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Reduce the management fees, reduce the cleaning fees and increase the rental times? It seems that you also get usage out of this property?
Have you listed the place on many rental sites? You could probably increase the rental income. The 1.5% could change drastically at that point. You didn't mention taxes, upkeep or HOA dues either.
Reduce the management fees, reduce the cleaning fees and increase the rental times? It seems that you also get usage out of this property?
Have you listed the place on many rental sites? You could probably increase the rental income. The 1.5% could change drastically at that point. You didn’t mention taxes, upkeep or HOA dues either.
Even when I succeed in optimizing all those things and would succeed in doubling net rental income to €10.000, it would still be only 3% yield. Patrick says this is still too low, and I agree.
At that point if someone would take ik off my hands for €350.000, he would still pay 35 times the yearly income. That is still way too much if you ask me.
As I understand from Patrick a good buy is when you have 10% net rental income, meaning you can earn your investment back in 10 years. That would mean that the price of the appartment should fall to €50.000!!! Even when I would succeed in doubling the net rental income to €10.000 the fair value of the property would still only be €100.000, maximum €200.000.
sell it and rent it back when you visit
I like your idea. Simple, profitable and effective. Thanks!
I will tell you to hold if you use a $ (dollar), but you used a € (Euro) which drops every day.
Are there similar properties in that area with better rent-to-price ratios? If you could get €350k for this place, and then buy something that's much cheaper but rents for the same amount, you'd have the same income, but would pocket the difference.
What is a normal rent-to-price ratio in your area?
Two ways to look at this home:
1. purely financial: How are property values in your immediate area? If they are at (or near) a peak (and trending down), I'd sell. You can buy back in at a later time at a lower price. This assumes you aren't in need of the money and that you're in a bubble or just past the high point. The way to tell? What are the comparable units selling for (not asking prices, selling prices)?
2. emotional: If use of the unit on a regular basis is very important - and very similar units are not easily found and rentable, I'd keep it.
"However, I do have some emotional bond with the property. I’ve been going there for holidays since I was young and do meet my family there as they also each have an appartment in the same building."
You have to distance yourself from this thinking. Unless it's the house you live in and raise a family in and enjoy the location, etc., this is just a house/condo/apartment. You have to look at an investment property as that, an investment. It's not your home anymore, it's just a house/condo/apartment. It's just like stocks and other investments.......don't fall in love with them, you have to take the emotions out of it.
Comments 1 - 9 of 18 Next » Last » Search these comments
Hi all,
I have an appartment in the Netherlands with beautifull seaside view. It is rented out to tourists during holiday season on a weekly basis. I have about €10.000 income but lose half due to costs (expensive cleaning each time, expensive management due to high turnover of visitors), so net rental income is €5.000
However the value of the property is €350.000
That means I get 70 times the price if I sell?!? Seems to be huge, is it not? I mean, one would have to rent it out for 70 years to get back his investment.
Or seen from a different angle, I get 1.5% net income from the property, after costs. Not a good investment if you think the value could start to fall.
However, I do have some emotional bond with the property. I've been going there for holidays since I was young and do meet my family there as they also each have an appartment in the same building.
However, this appartment represents half of my capital and I am so afraid that it will lose considerable value.
What would you do? Would you sell? Or keep it?
Thanks Patrick for your wonderfull website!