05
Jan

What is PER?

Buy to let is one of the most profitable options for small investors now. Gross Profitability for rental in Spain is 4.6%… Much more appetizing than the current interest rates offered at the bank. Banks are now freeing up more money for savers to be able to buy to let. This news should also motivate all owners who are holding empty flats. Below is the explanation on how to make an apartment rental profitable.

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Find out what is your PER (Price Earnings Ratio).

The latest report from the Bank of Spain on Market Indicators Housing shows that Gross Profitability of the apartments amount to 4.6% in the second quarter. There are no banks that can offer that rate at the moment. The interest on deposits of the leading financial institutions in the country are less than 1% and in very few cases come to just surpass this. This 4.6% Gross Profitability equals to an average PER of about 22 years or 264 months.

But lets look at this in parts, what is PER? It is  the number of years it would take to pay for the apartment with the rent money. It is calculated by dividing the price to the annual rent apartment. So the PER is that asks you how long it would take years to recover the money invested in buying the rented house. This means that the PER serves you to find out the profitability of the apartment when rented.

Lets look at an example:

If your flat will cost 250,000 euros and  you achieve 6,800 euros annual rental income, it will take 37 years to recover the investment. (Too long)

During the housing bubble the average PER was 33. At the end of 2008 it had dropped to 27. And it´s now at 22.

You should always try to have a PER below the country’s average for you to make a profitable rental.

Enalquiler – http://bit.ly/1MQo9Oi

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