WITH AN INVESTMENT IN REAL ESTATE IT IS TEMPTING TO DREAM OF BIG PROFITS AND RETURNS. BUT WHAT IS REALISTIC?
No economist ventures a sensible answer about
the yield of a brick. That is also logical: every building is different. The maintenance costs, repair costs and management costs differ from home to home. Each of these elements has an impact on the return. The realized capital gains on a sale are also different for each building. As a result, every real estate investor has to calculate his own return.
WHERE TO TAKE ACCOUNT?
- Added value
Investing in real estate usually comes down to this: you buy a house or apartment, you sell it after a few years and meanwhile you rent it. A lot of owners have high expectations, especially of the added value of a sale. However, experts warn not to count on a rapidly added value. It is true, of course, that real estate prices have risen sharply in recent decades. Over the past forty years, house prices have increased by an average of 5.5% on average each year and apartment prices by nearly 5%. The evolution from 2000 to 2010 was totally dizzying: real estate prices rose by an average of 8 to 9% annually. But those rises are a thing of the past. In recent years, real estate prices followed inflation sooner. Just to give an idea: since 2010, apartment prices have increased by 2.6% on average each year. And that will not change too soon. Experts do not expect large price rises and assume stable prices that, at most, slightly increase. An important factor in this is the evolution of interest rates. It is now historically low and will gradually rise again in the coming years. This will have a major impact on the property market: higher interest rates make loans more expensive, so people can spend less on a house, which in turn can have a downward effect on prices.
- Rental Yield
You only realize an added value at the moment of a sale. Until then, you as the owner are dependent on the rental income. And you can also blame yourself on that: there is a big difference between the gross and net returns. In other words, what you collect from rental income does not match what you actually earn on a rental property. After all, there are a lot of costs that you still have to charge. According to a study by the Steunpunt Women, these represent 32% of the gross rental income. The vast majority of this goes to all kinds of maintenance and repair costs. In addition, there is the property tax and fire insurance. Set against the value of the rental housing estimated by the landlord, this results in an average net return of 3.1%. Not only taxes and costs gnaw at the rental yield. Many owners also forget about lost income due to default or vacancy. Because if a tenant no longer pays the rent or when a tenant leaves and a new tenant is not ready to take his place, you lose income as the owner. If you want to estimate the rental yield carefully, assume a month of vacancy or default per year.
HOW MUCH TAX DOES A LANDLORD PAY?
Whether you pay taxes on your rental income depends on the question to whom you rent.
- Now take the rental to a private individual. Think of a student room that you rent out, an apartment that is rented by a single person or a house that you rent to a family. You do not pay any taxes on that collected rental income. However, you pay taxes on the indexed cadastral income, increased by 40%.
- The actual rental income is taxed if the tenant uses the house entirely or partially for professional purposes. In that case, the tax return must not only state the cadastral income, but also the rental income. In fact, the landlord has to mention the gross rent. This includes not only the rent, but also the contributions that the tenant pays for the maintenance or the general costs. That is also the reason why many landlords include a clause in the lease that prohibits use for professional purposes.
- And what if the rented house or apartment is sold? You only pay a capital gain tax during the first five years after the purchase. This amounts to 16.5% on the realized added value.
- After the first five years, no additional value tax has to be paid for a sale.