Category: buying real estate

Are real estate agents paid on commission only?

The answer is: It depends.

If real estate agents are paid on commission only depends if the real estate agent is self-employed or not. If not, he would get a monthly wage from his employer plus his share in a deal when he sold something.

Being employed

Any real estate agent who does not own a business is usually an employee at a bank or at a real estate office.

This can be lucrative. Although in this case the commission is not particularly large, he receives a fixed salary each month.

The commission varies greatly with the performance of the broker. In most real estate offices the performance-related salary would be between 20 to 50 percent of the commission.

Being self-employed

An alternative to an employment with a monthly salary is being self-employment as a real estate agent.

There is no fixed income, but the commission per sale or rental is higher.

Real estate commissions are based on the price of the property. The commission for a real estate transaction is negotiable. It tends to range anywhere from 1% all the way up to 10%.

But don´t forget, as a freelance real estate agent you also have more expenses, such as costs forrunning your office and possibly paying staff. These costs will lessen your profits. In addition, self-employed need to look after their health insurance and Pay taxes (income tax, trade tax, etc.).

Real estate agents carry a high economic risk, because they are responsible for the accuracy of their statements. Basically, they work for free until they sell something. Some properties may not be sold because of unrealistic price expectations of the seller. Also, some may sell only after many months and countless viewing appointments. In addition, buyers who contact the seller directly to bypass the commission pose a commercial risk to the real estate agent.

Real Estate Investment and the Rate of Return

Once upon a time there was a gingerbread house. It was lovely decorated with lots and lots of candy…

How often we have heard it. “If something looks too good to be true, it probably is”. Unfortunately, a real estate investment is no fairy tale with a happy ever after. Especially when it comes to profit, we must be careful with promises of an unrealistic high rate of return.

But to know if something looks too good to be true, we first need to know what is a realistic rate of return for a real estate investment? And how is it calculated?

The rate of return shows how much profit in percent is made per year in relation to the money spend. Like this it is possible to compare one real estate investment to another or even compare it to other types of investments.

When a percentage value is mentioned as a return on real estate, a serious investor should first ask what return is meant. A distinction is made between gross and net return (or some also call it “cap rate” meaning Capitalization rate).

The gross return covers purchase costs and additional purchase costs, but not ongoing expenses such as administration and maintenance costs or taxes.

It is calculated like this
annual income divided by purchase price x 100 = gross return in %

The net Return includes the current expenses except taxes, so the net return is always lower than the gross return.

It is calculated like this
annual income minus all expenses divided by purchase price x 100 = Net return in %

These are just the very basic types of return – of course there are others, more complex (price return, money-weighted return, time-weighted return…).

Let´s see an example.

You bought a house for 150,000 EUR and you rent it out for 700 EUR a month. Your expenses for the house are 2,000 EUR per year.

This means that your gross return is 5,6 %.
(700 EUR x 12 month) / 150,000 EUR x 100 = 5,6 %

Your net return on the other hand is only 4,26 %.
[(700 EUR x 12 month) – 2,000 EUR] / 150,000 EUR x 100 = 4,26 %

As a result, to get a good idea of your profit it is always better to look at the net return.

What is an average rate of return?

Depending on your country and the type of real estate (residential or commercial) your average rate of return would probably be something between 4% and 10%. Of course, the bigger the rate the better. But again, if the rate of return is very high in a real estate investment you must be cautious. Also look out for the wording “possible” or “potential” yield of …. Meaning you will need to do something to achieve that – maybe even investing more money.

So, if the rate of return in a real estate investment looks too good to be true maybe take a closer look at the tenant of this nice “gingerbread house” or bite marks on the walls….

How to generate passive income with real estate

Many people feel trapped: Pressure and stress at work makes them sick. The good news is, there might be a way out. Anyone can generate a passive income through real estate.

All you need to start is some savings or a good friend who lends you some money. When asking for a mortgage at the bank – depending on the bank of course – they usually would like to see that you have at least 20% of house price yourself.

The advantage of passive income through real estate

Setting up a passive income requires some work at the start. It requires some good decisions and a clever management of your real estate investments. If you want to be free of any work, you will probably ask a firm to look after it for you. After that you are laughing! It regularly fills up your bank account without you moving a finger. Life becomes light and free at once. Finally, you have much more time for the things that really matter to you. Usually only a small financing is necessary to get you started.

Financial freedom through real estate

Of course, real estate is not the only way. There are many ways to generate passive income. Some people write a song, a book or create some other sort of art… or others invest in the stock market. Much of it, however, takes a lot of effort and might not lead to anything. Real estate, on the other hand, is very well suited as a passive income generator.  Rental income will last for as long as you are a property owner. You can rent residential or commercial properties. Even if you are sick of it one day you can simply sell it again. 

Real estate as passive income: what should I consider?

Anyone who rents out a property must pay tax on the income. Also, the owner has a high responsibility towards the tenants. But this burden pays off in cash.  You can have it as simple or as complicated as you like… You are totally free to choose to which extend you like to do this. Some real estate owners bought a house one day and rent it permanently, that´s it. Others use the profits to finance the next house, increasing their real estate portfolio. They usually ask a specialized company to do the property management for them.

Once you generate a certain rental income, you can do things you really like. Now you can write a song, a book or create some other sort of art… and it will be more fun because you no longer have to earn an income from it.

House with swimming pool for sale – find cheap holiday homes

Are you looking to buy a nice property in the sun? Then it must come with a swimming pool, right?

When buying a second home many people are looking for that nice holiday feel: Palm trees, beach, cocktails by the pool… as well as peace and quiet, where you can just relax and unwind.

It all depends on your budget…

…you might think. But hold on. Of course, if you have the money you go for the full package: the best real estate in the best location. But only very few people are in that position.

If you are like most, you will probably invest some time on research to get the best bargain. By making some research in Portugal we found out that the local buyers are very different from foreign buyers. For example: A house in in a remote village does not look very appealing for locals, they must do a lot of travelling to go to work, bring the kids to school or to make shop.

Foreign buyers on the other hand love to be in a quiet spot where they can totally relax and forget their busy lives back home.

For foreign buyers this can mean cheaper deals if they look in remote areas.

For real estate agents this means more clients if they offer those properties specifically to foreign clients.

Now, but what about the swimming pool?

On our website you can search only for houses with swimming pool. Just hit the “show more filter criteria” link and you can tick the swimming pool box under extras. You can sort the results to see the cheapest first. This will give you an idea of what is available.

You can just use this link, too:

https://www.listproperty4free.com/houses-swimming-pool

If there is nothing that you like, don´t give up, good deals go fast! You can create a search alert (yes, including the swimming pool) to be the first to be informed when the next comes up.

And remember, you can always look at real estate without swimming pool that have a good size land and add one yourself. Depending on local prices it might be cheaper than you thought.

Happy swimming!

How do you like to spend your Sunday afternoons?

How do you like to spend your Sunday afternoons? Take a nap or walk the dog? Serious brunching or more serious biking? Window shopping or online browsing?

We recently were driving on a Sunday afternoon and saw a sign for an open house so we stopped to have a look around, as we weren’t in much of a hurry to get to where we were going. We spent maybe half an hour walking around this place purely for our entertainment. When we got back on the road, we noticed more and more of these open house signs and we wondered if we had stopped too early and if we had chosen the most interesting house to judge.

This is the thing about Sunday afternoons. I think even people who have to work have a different attitude about Sunday than about any other day of the week. It’s a day to be relaxed and refreshed, exercised and entertained. Of course this concept does not carry through to Israel where we lived recently. There, Shabbat is over on Saturday evening and everyone is back to work and school on a Sunday morning, the equivalent of Monday in the rest of the world.

Another thing Sunday afternoons are great for is big ideas. You’ve had a great weekend but now you start thinking about your routine starting up again the next day. You’re one of the lucky ones if this gets you more excited than disappointed. So maybe you have a dream to do something different – travel, set up your own business, start a movement, or buy a dilapidated property to renovate. This could be why Sunday is the busiest day for propertyunder20k.com: a combination of time off and escapism. We aim to cater to all these Sunday afternoon dreams.

Buying a property in a different currency – when to make the jump!

A good friend of mine recently bought a property in the US. He lives in Ireland and the property was as an investment. The property value was $360,000 US Dollars. He began the process of buying the property in question 6 months ago. At this time it was expected to cost him €310,000. This was based on the currency exchange rates at that time.

He closed the property 2 weeks ago (it took very long to complete the transaction due to it being a foreclosure property) and the actual cost was €288,000; a saving of €22,000 based on the exchange rate movement.

Whilst this worked out strongly in his favour I can’t help feel someone from the US who was buying a property in Europe and ended up paying far more than initially expected. It raises an interesting question though. Continue reading Buying a property in a different currency – when to make the jump!

Property prices react badly to wars – even a trade war

The big world news story at the moment appears to be regarding a trade war that has broken out between the US and China (although it could be argued that it is between the US and the rest of the world). Of course such a war will have an effect on many key elements of each world’s economy.

Being who we are, let’s talk about how it might affect property prices.

Generally speaking property growth relies on a stable local and world economy.

Continue reading Property prices react badly to wars – even a trade war

To Architect or not to Architect

For many years I must admit to being quote opposed to use an Architect and their (what I considered) exorbitant fees.

When it comes to house design I pretty much think everyone else’s idea is a good one.

Also I am not really one for putting my own stamp on things. All this meant I ways thought there was enough house designs out there already so why not just buy off a prescribed house plan rather than looking at designing your own pile. Just look through the catalogue and pick the design you want. In recent months though I am not so sure….

Continue reading To Architect or not to Architect

Generation rent

Generation rent is a generation of young adults who, because of high house prices, live in rented accommodation and are regarded as having little chance of becoming homeowners.

Doesn’t this feel like flushing money down the toilet?

First time buyers in England are not having it easy.

Before they can get a foot on the property ladder they may spend many years renting and end up spending more than 50,000 Pounds in rent.

Figures from the Association of Residential Letting Agents show that tenants will be renting for an average of 13 years and in 2015 spent 22% of their wages in rent. Continue reading Generation rent

Property transactions costs comparison between the US and Europe

I recently read an article which indicated that transaction costs for US property average between 9 and 10%. This seems staggeringly high to someone like me who is more used to costs around 2%.

The seller has to pay the majority of the US transaction costs and the largest part by far is the Real Estate Broker fee which is typically 6%.

Similar costs in Northern Europe are between 1.5 and 3%. Other overall costs are pretty comparable and consist mostly of taxes and legal fees.

Continue reading Property transactions costs comparison between the US and Europe