The typical real estate buyer's mistakes when investing in real estate in warm countries
Let's start with the theory. Everyone thinks that the property being rent in a resort area, will bring the owner a respectable income, far exceeding the interest income from a banking deposit. In theory this is true, but the vast majority of the income generating properties buyers cannot gain what they expected when buying the property.
Let us try to explain what likely mistakes make people who are trying to earn on real estate in the resort areas. First, you need to choose a strategy. What does a buyer who until recently has been a tourist himself? He monitors a few houses or apartments in one of the tourist countries like Spain, for example. Thereafter, property in Spain gets selected, which the buyer likes, and in parallel a question arises to the agent, whether he can lease apartment or a house and of course will get an affirmative answer. Thus, the person makes an important decision about the purchase of the real estate he believes income generating. Such an approach: buying something where one would like to live himself, can be called typical for most resort property markets. If the apartment will be intended for the whole family relaxation, then no questions. But if we are talking about buying a house with a view to earn income, such an approach is entirely misleading. Ideally, you need to determine your strategy long before the visit to the country. In other words, you need to understand who and how, and for how much you will be able to lend the object you choose.
There are three basic strategies:
- Daily rent
In this version you will be able to make money from tourists. The daily rent is more complex, due to the increase in operating expenditures and quick wear of the milieu and furniture. However, theoretically there is an opportunity to earn more.
- Rent for a long term
It means getting income from those who work and live at the resort. In contrast to the first strategy, it is lesser risky, and brings more stable income throughout the year.
- Protected tenancy
The property management company undertakes to transfer you a certain fixed amount, being themselves engaged in ledning your property. In this case, everything depends on the professionalism and commercial integrity of the company.