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 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 Replace 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.

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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 is 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 for 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. Also, 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 return on investment in rental housing 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 merits considering the location of the property.

The most favored areas are tourist cities, many of the 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 lease of other properties such as commercial premises is even more profitable than that of housing; the average profitability being 9.3%, its variations depending 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 are Seville, Zaragoza, and Lleida.

Participation In SOCIMIs: How To Invest In Real Estate Without Buying A Flat

An alternative to buying a flat to rent is to invest your capital in shares of intermediaries that are listed on the stock exchange.

This option allows you to invest less capital than that required for 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.

SODIMMs are dedicated both to 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. Also, during 2018 they moved 27% of the total real estate investment in Spain.

The four Spanish SOCIMIs that are 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.

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 made up of a collective portfolio are used to acquire a wide variety of properties, ranging from fertile lands to development projects and rental apartments.

Profitability comes from the leasing of such properties or the revaluation of these assets in the market.