Rental yield has to be right – Mannheim tomorrow

Berlin.It sounds tempting: Buy a rented condominium and finance the loan with the rent. Given the low interest rates, that seems like good business. But it’s not that simple, reports the magazine “Finanztest”. Buying a rented property is not without risk: Real estate is in great demand, but its value can fall if demand falls or if the price level falls in general. Three tips for a successful investment:

Calculating the rental yield: Whether a purchase is worthwhile depends on whether the purchase price and rent are in a reasonable relationship. Important: Not only the pure purchase price and the rents may be included in the rental return. The ancillary purchase costs also belong here. Expenses such as administrative costs or maintenance reserves must also be deducted from the rent.

Draw up an investment plan: An investment plan shows whether the business is worthwhile. For this purpose, the expected income and expenses are entered over a period of 15 to 20 years. However, the current trends should not simply be extrapolated for this. For the follow-up loan, for example, you should calculate with a higher interest rate than now. Because it is not a matter of fact that interest rates will always remain as low as they are now.

Establishing a purchase price-rent ratio: An indicator of whether the business is worthwhile is the ratio of purchase price to rent. For this, the purchase price is divided by the annual net rent. In the investment plan, the resale value should not be higher than 25. mr

© Mannheimer Morgen, Friday, January 22nd, 2021

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