2022 is looking to be one of the most challenging years for investors in decades. Inflation and the potential for higher interest rates are of greater concern for those who are looking for income in this low interest rate environment. At the same time, many are worried about stock market valuations and recent volatility.
A study carried out by McKinsey Global Institute places brick as the asset of choice for different economic agents. Compared to other assets, the property continues to be the asset most present in global equity.
It’s key for investors in any type of real estate to stay on top of interest rates and consult a tax professional, particularly with the recent changes to the tax code, but the experts, in do foresee that the prices of the house will stay throughout the next year in positive rates. The panel estimates that second-hand housing, aside, could maintain sustained revaluations of more than 6% until the end of 2022, when they would be reduced to less intense levels of growth.
Financially speaking, in order for the rental of a luxury property to be really profitable, the return you reap should be greater than what you could earn in conservative investments, such as bonds and dividend-paying blue-chip stocks, because of the real risks involved.
The level of yield can reach up to 10-15% on luxury vacation rental properties. It is critical to choose the best luxury vacation rental company to make sure this is done properly. Not everyone has the ability to manage this kind of luxury properties with high demanding tenants, achieving the best balance between a juicy income and a healthy level of occupancy.
Of course, this will also depend if you buy with cash or to finance your investment luxury property in Marbella. Paying cash can help generate positive monthly cash flow. Take a rental property that costs 1Million euros to buy. With rental income, taxes, depreciation, and income tax, the cash buyer could see 100k euros in annual earnings—or a 10% annual return on investment.
On the other hand, financing can get you a greater return. For example, say an investor puts down 20% on a house, with compounding at X% on the mortgage. After taking out operating expenses and additional interest, the earnings add up would be less per year but the annual return on the 200k euros investment is much higher than the 10% earned by the cash buyer.
In addition to this juicy return, buying a luxury property to rent in Marbella can be financially rewarding and have numerous tax benefits, including the ability to deduct insurance, the interest on your mortgage, maintenance costs, improvements, depreciations.
Marbella Mountain Resorts is a fully integrated Hospitality and Luxury Asset Management company specialised on luxury villa rentals industry. We act as a local partner and unique window for private investors, family offices and international Real Estate investments funds in the process of growth that are willing to set up and generate value in the south of Spain.
“Our services cover the entire investment process, from the identification of suitable luxury properties in South Spain; find the right partners if necessary, closing of the legal transactions, managing the short term rentals, manage the administrative tasks, renew the property and finally put it back on the market at the right moment (Buy- Rent- Renew- Sell)”.
The other primary way that landlords make money is through appreciation. If your property appreciates in value, you may be able to sell it at a profits (when the right time comes after generating rental incomes) or borrow against the equity to make your next investment. While real estate does tend to appreciate, there are no guarantees.
The capital gains taxes on a rental property sale are much steeper compared to the straightforward sale of personal-use property. The basic capital gains that you have to pay on the profit from the sale are increased by any depreciation you claimed against the property. This means that if the property lost money and you used the loss against your tax bill in previous years, you will have a larger tax bill when the sale goes through.
Marbella Mountain Resorts has an “asset light” strategy; but may take investment positions in equity in a number of these projects in the form of key money, subordinated debt, guarantees, minority equity investments or any combination thereof.