Buying and renting out real estate – is it worth it?

With interest rates rising, many people have become cautious about buying property. But what if you rented out the property and the rental income was enough to cover the mortgage payments? After all, this could be a worthwhile investment and a way to secure your retirement. We'll look at how it can work and what you should consider before buying.

In recent years, we have seen rising property prices, while rents have only increased moderately or even stagnated. With the change in interest rates, this relationship has shifted. Many people looking for properties are staying in their rental apartments or turning to the rental market for the first time. This has led to a decrease in demand for owner-occupied properties, while at the same time, pressure on the rental market has increased again, partly due to the limited supply of rental apartments, which in turn has led to rising rents.

Location, location, energy efficiency

Nowadays, when making investments, a favorable location is no longer the only important factor. Energy efficiency is playing an increasingly significant role. This means that both the choice of location—for example, a region or city with promising future prospects—and the energy efficiency of the property are of great importance. Furthermore, the ratio between the purchase price and the expected annual net rental income of the property is becoming ever more crucial.

An experienced local real estate agent not only has knowledge of where to find suitable properties in attractive locations with good energy efficiency, but can also give valuable advice regarding the relationship between purchase price and achievable annual net rent, i.e., the potential return on investment.

The role of equity in real estate purchases

The equity stake is of particular importance. Ideally, it should be between 20 and 30 percent of the property's purchase price. A higher equity stake generally allows for lower loan amounts. It's important to remember that additional costs such as property transfer tax, notary fees, and real estate agent commissions must be covered by the equity. An experienced real estate agent can connect you with an independent financial expert who can assist you with all financing questions and create a customized financing plan.

Think before you buy

Before deciding to invest your money, you should consider the following: What is the goal of your investment? How much capital do you have available? Do you want to buy a property that is already rented or a vacant one? Is it a house or an apartment? Which region do you prefer for the property? Is a more distant location an option? What is the demand for rental properties in that region? What are the expected returns? An experienced real estate agent can provide valuable assistance in answering these questions.

Are you wondering whether a rental property is a worthwhile investment and retirement provision? Contact us – we'd be happy to advise you!

Notice

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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