'Tis turbulent times. There is a lot of uncertainty and prices are soaring. In addition, your savings account yields little to nothing. For this reason, many private investors are looking for ways to invest their savings in a smart way. Is a real estate purchase one of them? The answer is yes, provided you approach it in a smart way. These 4 tips will help you generate a sustainable return on your rental income by 2024.
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2022 and 2023 were, to say the least, 2 intense years. The world economy had not yet recovered from the pandemic or Europe had to deal with the war in Ukraine and the related energy crisis. Not to mention inflation, which also caused the price of our shopping basket to skyrocket. The stock markets? We watched them go down with suspicion. Not to mention our savings account....
Yet there is also good news: for example, investing in real estate still remains a relatively safe and, above all, sustainable way to make your savings pay off after all. At least... If you're smart about it.
A good EPC value is key
Whereas until a few years ago location was the decisive factor in whether or not to invest in real estate, today the focus is increasingly on energy efficiency. Considering the spiking energy prices of 2022 and also early 2023, this only adds to this.
The more energy efficient the home you are interested in buying, the less additional (energy) costs you will have to cede. And this doesn't just apply to you as an investor or a resident, potential tenants are also increasingly looking at the energy efficiency of houses and apartments.
Moreover, in Belgium, from January 2023, there is also an obligation to renovate energy-wasting homes. Does your EPC score lower than an EPC value of D at the time of purchase? Then you are obliged to renovate your home within 5 years. The works involved, as well as the investments in materials, only add up to your final budget.
The following website will tell you more about EPC for a residential unit.
When investing, choose new construction
Building on the previous tip, choosing new construction automatically contributes to energy efficiency. Today, apartment blocks and houses are built in such a way that they virtually meet all standards from the start. As a result, you don't have to expect any additional maintenance costs for 15 years.
On the other hand, if you choose to buy an older home, there may be defects here and there. This can cause your home to decrease in value. On top of that, maintenance costs will also tick up significantly over time.
By the way, did you know that real estate with a good EPC score is worth almost 11% more than energy-guzzling homes? That percentage will only increase in the coming year. All the more reason to choose a new construction project.
If you are moving soon (to a new home) and are thinking of renting out your own home, then the following article is worth reading: Renting out your house or apartment: how to get started?
Don't wait too long to invest in real estate
That 2023 will undoubtedly be a difficult economic year need not be reiterated. But even though the uncertainty coupled with the economic panic might make you tend to wait and see, it's best not to wait too long before effectively proceeding to purchase.
A profitable real estate investment is determined more by its duration than by the moment of purchase. Even if the market takes a few years to recover, a property purchase generates a passive income thanks to the rental income.
Moreover, the real estate and rental market will also quietly change in the coming months and years. For example, research shows that more and more people living alone are looking for a house or apartment to rent. Because of a more limited budget, they are not opting for a lavish home, but rather something more cozy and above all more affordable. This is also positive news for those who want to make a real estate investment on a small(er) budget. After all, their property will be rented out quickly.
Want to find out how to get started investing in real estate? Then read: Starting real estate investing: here's how to get started
Raise your budget in a smart way
Yes, a real estate investment is and always will be a major purchase. Moreover, it is a purchase that in most cases we cannot pay for in its entirety out of our own pockets. But even taking out a loan costs money, not to mention rising interest rates.
Yet there are still several ways you can make a real estate investment even with a smaller budget. A few of these are:
- Taking out a (traditional) mortgage loan
- A recapture of your capital
- The final term loan (also called bullet loan)
- ...
Are you in contact with a broker or with one or several banks? If so, they will be happy to give you more information about the various possibilities.
Looking for more information about investing in real estate?
Discover the world of real estate investing and why more and more people are choosing to invest in real estate. Real estate offers numerous benefits, including capital growth, passive income and diversification of investment portfolios.
On our "investing in real estate" page, we dive deeper into the reasons why real estate is considered a solid investment.
Learn why real estate values have historically risen along with inflation, how rent increases and refinancing can work in your favor, and why real estate as a tangible asset can protect against inflationary pressures.
Discover the potential benefits and considerations of real estate investing and familiarize yourself with this exciting investment opportunity that can offer many opportunities in a dynamic market.
