How to calculate the profitability of real estate investments

For those who wish to invest capital in the real estate sector, this period, with prices at historic lows, could be the best.

For an investment to be successful and profitable, however, it is necessary to calculate the return on a real estate investment to ensure that the purchase pays off in the years to come. The more precise you are able to make assessments, the greater the precision of the forecast of the return on your real estate investment.

The rate of return is expressed as the ratio between the net income produced by the property and its purchase price. First of all, you need to calculate the gross annual income of the property, i.e. the annual amount deriving from the property rent. From this figure, we must subtract the annual costs to be incurred, such as taxes, maintenance and economic management. The result obtained will be the annual net income. To obtain the rate of return on the real estate investment, you need to divide the net income by the purchase price of the property, and multiply by 100: the number obtained will be, in percentage terms, the return. To be considered a good investment, a property should produce an interest rate of at least 5%. This calculation can give precise results if the forecasts of gross income, costs and purchase price are reliable.

For this reason, before choosing a property to invest in, it is necessary to carry out a professional real estate evaluation, to establish the actual market value and all the factors. To obtain a guaranteed return, more and more investors are aiming to purchase commercial premises to rent or properties already rented to high-level tenants. 

Expertise Re is a real estate agency specialized in the sale and rental of entire buildings, commercial premises and offices, industrial properties, and income properties.

It also has the skills in the study and analysis of intervention plans aimed at the disposal and redevelopment of properties according to specific needs and objectives.

We believe that only by starting from specific needs can we identify the most suitable real estate investment solutions.

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If, however, you are interested in purchasing an inocming property, we invite you to consult our dedicated section

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Income-producing properties, guaranteed investment