How to calculate the return on real estate investment

What is the method for pricing real estate?

The method for pricing real estate usually depends on a number of factors that influence the price determination, the most common of which are:

• Market analysis and comparative pricing: This is done by comparing the property to similar properties that have recently been sold in the same area. Real estate agents and construction companies often use this method to determine the market value of their properties.
• Estimated value of the property: This is determined by a professional appraiser, who takes into account several factors such as the condition of the property, its location, and available amenities. This procedure can also be done by a real estate appraisal company in some cases, as is the case in Turkey regarding foreign purchases, where the state has designated specialized entities to set a market value for the property and evaluate it before registering it in the name of the new foreign owner.
• The listing price/or the price set by the owner or the project owner, which is the price the seller asks for the property. The listing price may be higher or lower than the fair market value, depending on certain factors considered by the seller and current market conditions.

Definition of Return on Real Estate Investment

The term "return on investment" in the real estate field refers to the metric used by real estate investors to determine their profit returns from an investment property.

Profit and gain in investment are measured after comparing it to the original cost of the property and the income it generates as a percentage of the price.

What are the factors that affect the return on real estate investment?

The returns of real estate investment in Turkey vary significantly depending on a number of factors, including for example:

• First: The location of the property and its importance: It is likely that selling a property in a desirable location will be higher than a property in a less desirable location. Its proximity to schools, parks, or markets, as well as its distance from the city center or the beach, its views, and whether the property is in a serviced residential complex or a regular building, all affect investment.

• Second: Type of property: Residential (villa, apartment, etc.) or commercial (office, shop, hotel, etc.).
• Third: Size of the property: Naturally, the area plays a role in determining the price and the return on investment, whether increasing or decreasing.
• Fourth: Age of the property: Naturally, newer properties are more in demand than older ones, and selling a property that needs repairs or renovation is at a lower price than a new, ready-to-move-in property.
• Fifth: Additional property services and amenities: These are included in upscale residential complexes, becoming a mark of luxury and sophistication, such as the presence of a swimming pool, hot tub, gym, private gardens, various playgrounds, etc.
• Sixth: Quality of the property: In terms of finishes, quality of construction, and added technologies, such as smart home systems.

What is the importance of calculating the return on real estate investment?

It is certain that calculating the return on real estate investment is important for several reasons:

First: It helps determine whether the investment is profitable or not, knowing how much money the investment has made or lost, and whether the investment has met expectations or not.

Second: It also helps in comparing different investment opportunities and choosing between them for future benefit.

Third: In addition to the ability to track investment performance over time and whether investments are achieving their intended goals.

You may be interested in: Real estate investment funds in Turkey: Features and advantages 2023

How to calculate the return on real estate investment

In short, we can say: The total investment return is the amount of money you earn from selling or investing in the property, minus any closing costs or other expenses.

For example: If someone buys a property for $200,000, then sells it for $250,000, but after making repairs worth $10,000, the total profit will be $40,000, and the return on investment will be about 19%.

Best rates of return on real estate investment

It is not possible to specify a fixed number as the best rate of return that can be achieved in real estate investment, as the field is broad, properties differ, and profit returns compete from one location to another.

Property returns in some locations have achieved above-average figures, especially as the area where the property is located improves, its zoning map changes, or the location develops later on.

At the same time, it is possible for properties to sometimes achieve a negative return (loss), so the matter depends on the type of investment, its form, and making the right choice of property and location.

Read more about: Returns of real estate investment in Turkey compared to other countries.

Best countries in terms of real estate investment returns

There are many countries that can be ideal for real estate investment and can add more profits to your investments, including for example: Canada, America, Australia, New Zealand, Portugal, and Turkey also has a good share in this field, boosting the value of real estate investment there, especially within its modern properties with high specifications. The reason for this is the increased demand for this type of property, while the supply does not match the size of the demand.

In general, unless real estate investment adheres to the correct investment principles, you should not expect much from it, as successful investment has rules that should not be neglected.

Book your free consultation with Imtilak Real Estate

For those wishing to achieve successful and well-studied property ownership, Imtilak Real Estate offers the best freehold property offers in the most important Turkish cities, attracting the best investment opportunities in elite construction projects and complexes with high specifications, and at the best prices, based on its strong connections with major local and international construction companies operating in Turkey.

The main services of Imtilak Real Estate are divided into two sections:

Pre-purchase services, which include:

• Free real estate consultations.
• Reception from the airport to the place of residence.
• Hosting you in one of our guest apartments.
• Extensive real estate tours.

And post-purchase services, which also include:

• Organizing freehold and real estate brokerage transactions.
• Issuing the title deed as required.
• Related legal services.
• Receiving the property and ensuring it matches the contract terms.
• Issuing real estate residence permit and following up on our clients' files applying for Turkish citizenship.
• Opening a bank account.
• Preparing the property for use (decoration, furnishing, modifications).
• Property management through renting or reselling, and following up on taxes, bills, and fees.

And other professional services, which are rarely found together in one place...

Read more:

Apartment prices in Turkey and the most important influencing factors

Edited by: Imtilak Real Estate©