Calculating the profitability of a property after tax

Calculating the profitability of a property after tax

We can all turn to rental investment one day for good reasons: to count on additional income, to prepare for retirement or to pass on an estate to loved ones. For each, however, the goal is the same: to make the investment profitable. However, to be sure, a calculation of profitability is essential before venturing to buy. To help the future investor face this complex process, the real estate hunter proves to be his best ally.

Why a property hunter helps you with your rental investment

Investing in real estate is often a juicier investment than the classic Livret A, but you have to know how to go about it. A professional like Parisearch, real estate hunter in Paris, is a partner of choice to help you succeed in a real estate investment.

This professional masters all aspects of the sale of a property from its search, to the financial, administrative and legal aspects. He draws up specifications for you that perfectly define the type of investment, in order to find the property quickly and at the best price. He has assets for this: an in-depth knowledge of the real estate market, a large network and access to hidden offers on the market.

In the calculation of a rental investment, the price will indeed be one of the basic variables. A poorly negotiated property will immediately lower the profitability of the investment. Relying on the negotiating skills of the real estate hunter is one of the first conditions for a successful first phase of the project: buying well.

Many investors have the idea, for the sake of profitability, of looking for a property to renovate. The idea may be good, but the advice of a professional will be greatly useful. The real estate hunter can validate your choices of layout or decoration in relation to current market preferences. It allows you to be sure to rent, and at a good price!

Why do your accounts before starting

The profitability of a rental investment is subject to fairly complex calculations. It is strongly advised not to embark on the adventure alone, under penalty of exposing yourself to big surprises.
The profitability of a property is not limited to the simple deduction of rents from the purchase price. Its total cost includes multiple expenses, of which a simple individual is not always aware. A good real estate hunter includes in his advice the calculation of the profitability of the property, taking into account all the factors that will make it vary.

We can break this calculation down into several stages. The first consists of the gross yield, i.e. the ratio between the total purchase cost of the dwelling and the amount of the rents. In addition to the price of the property, there is the cost of the work and the notary and agency fees. The calculation corresponds to the following ratio: sum of rents deducted from the price of the property multiplied by 100, all divided by 10,000.

But a landlord's fees and charges don't stop there. They also include its condominium fees, property tax, housing maintenance, insurance and loan interest. Subtracting all of these costs each month from the rental revenue in the calculation is equivalent to calculating a net rate of return.

Finally, it will be necessary to take into account the tax to know the final profitability of its investment. The calculation takes into account the tax scale of the future owner, with its tax bracket and its allowances. It therefore depends on each person's tax situation. A real estate hunter will take into account your own criteria to carry out a simulation, so as to provide you with significant figures as to the financial viability of your project.

Do not consider a rental investment without listening carefully to a professional.

A good investment is prepared from the purchase stage and is made sustainable by good financial preparation upstream.

Photo by Ilnur Kalimullin/Unsplash