What do I need to know to invest in real estate?

The real estate sector has an undeniable weight in the Spanish economy. The growth and recovered health of the buying and selling markets have made the real estate portfolio one of the fundamental pillars for the field of investment and the financing of large consortiums. But not only the business sector is interested in this investment, Spanish families also see real estate investment as an attractive way to obtain benefits.

In this article, from Sky Marketing we will talk about why this investment is attractive and how to invest in real estate successfully.

Why invest in real estate?

The housing market last year was on the rise throughout the country with an increase of 8.1%. In the capital, the year-on-year increase reached 17.0%. This increase was contributed by the drastic reduction in the supply of second-hand housing in the capital, as well as the little construction of new construction.

With this in mind, you may wonder if you should invest in real estate right now, how to invest in real estate successfully, or if it’s too late. You may also be wondering if you should invest in real estate in a traditional sense, such as becoming a homeowner, or if there are other options available to you.

The good news is that not only is this a great time to invest in real estate – as more growth is likely on the way – but there are also more ways than ever to invest in homes without having to deal with tenants or others. minutiae to which the owners are dedicated.

The traditional option: buy a flat to rent  

There is a sector in Spain that has a predilection for rental housing. In addition, the substantial increase that rents have been experiencing in the last two years makes this investment very attractive. Currently, buying an apartment for rent is a favorite option for national and foreign investors, which offers a higher return than bank deposits or public debt. Whether you invest in new construction or second-hand housing, both are profitable operations.

What return to expect on the investment in lease?

The average profitability of the investment in housing for rent is in the range of between 4% and 6% per year. It is necessary to bear in mind that a range of factors directly influence the final profitability. It is not always more profitable to rent an apartment in an exclusive area. Weighing where to invest deserves to consider the location of the property.

Rents increase at different rates in Spain. During 2018, Madrid, Malaga and Valencia led the rental market boom with increases of over 10%. In the case of Madrid, the upward trend is such that it extends to the peripheral districts of the capital. However, it is necessary to point out that it is not so easy to achieve the same yields in other Spanish regions.

The most favored areas are tourist cities, many of them coastal. The regions with strong economic activity that have tourism, commercial investment and sources of work, are the best options. When it comes to knowing how to invest in real estate, it is advisable to look for options in large cities, as rents could have peaked.

The leasing of other properties like commercial is even more profitable than housing; The average profitability being 9.3%, its variations depend on the regions, the most popular being Lleida, Lugo, Oviedo, Las Palmas and Pontevedra. In the case of office leasing, the reported yield reached 8.4%. The regions with the greatest rebound being Seville, Zaragoza and Lleida.

You can also read information about:

  • When is IBI paid
  • How to calculate the IBI
  • Who pays the IBI
  • Real estate appraisals
  • Real estate tax

Participation in SOCIMIs: How to invest in real estate without buying a flat

An alternative to buying an apartment to rent is to invest your capital in the shares of intermediaries that are listed on the stock exchange. This option allows you to invest less capital than that required by direct purchase, and also provides investment diversification. It is carried out through the so-called SOCIMIs, Real Estate Investment Companies. These are an alternative that allows anyone to invest in a diverse portfolio of real estate.

SOCIMIs are dedicated to both the rental of real estate and the sale of real estate assets, such as office buildings, hotels and other types of properties.

SOCIMIs have prospered in a very few years, multiplying their volume of operations by 2.5 during 2018. In addition, during 2018 they moved 27% of the total real estate investment in Spain. The four Spanish REITs listed on the continuous stock market are the large Merlin, Colonial, Hispania and Lar. Together, the four control assets worth more than 27,000 million euros.

Currently more than 60 Spanish REITs are listed on the Alternative Stock Market (MAB). And from the Spanish Government, several proposals have been put forward:

  1. Adjust the taxes to the SOCIMIs that until now have been taxed at zero rate.
  2. Regulate the times and conditions of the leases.

However, for now, fiscal measures have not been included in the 2019 General State Budget Project. Industry experts predict that in 2019 more SOCIMIs will be listed on the stock market.

Participation in Real Estate Investment Funds (FII)

This is a product that channels collective investments in real estate. It is a conservative way to invest in real estate. The resources constituted by a collective portfolio are used to acquire a wide variety of properties, ranging from fertile lands to development projects and apartments for rent. The profitability comes from the leasing of such properties or from the revaluation of these assets in the market.

Those who find this option attractive should be aware of market trends to know the risk profile, in which assets and when to put their money. Investing in land is different than in leased property. This is a market for equity investors who expect medium and long-term returns. The liquidity of this investment is not compared to that of stocks or bonds, since in this case the investor cannot obtain a refund of their participation at any time. As you can see, there is a wide variety of options to choose how to invest in real estate. It is undeniable that, like everything in the area of ​​capital investment, there are no absolute guarantees, and you can always make errors of appreciation that will have an associated risk. If you are looking for expert advice on the state of the real estate market in Deplace we will help you with whatever you need. Contact us!