in total, including walls and pillars, among other elements.
Technical status. Architects and experts can give us an idea of the condition of the home and the quality of the materials.
Legal status. Hiring a lawyer and/or an economist may also be valid options. Knowing how to read a simple note well is a guarantee of knowing certain legal and economic aspects related to the property.
Furniture. A home with a good inventory of furniture represents a total cost saving for the investor if he or she wants to rent it immediately.
Community Features. If the home is located in a community of neighbors, it is possible that there is access to parking, a swimming pool or a paddle tennis court. Therefore, they are assets that must be taken into account in the value of the home. Of course, be careful with the community fee.
Additional items. The installations of solar panels and electric vehicle chargers are elements that, although they do not represent a great increase in value, are an asset more associated with housing.
Then, taking into account factors such as fiscal, financial and real estate valuation, it can be stated that the investment has been studied and considered with data. Furthermore, our calculated value will not only be supported by the analyzed data, but, if in the end we have hired an economist and/or an architect, they will be able to guide us on the purchase prices of the area and the property in which we are located. interested parties in question.
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