Wednesday, February 15, 2023
HousinGo Real Estate

Real Estate investment, safe value in uncertain times

Few could have predicted that the economic turbulence (and all kinds of turbulence) brought about by the pandemic would be followed by a period of marked uncertainty such as the one we are living through. A time when, in addition to widespread inflation, rising prices of building materials, the increase in the shopping basket and therefore in the cost of living (as well as electricity bills, self-employment fees and other servitudes), there would also be a war in northern Europe that would further agitate the markets.

The investment landscape is changing and opportunities are being sought in cryptocurrencies, paper gold and shares in technology companies. Banks are also offering new, more sophisticated products (whether index funds or derivatives), ready to meet the investment demand of their clients.

However, in this complex scenario, real estate continues to maintain its profitability guarantees, as long as it is invested wisely and following a series of guidelines. In HousinGo by David de Gea, a real estate agency specialized in buying and selling and renting real estate in Barrio de Salamanca, we believe that investing in real estate is still a wise decision.

Advantages of investing in Spain

Within the investment possibilities, Spain is an optimal scenario to do so. According to a report by PWC and Urban Land Institute, Spain is one of the safest countries for those concerned about where and how to invest in real estate. In addition, Madrid ranks as the fourth most attractive European city for this purpose.

To begin with, there is certainty that Spain is one of the safest countries to invest in real estate and, in particular, Madrid is the fourth most attractive European city for it. A certainty that is demonstrated by facts, such as the data confirming the increase in the number of foreigners who are betting on Spain, convinced of the advantages of investing in real estate in our country.

According to data from the General Council of Notaries, 2022 was a very good year in that sense, such as an increase of 52.7% in purchase and sale transactions by foreign capital during the first half of the year.

Although it must be taken into account that these positive data are due to the stimulus produced after the reestablishment of the activity after the coronavirus pandemic, they give an important clue of the interest aroused by the Spanish brick.

How to invest in Real Estate

It is not enough to have capital to invest in real estate to rent or to sell later, after a renovation that revalues it in the market. In order to obtain the best Return on Investment (ROI), it is advisable to evaluate key factors such as the type of property, its condition, location, neighborhood and physical characteristics.

It should be taken into account that the cheapest properties do not necessarily have to be those that generate the highest profitability, both in rent and resale, since if they are so cheap, in many cases, they denote weaknesses that lengthen their exposure in the market. A marginal neighborhood, with marked delinquency and no signs of gentrification in the short term, may offer apartments at a good price, but whose investment is not worthwhile due to the low return generated.

Once the desired type of property and the specific area have been chosen, it is advisable to analyze the particularities of each property, its peculiarities, its condition, its qualities and its possibilities. Because an apartment in poor condition that hardly attracts the attention of potential buyers can be completely revalued if it is washed.

Specifically, in districts such as Barrio de Salamanca it is essential to pay attention to the age of the buildings, the maintenance and the state of possible abandonment that many of the properties may suffer. Although we can find opportunities when renovating apartments with obvious deficiencies, we can also find a series of burdens and 'vices' that discourage any investment.

For all these reasons, the best possible recommendation is to count on the advice of the most experienced real estate managers in the area and to let them advise you.

How to achieve the highest profitability with your Real Estate investment.

Although the ways of accessing the benefits of investing in real estate are evolving, through SOCIMIs and investment through companies, crowdfunding projects or real estate investment funds, there are three ways that remain stable. We are referring to the sale and purchase of properties for later renting, to the traditional long-term sale and purchase of housing, without an immediate resale plan, and to house flipping.

By house flipping we refer to a trend born in the United States and which is making a strong impact in Spain. It is based on the acquisition of second-hand homes, at very affordable prices, to refurbish them and then sell them at a higher price, as a result of the improvement in quality that the refurbishment has brought.

Although it is necessary to calculate the profitability since, like any investment, it entails its risks (unforeseen events in the acquired property, conflictive neighborhood, etc.), it is a strategy that, if carried out correctly, offers a short Return on Investment, generating benefits that allow the investor to replicate the process in successive properties.

Regarding buy to rent, it is the safest option and intended for those buyers who want to obtain a regular and constant income without major complications. For this, it is important to acquire properties in areas where the rental demand is high and sustained throughout the year (something that does not happen in apartments in coastal areas, where there is also saturation of supply), such as well-located homes, in cities with labor, university or tourist weight.

Finally, the traditional purchase and sale of homes satisfies those investors who acquire a property without rushing to obtain that return, able to wait as long as necessary for that home to appreciate in value.

In this case, a sale at a higher income than the initial purchase price can be considered, which would compensate for an original investment that has allowed the use and enjoyment of the property for years. In some cases, this sale over time is the most reasonable option if there is not a high rental demand or the profitability at stake is not entirely satisfactory.

Different possibilities for different profiles that, with the proper real estate advice, will generate in that particular willing to invest the highest income and satisfaction.

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