Buying a home as an investment has one main attraction: its high profitability when renting it out. According to the latest data published by the Bank of Spain , the gross profitability of renting a home rose to 4.6% in the second quarter of 2015.
Buy to let: What factors will influence our profitability?
If we choose to buy a home to rent, we must bear in mind that our profit will depend on many factors: the area where it is located, the size of the city, its services and features and, of course, the price.
According to a recent report by Pisos.com, rental profitability has grown significantly in recent years, especially in central locations with limited supply for sale. In other words, the best areas where we can make this investment will be the big cities (especially the capitals).
When buying, one of the most important aspects will be the area where the apartment is located and its characteristics. For example, you have to consider the relationship between supply and demand in the area in question, whether it is a well-connected neighbourhood with good services (supermarkets, schools, transport...) or whether it is a quiet or noisy and busy area. All of these aspects will influence the price of the property, both the price we will pay for it and the price we will ask for when we rent it. The best areas will allow us to increase the price and thus make our purchase profitable. We must also take into account possible initial investments, such as renovations or the purchase of furniture.
How is the rental price set?
Once the purchase has been made, it is necessary to think about the price. If we choose a rental price that is too high, in order to recover the investment more quickly, there is a risk that the property will not be rented. To establish the rental price we must assess the characteristics of the property , its location, the profile of the tenants we are looking for (students, families, etc.) and make a comparison with other apartments in the area.
According to another study carried out by Fotocasa , it is currently more profitable to buy to rent than before the crisis, as the prices of second-hand homes have dropped considerably, while rental prices have increased. According to this research, in Spain it is possible to achieve up to 5% annual profitability, 1% more than in 2007 when the historical maximum price of housing was recorded.
A significant fact is that the rental price in Spain has increased slightly by 2% on average in 2015, an increase to take into account when making your investment. The most expensive cities are Barcelona (with an average of €12.9/ m2 ), Madrid (€11.6/ m2 ) and San Sebastian (€11.4/ m2 ), according to a study by the real estate portal Idealista.