Income or capital gain? Yield or revaluation?

If you invest in “bricks”, what should your goal? The income from rental or the capital gain? When you purchase an income-producing real estate, what to privilege? The income generated by renting a commercial property? Or the capital gain for the property revaluation compared to the purchase price you paid? Of course, the obvious answer is both! Contact us at know how!

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Income or capital gain? – Keep an eye on real estate value
Many people tend to favour the rental income instead of real estate revaluation. So they invest in a property cashing a good rental income, but with little real estate value.

The classic example is a supermarket, which generates a good rental income, but consists of a prefabricated building which, of course, has a low property value. Especially when the alternative is a historical building with offices located in the city historic centre. It generates a yield, but it also has a great real estate high value!

So, are you thinking of investing in one or more commercial income-producing properties? Then you should consider some fundamental aspects. We list them below…

Income or capital gain? – What Type of Income-Producing Real Estate
The choice between the various yield-generating real estate is wide. Offices, commercial, logistics, nursing homes, private clinics, telephone exchanges, bank counters, touristic, residential, etc. Also, do you prefer a newly built property? Or a historical building? Before proceeding, get clear ideas.

Income or capital gain? – In Which Area
If you invest in the acquisition of a historic building in the historic centre, it is very hard to go wrong. There are some areas, like the historic centre of cities like Milan or Rome where the real estate value is only expected to grow over the years. Especially historical buildings. And in those areas commercial real estate for rent, which generates a yield, is always in demand. In the rare event that the tenant of a store in Via Condotti in Rome goes away, the property will be immediately re-rented. But even in the suburbs, you can find properties with a very attractive return. For example, logistic centres, that are increasingly searched by large real estate funds. Contact us for info.

Income or capital gain? – Risk Profile
Regardless of whether certain properties with a yield may be more familiar than others, we must consider that some are a bit more at risk. For example, the apartment with yield, because it is virtually impossible for an individual who rents an apartment to be able (or willing) to issue a bank guarantee to secure the regular rental payment. As a result, there is a high risk of not getting paid if the tenant is in troubles.

Yield or capital gain? – Yield-Producing Real Estate Acquisition Costs
In addition to the purchase price, calculate the fees for the notary, real estate agent and any other professionals. In addition, there are the taxes on the purchase provided for by law.

Yield or capital gain? – Maintenance Costs for Yield-Producing Real Estate
Each yield-producing property has ordinary and extraordinary maintenance costs. Usually, ordinary maintenance costs are covered by the lessee (ie by the tenant). While the extraordinary maintenance costs and the insurance coverage on the yield-generating real estate, are paid by the lessor (ie the owner of the property). In a “triple net” rental agreement all costs are covered by the tenant. But deals of this type are not easy to finalize and are contemplated for renting particularly prestigious or important assets.

Yield or capital gain? – Taxes
How much is the tax for the acquisition of an asset that generates a yield? When calculating the return on a yield-producing property remember, in addition to the ordinary and extraordinary maintenance costs, also the taxes on the property. All this affects your final profit, therefore it should be kept in mind when calculating returns.

Yield or capital gain? – Exit strategy
When planning the investment for the acquisition of a property that generates a yield is important to plan how long your expect to hold the property, when sell it and under what conditions. The actions you will do after purchasing yield-generation real estate will affect your profits, so it’s better to plan them carefully. Even trying to hypothesize various scenarios and the actions to be taken for each one.

If you are thinking of creating a real estate portfolio with a rental yield, on this Real Estate Blog you’ll find other suggestions.

Or contact us for a free consulting!

Click here to see our Income-Producing Real Estate and Commercial Real Estate for Sale:
Tenanted Commercial Real Estate

If you don’t find what you’re looking for, contact us and we’ll make a customized search.