Buying a flat to rent: is it a good investment?

In recent years, with the rise of holiday home rental platforms, there has been an increase in a type of investment that consists of buying a flat to rent. Investing in a flat to rent can become a very profitable alternative as long as a series of key factors are taken into account, such as the location of the property and its quality.

Next, we are going to know when it is profitable to buy a flat to rent.

Is it profitable to invest in a flat to rent?

Investing in a rental property is profitable as long as you can afford it and assume that the investment can be recovered in the long term. In addition, it is important to keep in mind that, in order for the value of the property to be maintained and remain profitable and attractive to the rental market, you should reinvest in it from time to time, i.e., make small renovations, improvements and even repairs. Keep in mind that, even if the tenant is very careful with the property, you will always need a thorough cleaning, a change of mattresses, painting, eliminating humidity, etcetera.

How to calculate the profitability of a property?

The objective of buying to rent is to be able to recover the investment and, in the long run, to earn money, although this usually takes several years.

To know if it is a good investment to buy a flat to rent you have to take into account the following:

● Purchase price: taxes, notary fees and possible renovations or repairs.

● Maintenance: possible repairs and breakages of household appliances.

● Community fees and community repair charges, as well as garbage fees.

● Fixed expenses: insurance policy for the property, among others.

To calculate the profitability, the annual rent that would be obtained by renting the property (12,000 euros per year if the property is rented for 1,000 euros per month) must be added; and from this amount subtract the fixed expenses, in addition to the maintenance costs. For example, of this 12,000 euros per year, 1,000 euros or 2,000 euros should be set aside for maintenance.

The result of this subtraction must be divided by the initial investment (including the expenses associated with the purchase and sale, notary fees and tax payments) and multiplied by 100. To this amount, the revaluation or loss of value of the property, if any, can be added.

What type of flat is more profitable to buy to rent?

Buying a flat as an investment is a good option to increase your income as long as it is done in the right way. And one of the main factors to take into account is the choice of flats to invest in.

It is necessary to consider that luxury properties, although very profitable, are more difficult to rent, so it is better to invest in properties to rent that can be adapted to a more general public.

Very old properties are not usually a good alternative either, unless the cost is minimal, since they require a higher investment to fix them up and the rental cost tends to be lower.

Where to buy a flat to rent in Spain?

For a property to be profitable it is necessary, in addition to having sufficient income to buy it, to advertise it and maintain it, and to bear in mind that the speed with which it is rented depends on its location. In big cities it will be much easier to rent the flat, while in towns or holiday destinations the demand will be higher in holiday periods.

Although vacation rentals have the attraction of being able to be rented at a higher price, keep in mind that this is a one-time income and will only occur in the summer months; while a long-term rental, although it may be less in quantity, is something fixed.

Buying a flat to rent in Madrid

Buying a flat to invest in Madrid is one of the best options, since according to the real estate market in the capital, although the purchase cost is higher, it will be easier to rent it more quickly. 

Investing in a flat to rent in Valencia

Valencia is also another good option to buy a flat and rent it, as it can be both as a permanent residence and as a holiday home. 

Buying a flat as an investment in Barcelona

Barcelona is also one of the best cities to buy a flat to rent, since besides being the capital of Catalonia it is the second most populated city in the country, so renting a flat is a very simple task.

Buying a flat to rent in Seville

Seville is a city that has a high population, both student and labor, so it is easy to rent a flat, therefore, it is profitable to buy it. 

Investing in a flat to rent in Malaga

Malaga, besides being a perfect city to live in, is a great vacation destination, so it is also very profitable.

What are the costs of buying a flat to rent it?

Buying a flat to invest in entails a series of expenses. If it is second hand, you will have to give a deposit (10% of the value of the property) to the former owner as a deposit. If you buy the property through the bank, you will also have to pay the monthly mortgage fee, which can be fixed or variable rate. In addition to other expenses, such as notary fees and taxes. For this reason, when buying a property it is recommended to have an extra 10% of the sale price. 

On the other hand, you will have to pay the community expenses, the garbage tax and the Real Estate Tax. And do not forget the possible reforms to revalue the property. This can involve anything from a few coats of paint to a complete renovation, including the purchase of modern furniture, etcetera.

How to choose a profitable property?

If you are going to invest in a property to rent keep in mind the following:

• Look for a house that does not need a lot of renovations, but small modifications. 
• Get a flat in a booming area of the city.
• Choose a house well connected with public transport and with all services and leisure around.
• If you can afford it, buy a property with common areas such as swimming pool, gardens, gym, etcetera. 
• If it has parking space and terrace, the better.