Is real estate still an interesting investment in 2023?

In 2023, real estate will remain a good way to obtain a passive income and thus build financial security. Real estate is a relatively safe investment, but there are potential risks and disadvantages, just as there are advantages to investing in real estate.

That is why in this article we discuss what you should take into account when investing in real estate.

The benefits of investing in real estate

One can invest in real estate in different ways. The choice of the type of real estate you invest in depends on the purpose and budget you have available. For example, you can invest in an investment property that allows you to earn rental income and therefore passive income. Below we discuss four advantages that investing in real estate brings.

Double the return

When investing in real estate you create a double return in contrast to other forms of investment. Because in addition to the direct income stream that you receive from the rents, the value of the real estate itself will also increase.

For example, there is an increase for homes in 2021 of between 6% and 6.4% compared to 2020. In short, you have short-term benefits, namely passive income, and in the long term you enjoy the increased value of the property. property. Of course, pay attention to any capital gains tax, which you can read about here .

Protection against inflation

Inflation refers to the general increase in prices of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money. In other words, inflation means that you can buy less with the same amount of money than before because the prices of goods and services have risen.

So due to the increase in inflation, the savings in your savings account suddenly become less valuable. When you choose to invest in real estate, you can also index the rental income. This is in accordance with the legal rules, so your passive income increases as inflation rises.

The leverage effect

The leverage effect (or leverage effect) in terms of returns refers to the impact of debt on the return of an investment. The leverage effect occurs when a company or an individual borrows money to invest with the goal of earning a return greater than the cost of the borrowed funds.

Leverage can be either positive or negative depending on how the investment performs. If the investment performs well, the return on the equity invested may exceed the cost of the funds borrowed. In this case, the leverage effect ensures that the return on total invested capital is higher than if no debt had been used. This can lead to significantly higher profits for the investor.

Tax benefits

There are also tax benefits associated with investing in real estate. This way you can still enjoy the federal housing bonus. Make no mistake, the Flemish housing bonus was abolished in 2020. The tax benefit of taxpayers is retained. This until 2023, after which it will be abolished. So now is the time to purchase investment real estate. You can receive a discount of up to €693 per year, as long as the loan is current.

Furthermore, the interest received on the mortgage loan is also deductible from the net taxable real estate income. Which also brings an advantage.

The possible risks when investing in real estate

Before investing in real estate, one should also consider the possible pitfalls. That is why we list the biggest pitfalls here and provide tips to limit the risks of these pitfalls.

An emotional investment

You invest in the long term, which means that the real estate market, like other markets, can experience fluctuations. The real estate market may therefore experience slower growth for a year or several years. This should not deter you and you must continue to stick to the plan that you have set.

Underestimating the extra costs

Landlords often find it difficult to estimate the maintenance or repair work on the property and therefore the additional costs. It is also important that from this year, 2023, there is a renovation obligation in Flanders. So when you purchase a home with an EPC label E or F, you are legally obliged to carry out an energetic renovation.

To avoid this, it is best to opt for new construction. Not only is this attractive for potential tenants, it also benefits your budget.

Not finding a suitable tenant

The biggest problem with investment real estate is vacancy. It is important to find a good tenant. You do this by creating an attractive offer for potential tenants.

Sometimes it can also happen that the relationship with the tenant breaks down. This may be due to overdue payments or due to damage found to the rental property. There is also legislation regarding this and Kasper & Kent can help you find a good tenant.

 

Tips for investing in real estate in 2023

The best tips to take with you to avoid the previous pitfalls are:

• Choosing the right location : this affects how quickly you can find a tenant
• Choose energy efficiency : this will save you a lot of work and a lot of costs if you fall under the renovation obligation
• Be assisted by a Kasper & Kent expert: The real estate experts at Kasper & Kent not only have a range of interesting investment properties, they know the applicable rental legislation. This way you will never be faced with any surprises .

 

Does investment real estate appeal to you? Then contact Kasper & Kent for an introductory meeting!