Many people dream of being owners. The real estate sector in is one of the favourite investments of many, and that is not likely to change. But before embarking on real estate, it’s important to make sure that the investment will be profitable. It is important to take into account the steps to undertake and to have a clear idea of the expected results. You also need to know the key factors for success in real estate investments. A very useful tool for making forecasts is the rental investment simulation/calculation.
What is a rental investment simulation/calculation?
A rental investment simulator is a tool that calculates the profitability of a real estate project. It provides an overview of the financial balance sheet of an investment by rental leasing. It is a very precise calculation tool that is used to compare the profitability of several real estate investments.
How an investment simulation works
A fundamental step in your real estate project is the simulation of the investment. This will allow you to know in advance the cost of the investment and determine if it is worth it. The simulation will help you to identify the different financial data of your project to optimize your results.
Calculate monthly payments
It is necessary to make a provisional calculation to know how to distribute the monthly rental fees. The rent income must correspond to the monthly payment of the loan. When calculating the monthly instalments, the insurance portion of the loan should be taken into account, as well as the total cost of the loan, not to mention the calculation of all other fees. Once this calculation is done, it is possible to make the calculation regarding the profitability of your rental.
Calculate the rental yield
The real estate investor must imperatively take into account any indicators related to the rental yield during the calculation. Thanks to these indicators, it is possible to compare different projects to choose the most promising ones.
Evaluate the sum of the mortgage
Passing this evaluation requires the consideration of the amount of the optimal monthly payment according to the budget. This will accurately determine the amount to be borrowed from the bank. This is very important because you always have to know your purchasing power (ability to invest) before you start. A loan that exceeds the purchasing power will always have a negative impact on the profitability of the investment.