Opinions

Does Buying Property to Rent Make Sense Anymore?

In Malta, the property has always been perceived as one of the safest investments you can make. The value of the property has always increased when looked at over an extended stretch of years. Anyone who bought property in the past years is highly likely glad that he has done so due to the remarkable increase in value. With all the controversy surrounding the property, you get various commentators who express different views, which may be interpreted as being in two opposing extremes. On one hand, you will find those who encourage you to invest in property, whilst others will state that the market cannot go on like this and it is only a matter of time until a strong correction takes place.

In this article, we will discuss whether investing in a property to rent is worth it or not in this current market. The recent reports of dips in sales, when compared to last year, will undoubtedly create a sense of cautiousness where some might wait before making a large investment. This may be wise considering that with the dip in sales, we might see more affordable property prices.

In most cases, when one buys a property for rent, he will need to take a loan. When considering the prices of property and the loan repayments required, together with rental income, it is quite clear to see that during the first few years, it would be quite difficult to make a profit. You might in reality just break even. Whether it would be a worthwhile investment depends on your financial objectives. If you are willing to wait a few years before your rental property generates substantial profit, it is a good investment. If however, you are seeking something which renders you immediate profit, a rental property may not be the best option. One must also keep in mind that the Central Bank has tightened regulations when it comes to buying a second property for rental purposes, requiring a higher deposit, which makes it more difficult to invest.

A number of factors will also determine if a particular property is worth the investment. One would need to consider the price, size, location, whether it is served with a lift and also the going rental rate for such a property during the different months of the year. One will also need to analyse which type of rental strategy he will adopt, will it be short-term or long-term lets? Both have their advantages and disadvantages and will ultimately impact whether the investment is worth it or not.

What is your view on buying property for rental investment? Let us know in the comments section.

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