Real estate investors, understandably, want to know what the typical return on investment in their location is in order to fully understand their own returns. This makes one wonder: what is the average return on investment on real estate in Ethiopia?
Investing in real estate, and more specifically in properties to rent, can be one of the most lucrative and safest investments people can make. With long-term price when the property grows in value over time, a monthly cash flow, and tax advantages, owning and operating rental properties will increase your wealth so you can save for retirement, It might seem intimidating to know where to start, but investing in properties to rent is for anyone and everyone — no matter your age or experience.
In this informational blog post, we will discuss what the average ROI for your rental property is and how to calculate it.
Types of Properties to Invest In
For those new to real estate investing, rental properties can be single-family homes, apartment complexes, townhouses, duplexes, multi-family apartment buildings and as a commercial unit. The main advantage of owning and renting out a property is the monthly cash flow from rent payments — many argue it’s one of the safest investments you can make. Another bonus is that landlords can decide if they want a long-term or a short-term rental; or whether or not to go out at any time.
When you invest time and money into a property, getting the best possible return on your investment should be the main goal. This might mean opting for a long-term rental instead of a short-term rental or vice versa. Short-term rentals are becoming very popular as an alternative to pricey hotels in vacation destinations or high-tourism areas. On the flip side, long-term rentals provide more stability and consistency with year-long leases and committed renters; therefore a steady cash flow.
The old adage “location, location, location” is spot on when deciding what direction you are going to take with your rental property. Addis Ababa is the best top places to invest in long-term rentals in Ethiopia.
Potential advantage of Long-Term Rentals
Long-term rentals have been the traditional option for property investors for a variety of reasons, including:
• Longer lease length: Having a consistent deadline and a year-long lease will ensure you always have someone in your property paying rent.
• Less advertising: With a long-term rental property, you will only need to advertise when your tenant leaves.
• No utility payments: In a long-term rental, the tenants are usually responsible for taking care of their electricity and water and other utility payments.
• Renters will take care of basic maintenance: Long-term renters can generally keep the house clean and do minor repairs more space the house.
Metrics to calculate the potential of ROI on real estate?
Now, you’ve found a potential property that you think would be the perfect rental, how do you know if it’s a good investment? That’s where calculating the ROI comes in. Here are the basics of what you’ll need to calculate the ROI:
• Property Details: This includes the property value, property repair costs, square footage and number of bedrooms. Metropolitan Real Estate offers 1 to 4 bedroom apartments that meet international standards with high-end finishing materials from Europe and are supervised by experienced European site engineers to exceed your expectations.
• Mortgage Details: This would be the loan terms, down payment, closing costs and interest rate. Metropolitan Real Estate’s high ROI ambition for our buyers would be impossible to achieve if you bought with a loan. The ideal solution we offer is a flexible down payment with optional and long-term payment plans till you receive your key.
This allows you to flip your money and increase your time and earnings to pay your additional payment based on the progress of our construction.
• Rental Income Details: To calculate what the monthly rental income would be, you need to know the -rental value per month and the anticipated vacancy rate. Metropolitan Real Estate Apartments are unmatched investment opportunities that will yield you high rental income in USD per month if rented out. In addition to a high rental income, you will enjoy a premium lifestyle and property ownership, which will make you wealthy in a matter of years.
• Monthly Rental Expenses: You need to know what your monthly maintenance, monthly repairs, monthly utilities, monthly Home Owners Association (HOA)/dues and property management costs will be. No Worries! When you buy apartments from Metropolitan Real Estate, you won’t have to worry about unexpected maintenance and repair costs because we imported high-quality elegant finishing materials from Europe. After you receive your key, Metropolitan will support you in establishing a HOA, and property management will manage the rest.
• Annual Rental Expenses: This will be the annual property taxes and the annual insurance cost. Rental Income Tax is one of the taxes being recently enforced in Ethiopia. Even though it has been a long time since it was included in the income tax proclamation, it was started to be strictly enforced especially on individual home owners who rent out their property not more than 2 years ago.Return on Investment on a rental property: What You Need to Understand• Annual Rental Expenses: This will be the annual property taxes and the annual insurance cost. Rental Income Tax is one of the taxes being recently enforced in Ethiopia. Even though it has been a long time since it was included in the income tax proclamation, it was started to be strictly enforced especially on individual home owners who rent out their property not more than 2 years ago.
Knowing all of these details about a potential rental property will help you decide if it will be a good investment that aligns with your investment goals.
Let us connect today to start investing and grow your wealth! on Metropolitan Real estate, which has multiple ongoing projects such as The Metropolitan Tower at Bole Rwanda in front of Mamokacha cafe. Metropolitan Central Tower Luxury Apartments are around AU headquarters. Metropolitan Westview Standard Apartments is located at Total Soset Kuter Mazoriya and The Metropolitan Residence is located around Bole Main Road, In front of the Mega Building.
Contact us at the Ethiopian office: +251973404040 and the USA office: +1480 280 2242.
Reference – Forbes Biz Council