Renting out real estate in other countries.
To have your own apartment, house or other living space is the aspiration of any modern person. But not everyone can afford to financially purchase it for themselves. One of the ways is an internal short-term loan from a developer or purchase the desired square meters in a long-term mortgage. The second option is to rent an apartment under a lease agreement. This method is safer and more convenient, as it does not require any significant investment. This factor has attracted significant financial investments in this real estate sector.
But with the onset of the coronavirus epidemic, changes have occurred in this real estate sector as well as in the general real estate market. Now many banks have suspended the provision of loans and mortgages, which forces them to look closely at rental housing more often. And it is precisely the increase in demand for rent that leads to the increased interest of investors, both domestically and in the overseas property market.
Now renting an apartment is much more profitable for a month than booking a hotel room. In many countries, long-term renting of apartments is becoming more profitable, since there is no danger of getting into financial debt, paying taxes and fear of changes in the economic situation due to the coronavirus epidemic. And, of course, it is more practical to rent an apartment near the place of work or study. And given that many have lost their jobs and are now finding new positions, it is financially costly to buy an apartment next to a new workplace, the idea of renting an apartment is a very good choice.
But also, do not forget about investing in real estate for the purpose of renting out. In the context of a pandemic, it is becoming more and more difficult to sell real estate, since the financial capabilities of the population are reduced, which has led to an increase in rental, which brings more predictable and stable income.
But when investing in real estate for the purpose of making a profit, there are some factors to consider.
1. First of all, for renting it is necessary to purchase real estate in a more affordable price range. When you buy a property for yourself, you choose the best, the best place, the best view, the best furniture. However, this leads to higher rents if you rent out such property. That is why it is necessary to strive for the maximum reduction in the rental value of real estate while maintaining a comfortable stay.
2. Secondly, it is necessary to determine the purpose of buying real estate. If the acquisition of real estate is planned in order to sometimes rest for a couple of months on your own, it is recommended to look closely at the resort places. And the rest of the time to rent. However, if the main goal is to make a profit, then the most promising investment is buying real estate in large cities with a high demand for housing: rooms in an apart-hotel or mini-hotels, affordable apartments in new buildings.
3. Thirdly, one should take into account the region, the country where the property is located. So, in the countries of Western Europe (France, Great Britain), the rental income is lower, but much more stable and permanent, in comparison with resort countries (Egypt, Eastern Europe), since they are not affected by seasonal trends. And also, one should not forget that mechanisms for reducing investment risks have been debugged in the countries of Western Europe, it is possible to ensure financial risks if the tenant spoils the property, does not pay, and there are legal difficulties with his eviction.
With the lease of real estate, there is a problem of managing the process of leasing, receiving payment and other issues. It is to solve these and other problems in many countries there are management companies that, for a percentage of the profit, help to solve all the problems at once. And it is with management companies in a number of large resort complexes that you can conclude an agreement with guaranteed profitability. Using the services of such companies is a convenience, but it should be borne in mind that the interest can vary for the provision of such services, from 3% to 15% of the profit, which is sometimes a very significant amount.
There are two options for purchasing real estate for the purpose of renting:
· buy housing without a mortgage;
· buy housing with a mortgage.
If in the first option everything is more or less clear, the investor buys housing having paid the full cost and rents it out. In the second case, there is a third party, it is a bank or other financial organization that issued funds for the purchase of a real estate in a mortgage. In this case, it is necessary to take into account the nuances of national legislation, the investor should be interested in the opportunity to evict the tenant without problems if necessary, as well as insure financial risks. In some countries, for example, it is difficult to evict a tenant, as in India it may not be possible to evict a tenant for 25 years. In Europe, the real estate market is more complicated. So, in Germany, the state regulates rates and actively protects the rights of tenants. In other European countries, it is possible to terminate the contract by giving the tenant one month in advance. There are three different types of annuity contracts in the UK. And in some countries, it is even possible to resell real estate purchased with a mortgage until the entire amount is paid off. Therefore, it is better not to enter the rental market of European countries without consulting a professional.
4. And it is the peculiarities of the national legislation that are the last factor. The national characteristics of each market strongly influence the final result of the investment. In Bulgaria and a number of other countries, mortgage loans are extremely rare for foreigners, which means that you can forget about profit above 5-6% per annum there. Some states have restrictions on the purchase of a second home or a quota for foreign investors. When using a loan, it is better to have an additional source of repayment or limit your investment optimism. It should be borne in mind that housing is not always capable of redeeming itself. It is successful if, with a yield of 6%, it was possible to take out a loan with a rate below 4.5%, and the amount of taxes and other expenses does not exceed 1.5%. In France, the state guarantees the recoupment of a number of properties that are sold under the leaseback scheme. With this scheme, the investor also gets the opportunity to return VAT after some time.
Next, we will consider the best countries for buying real estate abroad for the purpose of renting it out
To determine the best countries for owning investment property, we will use the following factors:
· rental yield;
· average monthly rent;
· rental income tax rate.
25. Turkey is at the bottom of the list due to low rental yields and effective income tax, which exceeds 80 per cent among other countries on the list. In fact, Turkey is one of the worst countries in terms of taxes.
The rental yield is 3.62%. The effective tax on rental income is 21.94%. Average rental price: $ 1,128.
24. With a rental yield of just 3.8 per cent and an effective tax on rental income of 17.25 per cent, Latvia is probably not the best choice for investors.
The rental yield is 3.8%. The effective tax on rental income is around 17.25%. Average rental price: $ 1,074
23. Reliable rents and decent rental income are not enough to push Portugal further on this list; the country has the highest effective tax rate on rental income of all countries included in this study, at 26.44%. In fact, Portugal is one of the countries where people pay more taxes than Americans.
The rental yield is 5.45%. The effective tax on rental income is around 26.44%. Average rental price: $ 1,939
22. The rent is high in Malta, and rental income is in the top third of the countries surveyed. But effective taxes on rental income are high and property prices are rising, so there may be better options for your investment.
The rental yield is 4.35%. The effective tax on rental income is around 23.33%. Average rental price: $ 2,229
21. The relatively high rental yield of 6.51 per cent offset in part Colombia's effective tax rate on rental income of 24.75 per cent, which is the third-highest in the study. It helps that low prices for food and other goods and services remain low relative to purchasing power.
The rental yield is 6.51%. The effective tax on rental income is around 24.75%. Average rental price: $ 1,548
20. As one of the least tax-friendly countries, Argentina is at the bottom of the list of the best countries for owning investment properties. Its effective tax on rental income is 14.7 per cent and rental income is only 4.48 per cent.
The rental yield is 4.48%. The effective tax on rental income is around 14.7%. Average rental price: $ 1,490
19. Despite low rental yields and a higher effective tax on rental income, the cost of living in South Africa makes it a good retirement option for ex-pats, but only a mediocre choice for real estate investors.
The rental yield is 3.88%. The effective tax on rental income is around 12.8%. Average rental price: $ 1,636
18. Foreigners cannot buy land for agriculture in Morocco, but they can buy an investment property. The effective tax on rental income is roughly in the middle of the list, and rents are the lowest among the countries studied, but the high purchasing power and low cost of living make Morocco something to consider.
The rental yield is 5.52%. The effective tax on rental income is around 10.7%. Average rental price: $ 854
17. Canada has the fifth-largest rental income and the second most effective tax on rental income, but if you can find a cheap property that doesn't require a lot of work, a $ 3,740 monthly rent can help you get a return on your investment.
The rental yield is 3.98%. The effective tax on rental income is around 25%. Average rental price: $ 3,740
16. On the face of it, high taxes and relatively low rental yields may cause an investor to avoid Spain. But that could be a mistake, given the country's attractiveness to ex-pats and the purchasing power that keeps one of the highest rents in the study.
The rental yield is 4.7%. The effective tax on rental income is around 19 per cent. Average rental price: $ 2,531
15. Even though its rental yield is the seventh highest in the study, the effective tax rate on rental income in Greece is in the bottom half of the surveyed countries, so you will save most of your rental income.
The rental yield is 4.17%. The effective tax on rental income is around 7.5%. Average rental price: $ 1,460
14. A rental yield of 5.24 and a strong industry means there are many opportunities for real estate investors in Hungary. However, it also has one of the 10 highest tax rates on rental income among all the countries participating in this study.
The rental yield is 5.24%. The effective tax on rental income is around 13.5%. Average rental price: $ 1,621
13. Although rents in Bulgaria are on average low compared to other surveyed countries, and the effective tax rate on rental income is the fifteenth highest, a good rental yield of 6.24% makes it a good choice for investors.
The rental yield is 6.24%. The effective tax on rental income is around 10 per cent. Average rental price: $ 997
12. Croatia is arguably one of the least tax-friendly countries in the world, and its low average rents of $ 1,320 may make investors want more. But rental yields are higher than in many other countries included in this study.
The rental yield is 5.43%. The effective tax on rental income is around 8.4%. Average rental price: $ 1,320
11. The relatively low cost of living is likely a factor in Germany's popularity among ex-pats - an ideal target market for real estate investors hoping to benefit from the country's low effective tax rate on rental income.
The rental yield is 3.99%. The effective tax on rental income is about 2.71%. Average rental price: $ 1,769
10. Rental yields in Cyprus have remained stable in recent years, although they have declined elsewhere. Property prices are modest. Rent is low, but so is an effective income tax; you will not pay taxes on your first $ 23,339.22.
The rental yield is 5.12%. The effective tax on rental income is about 0 per cent Average rental value: $ 966
9. High rents - the highest in this study - keep France in the top 10 for investment property ownership despite low rental yields. The tax on rental income is lower than in other well-known European countries such as Spain and Ireland.
The rental yield is 2.79%. The effective tax on rental income is around 10 per cent. Average rental price: $ 4,379
8. High rents and rental yields keep Ireland in the third-best country for investment property ownership, but rising property prices require caution.
The rental yield is 6.64%. The effective tax on rental income is around 10.05%. Average rental price: $ 2,077
7. Although the average return in Thailand is 5.13 per cent, an average property located in the center of Bangkok, for example, can yield up to 8 per cent. Add to that a low effective rental tax rate and relatively high rents, and Thailand is a promising investment opportunity.
The rental yield is 5.13%. The effective tax on rental income is around 2.73%. Average rental price: $ 2,029
6. Fifth highest rents and modest income taxes offset Barbados' poor rental yields. But to buy an investment property, you will need permission from the country's Central Bank.
The rental yield is 5.48%. The effective tax on rental income is around 7.5%. Average rental price: $ 2,501
5. The effective tax on rental income in Indonesia is one of the highest in the survey, but high rents and the highest rental yields should prompt investors to pay attention.
The rental yield is 8.61%. The effective tax on rental income is around 20%. Average rental price: $ 2,486
4. High rental yields, low taxes and solid rents keep Panama on the list of top countries for real estate investment. Investors also benefit from the Panamanian retirement incentive program and secure property rights for foreigners.
The rental yield is 5.75%. The effective tax on rental income is approximately 2.08%. Average rental price: $ 2,075
3. Although rents in Costa Rica are comparatively low, they are the second most profitable in the study, and their effective tax on rental income is below 72 per cent of the other countries surveyed.
The rental yield is 7.48%. The effective tax on rental income is around 5.16%. Average rental price: $ 1,450
2. In addition to low effective tax rates on rental income and high rents, the UAE is one of the most tax-friendly countries in the world, giving residents more income to spend on rent.
The rental yield is 5.19%. Effective tax on rental income: 5%. Average rental price: $ 3,070
1. Despite the low cost of living in the Philippines, the country's rental yield is a respectable 6.13 per cent and the effective tax rate on rental income is one of the lowest among the surveyed countries, making this country as a whole the best country to buy an investment real estate.
The rental yield is 6.13%. The effective tax on rental income is around 4.06%. Average rental price: $ 2,422
Sources:
· https://www.gobankingrates.com/investing/real-estate/best-countries-investment-property/
· http://www.homesoverseas.ru/
