Calculate your rental yield to optimize your Airbnb real estate investment
As an investor, it is legitimate and even strongly advised to assess the profitability of a project over the long term. If, after much research, you have decided to go into the real estate field, you are choosing a long-term investment requiring a considerable personal contribution. But real estate can become a very good choice depending on your management of the project. Furnished, unfurnished, short-term or not, all projects will bring you specific advantages and disadvantages. If you have chosen the field of seasonal rental, our La Rochelle Concierge supports you in the study and calculation of your Airbnb rental yield and helps you make the best choice for your investment.
What is a rental yield
Although many questions arise when you want to invest in a source of passive (or semi-passive) income, the question of rental yield is essential to start and complete your project. But what exactly is rental profitability?
How do you determine good performance?
Return is an essential notion of a real estate investment. This is a quick calculation to assess the feasibility and financial implications of your project. First, the return on an investment is estimated against personal goals related to it. Would you like to live off the rental of your property or benefit from an attractive additional salary? Do you plan to buy new establishments afterwards to create a real estate fleet? Or do you want to make a profit from an inheritance or a purchase that you don't want to sell at the moment? All his questions move the cursor of your objectives and vary the balance between a good investment and a project sticking to your expectations.
The rental yield is calculated by taking the ratio between the investment provided in the accommodation and the sum of the rents generated per year from it. For greater clarity, you must take into account all the costs resulting from the purchase of your property (notary fees, bank loan, work) and its maintenance (rental charges, taxes, etc.).
If you want a comparative basis, it is generally estimated that a good rental yield is between 5 and 10% of profits.
Difference in yield and return on investment
The return on investment is a very important ratio to master when you want to grow your purchases of real estate. Professionals in the sector use the IRR (Rate of Return on Investment) to evaluate a home. The secret of investment professionals is based on the diversion of bank credit to play on the leverage effect.
It's about recouping the benefits of a rental by injecting as little personal money as possible into the transaction. For this, everything is played in the contribution. The rental yield takes into account the overall investment of the project vis-à-vis the profit recovered. The return on investment, on the other hand, calculates the amount you paid out of your pocket on the total recovered thanks to the rental.
How to simulate your Airbnb rental yield
To know the merits of your investment, you can easily calculate your rental yield by first determining the cash flow of your accommodation. That is to say how much your accommodation brings you annually or monthly.
Rental profitability (%) = (monthly rent x 12 months) x 100/amount of acquisition of the property
This will help you determine the gross rental profitability of your home. Your concierge in La Rochelle draws your attention to the fact that this calculation must be linked to more advanced statistical data. Indeed, although we consider a good return from the moment it exceeds 5%, you will not be able to obtain the same results depending on the cities of your properties. For example, the rental yield in Paris is estimated at 3,5% on average.
Improve your rental yield thanks to your concierge service in La Rochelle
The most important point for a rental property investment is not the amount you will pay for it, but the added value that you will be able to derive from the rental of your property over the years. You must evaluate all the financial indicators of your project such as the interest rate of your loans, the cash flow as well as the rental yield of your property. But also pay attention to other information about your surroundings. Your city of establishment, the rental obligations related to your area, the costs of co-ownership and management of your rental are also taken into account.
Have you thought about your personal investment? Often minimized, the majority of investors forget that in addition to investing money, a project of such scope requires time and patience. Your concierge in La Rochelle can support you throughout your project thanks to its knowledge of the field and its 10 years of experience in rental management. Investing in a concierge does not reduce your returns, because following your expenses, you will benefit from an interesting reduction directly on your tax form.
Once your property has been purchased, leave all of your rental management to us. The teams at your conciergerie in La Rochelle will take care of making your assets grow without asking you for the slightest effort. Management of advertisements, reception of travelers, cleaning and inventory, we will take care of everything.
Although calculating the profitability of a product is the nerve of war in real estate investment, there are several important parameters to correlate before deciding to buy a property. The percentage of your contribution, the interest rate of your loan, as well as the rents that you will receive come into focus in the calculation of your rental yield. Fortunately, several simple simulations allow you to assess at first glance whether the property you want represents an interesting investment. And while management expenses affect that profitability, don't discount the help of a professional rental management agency. Our concierge service in La Rochelle can, thanks to its experience, increase your rental income by an average of 25% over a full year. What positively influence your rental yield.
