What is more profitable: investment in real estate or a deposit

The fundamental question is where to invest their savings for guaranteed preservation and, preferably, an increase. And if in the CIS countries a bank deposit is considered a good option, then abroad this is not such a friendly offer. To understand which assets are better to invest in, let's compare investments in other real estate and a bank deposit.

Deposit rates

Interest on deposits in European banks is minor: for residents, they range from 0.2% to 0.8% per annum; for non-residents - even less, plus an increased commission and other payments for the maintenance of the account. In some banks in Germany and Switzerland, interest rates may even be harmful.

Even ten years ago, deposits were an excellent tool for increasing capital, and rates reached 6% per annum. For example, 12 years ago, a deposit in the Republic's bank of Cyprus for €100,000 made it possible to receive €6,000 per year. For comparison: if you now place the same amount in a bank in Cyprus with a maximum interest rate of 0.8%, you will earn only €800 in a year.

In Ukraine, a deposit in the national currency is now the most lucrative. When issued in hryvnia, banks give deposits at 8...9% per year, which is far less than 5-10 years ago. Only 1...1.75 percent when issued in US dollars.

Yield from the long-term rental

Those who rent out real estate provide more income than bank account holders. Consider the various options for investing in real estate in different countries.

When buying a 1-room apartment with an area of ​​45 sq.m in Kyiv near the metro for 1.4 million UAH ($50 thousand), you can rent it out for an average of 12 thousand UAH per month or 144 thousand UAH per year. The income will be about 10% per annum. The same UAH 1.4 million can be placed in a Ukrainian bank at 8...9% per annum or at 1...1.75% when depositing US dollars.

Important! However, when selling speculatively, it is important to consider the risks of investing in construction, which is typical of the Ukrainian real estate market and price changes. So, from 2009 to 2019, the cost of metropolitan real estate in dollar terms fell by about half, which crosses out most of the rental income...

Profit from guaranteed rent

The most popular investment program abroad is guaranteed rent. In Thailand, the guaranteed income for such a lease is 6-8% per annum of the cost of the apartment, and the program lasts from 3 to 15 years. The profit is transferred by the owner in one payment once a year. According to calculations, it can be extended or used in future programs for its purposes.

This exotic country has the most significant tourism revenue in Southeast Asia, at a record $66 billion a year. Hotel chains take advantage of this: they take control of apartment complexes and rent out apartments independently. Apartment owners receive an annual income fixed by the contract.

In addition, because of the popularity of real estate in Thailand, its value is growing every year by 5-10%. Selling an apartment, for example, after five years, besides guaranteed profits, you will receive a capital gain of 5-10% per year. For example: after buying an apartment for $100,000, rent at 7% per annum for five years will bring $35,000. Plus, the increase in value will be about 5% per year, and after five years, the apartment can be sold for $125,000. Over five years, the total profit will be $60,000 or 12% per year. Note that the Thai baht has become one of the few currencies strengthened against the US dollar over the past 20 years.

Income from investment in construction

By investing in a Turkish project at the "pencil" stage, you can earn 20-50% of the cost of the apartment. The sooner you enter the construction site, the greater the profit. For example, at the Pre-Sale stage in a new project from a well-known developer, the cost of an apartment was 40,000 €, six months later, the minimum price increased to 56,000 €. In just six months, the minimum price in a new building "grew up" by about 40%.

It is also worth it because real estate away from the seacoast of Turkey is being built for the domestic market. Thanks to loyal mortgage conditions and the growth of household incomes, many investors became interested in such projects. Now the situation has changed - because of the lira's fall, many new buildings in the center of the country have become unclaimed. Resort real estate is still of interest too many. Therefore, there are prerequisites for further price growth in the resort regions, where Turkish citizens invested more actively.

Summary:

Profitability from deposits in rubles/hryvnia/tenge is comparable to rental income from foreign real estate. Still, it carries serious currency risks, and the profitability of a foreign currency deposit is too low for investors' appetites. Therefore, investing in real estate with a subsequent lease, primarily when investing at the stage of excavation, looks attractive, and a fixed income from a guaranteed lease guarantees the safety of funds.

If the major goal is to generate income, then before choosing an object, we recommend building an investment strategy. It is necessary to clearly understand the entry threshold, exit dates, actual costs, etc.

Since 2012, our company has been engaged in selecting and selling real estate abroad. We are ready to share our experience and knowledge. Trust professionals, and you will save your money and increase it!