Profitability of Real Estate
Today, we will talk about an important topic—profitability and how to calculate it correctly.
? How to determine if your property is profitable?
Use the profitability calculation—it’s a simple way to assess the income potential of a property!
There are 3 types of profitability:
1️⃣ Gross Profitability (income without considering expenses).
2️⃣ Net Profitability (taking all expenses into account).
3️⃣ Return on Equity (when there is a loan involved).
Let’s break it down with examples! ⬇️
? Gross Profitability (income without considering expenses)
Example:
? The apartment costs €200,000.
? You rent it out for €800 per month.
How to calculate:
1️⃣ Annual income:
800 € × 12 = 9,600 €.
2️⃣ Divide the income by the property value:
9,600 € ÷ 200,000 € = 0.048.
3️⃣ Multiply by 100:
4.8% — this is your gross profitability!
? Net Profitability (taking expenses into account)
Example:
✔️ The apartment costs €200,000.
✔️ Rent: €800 per month.
ℹ️ Annual expenses:
? Repairs: €500
? Insurance: €200
? Utility bills: €300
How to calculate:
1️⃣ Total expenses:
500 + 200 + 300 = 1,000 €.
2️⃣ Net income:
9,600 − 1,000 = 8,600 €.
3️⃣ Divide the net income by the property value:
8,600 ÷ 200,000 = 0.043.
4️⃣ Multiply by 100:
4.3% — your net profitability!
? Return on Equity (if a loan was taken)
Example:
✔️ The apartment costs €200,000, but you invested only €40,000; the rest is a loan.
✔️ Net income: €8,600.
How to calculate:
1️⃣ Divide the net income by your investment:
8,600 ÷ 40,000 = 0.215.
2️⃣ Multiply by 100:
21.5% — this is the return on your equity!
? Why is profitability calculation important?
✅ Gross profitability helps quickly assess a property.
✅ Net profitability considers all costs.
✅ Return on equity shows the benefit of your investments.
Do you want to calculate the profitability of your property? Write to us, and we will help you understand! ?
Or
? Schedule a consultation:
calendly.com/dominartinvest
? Our professional approach to your requests!
