Are you considering buying a property as an investment but not sure if it's the right time?

Real estate investments are considered unique compared to other types of investments because they can generate two types of appreciation. On the one hand, they generate rental income, on the other hand, they can appreciate in value over time. However, this trend may change dramatically in view of the current situation. In the short term, property appreciation is more likely to stop and you can only count on rental income. This also brings with it some positives. According to current statistics, rental housing prices are gradually increasing and purchase prices are decreasing or at least stagnating. It cannot be said that this will be a continuing trend, but it does create a short-term buying opportunity. In this article, we will introduce you to how to assess such opportunities so that you can react quickly.

We will introduce you to the ROI (Return of Investment) method, which you can easily apply to any investment property. If you want to calculate the real return on investment, you need to factor in costs. It is essential to identify all the costs associated with your type of investment quite accurately and deduct them from the projected gross return. This difference is called the net operating income. You then divide this amount by the amount of the investment. The purchase price of the property and the amount of the investment may vary, as the investment is affected by initial costs such as renovation.
ROI = (net income / investment) x 100

Example:
Annual sales: 192.000 CZK (12 x 16.000 CZK)
Total annual costs: 50,000 CZK
Operating income: 142.000 CZK
Investment: CZK 3,450,000
ROI = 142.000 / 3.450.000 = 4,11 % | (1 / 4,11 %) = 0,2433


This shows that the resulting return on investment in the example is 24 years.
In a similar way, you can quickly calculate the return on any investment property and make the quick decisions you need to make when there are interesting offers on the market.