Is It Worth to Buy a Property and Rent It?

by / Tuesday, 23 August 2016 / Published in General

With the prices of rent going up, one might think that it would be an excellent idea to just go ahead and invest their money in buying a property. It’s certainly tempting, and owning an apartment is not a bad idea at all. There are many upsides, including that you will be saving on rent yourself if you decide to buy yourself a property.

Some countries make it very easy to snap up an apartment. Take, for example, Ireland, where paying a bank loan would cost you just as much as you would pay for your monthly rent. All of this aside, there are many upsides of being a property owner, but the big question is – are you ready to invest $200,000 to be paid $1,000 in monthly rent?

The Economics of Real Estate Investment

Even high-fliers would need quite a bit of time to earn enough to comfortably buy a property and rent it out or post it on Airbnb. Even then, the money you will be making monthly isn’t quite enough come to think of it.

For starters, a $200,000 property that is rented at $1,000 would take 16 years to be paid off in full based on the rent alone, but in addition to that, there are other factors that you should consider as well. This includes the tax that you will be paying both on your property and your earnings, which means that you might need to round up the profit you turn a month to $800.

This will, in turn, stretch the process of paying off relying on rent alone. Here are the facts, as they are today:

  • That kind of investment is good if done before your 30s
  • You should consider it only if you can buy the $200,000 property without a loan and be able to knock off 20-30% of the original value
  • Renting profit expectations shouldn’t be based on Airbnb
  • You should assess the economic situation in the region to know if you can expect tenants or visitors to the property

It’s a tough market, buying real estate, especially if you are relying on a salary and not moving around more significant amounts of cash. Then again, investing in real estate is perhaps the surest way to guarantee yourself regular income, even though the returns won’t be that big, to begin with.

Investing for the Sake of Airbnb?

Investing in the hopes of riding the gig economy in places like Europe may now come too late. Airbnb, while an interesting platform and still very much in vogue, is now being opposed in full force. Besides, owners themselves have been reporting negative experiences themselves. In some cases, a tenant would just steal and sell the furniture overnight which results in the need of hiring a locksmith to change the locks to keep the intruder out.

In such cases, owners need can simply go to a reach engine and type “locksmith near me” to find the best one that will be capable to quickly undo the trouble caused by the mischievous tenants. With such cases being rather isolated occurrences, people still try to decide whether placing their apartment on Airbnb is worth it.

Many cities in Europe are now leading a fight against it with the main argument being that it pushes up the prices of goods and rents as well as invites throngs of tourists. In Dubrovnik, Croatia, tourists have become a real hassle for the locals and now outnumber them.

This is good economically, but then again there are the above-mentioned considerations that make it difficult to have Airbnb as a very hot option. Being a property owner in places like Dubrovnik will certainly pay off, though. Even if you charge $30 per tenant and have 3 tenants on average, that would amount to $2,700 a month, and given the city’s holiday season, this makes perfect sense.

In places like Venice and Barcelona, people have been long calling for a ban on cruise ships already. This comes at a time when cruise-going has been picking up as an activity. Furthermore, it has become quite affordable now. Spending time at sea is indeed something that many people appreciate and the comparatively low price of each trip these days means that there will be a lot of people lining up to go on escape getaways at sea.

So be sure to make the necessary checks and investigations and see if it will make your while to own, rent or maybe both.



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