It can be hard, especially in the beginning, to determine if a property will be profitable to you or not. There are however, some things you can keep in mind while looking for your long-term investment.
Research has shown that the location and the condition of the property are key factors to decide whether the property is a good investment or not. Apparently price is not too important all of a sudden. Why is that?
Think about this, you have spotted a cheap house and the photos you have seen are quite fine too, so you buy the house. After a little while, the first tenant moves in. It is all good and you are happy you could get this house so cheap. However, a month goes by, and you start to get complaints. The water is cold sometimes, the wall isn't very well isolated etc.
So was this a good investment?
In order to keep renting out the room you need to pay for repairing what is broken, these costs are lost and don't add value to the property. To avoid this you want to check thoroughly for damages in and around the house.
Doing this correctly makes sure you don't lose money paying repairs in the future. Furthermore, it keeps your status intact as a real estate owner.
It is recommended to hire a specialist for this. Even though you have to pay them, it will most likely save you money in the future.
Comparing the total price and the monthly rent can also really help to determine the profitability of a property, a common used evaluation is the 1% rule. The 1% rule states that the income property should rent for at least 1% of the purchase price to yield positive cash flow. This avoids long-term contracts that need a lot of attention but don't add much to your income stream.
Even though price and condition are very important to keep in mind, location is the biggest factor of them all. That influences the price of a property. Is it located in the centrum of Barcelona or is the property located somewhere in a small village in the mountains. Of course there is way to benefit from this and get rich quite fast.
Barcelona, centrum
Look out for areas in your neighbourhood or province that are starting to get more popular, observe them and make your purchase. After this it is the key to wait and make your service qualitative good. When the market price is high you could either sell or keep renting, either way you will earn your money back quit fast!
To wrap this all up, look for an area that is getting more popular, make sure to follow the 1% rule when evaluating the price and don't forget to look for hidden damages in the house!