Building up a financial reserve, it is something we all want. But how can you best secure an extra income alongside your pension? These days, a savings account yields almost nothing. What ís a good idea, however, is investing in real estate. But if you do, it is best to take these tips into account.
Borrowing for an investment is always a good idea
If you have the necessary funds to invest in real estate, it is still a good idea to borrow when purchasing finance property. There are a few reasons for this. For example, anyone who buys an investment property with a loan is entitled to interest deduction and thus falls under the system of long-term savings. In other words, you can deduct the interest you pay to the tax authorities from your net taxable income. In addition, any premiums paid for your outstanding balance insurance will also be tax advantageous. But be careful! Your loan must run for at least 10 years.
Take the return into account
Investors or future investors often have high expectations when it comes to the return. For example, one in four Belgians thinks that real estate offers a 5% return. One in six is convinced that it even yields 8% or more. But unfortunately, reality is different. Various factors play a role in this calculation, which ultimately makes it a difficult task.
The return on a real estate investment consists of the rent and the added value on resale. Usually, the rental return is around 3 to 4% without taxes, maintenance and the cost price of a loan.
Brand new real estate
When investing in new buildings, you should also keep in mind that you are not buying for yourself, but you are making an investment. In other words, you have to imagine yourself in the lives of buyers and tenants. After all, you want to make a profit later on or rent out the property without any inconvenience. What do you have to take into account? Looking at revenue properties with the highest possible profit margin. In other words, not only is the location important, but also the potential added value when reselling. Residential property, for example, is a long-term certainty. Those who invest in retail space or office buildings have more risk of uncertainty.
Finally, it is also important to resell your investment on time. When? Before major costs are incurred. With a new-build investment, you are safe from major energy and maintenance repairs for a while. How long should you wait before reselling your investment? About 10 to 15 years.
More advice on how to make the right real estate investment? Immowi is happy to help!