Calculation of the payback period of real estate

The easiest and fastest way to find out whether it is profitable to purchase a particular property is to use the formula:

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[Payback period] = [Purchase price] / [Annual profit]

Real Estate Payback Calculator

A simple payback calculator to determine the potential benefits of buying an investment property.

Payback period in months

Payback period in years

What is a good payback period for real estate?

A good payback period is considered to be a return on investment period not exceeding 10 years.

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How to choose a property for investment

❋ Location

The location is crucial.

Evaluate the infrastructure, transport accessibility, noise level, and development potential of the area.

❋ Cost

Never choose an investment solely based on price.

This is a relative measure that should be taken into account along with the potential for capital gains and high rental yields..

❋ Rental income

This is the most important indicator that should be taken into account.

Rental income is expressed as a percentage and is calculated by dividing the annual rental income by the purchase price of the property.

❋ Demographics

Study the current and potential population growth.

In developing areas, the demand for housing and commercial real estate will grow. Look for regions with steady population growth and demographics that match your property type. This strategic approach ensures that your investments will meet market requirements and maximize potential profits..

❋ Number of rental offers

The share of space available for rent in the area should be from 2% to 3%.

The vacancy rate below 2% indicates high demand and limited rental supply. The rent is likely to rise, which will provide you with a stable income as an investor. The level of available space of more than 3% indicates that there are more offers for rent than tenants. Rents may remain at the same level or even decrease, which could potentially affect your income.

❋ Customer demand assessment

Calculate the average time that a property remains for sale or for rent before it is bought or rented.

A short time in the market indicates high consumer demand in the area, which could potentially lead to higher prices for your investments. The long term indicates that the interest of buyers is low, which can lead to a slowdown in the capital growth of your investment property.