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Rental investment : a winning strategy to diversify your wealth
Definition of rental investment
Rental investment involves purchasing real estate with the intention of renting it out to generate regular income. It is a popular strategy to diversify one's wealth and create a source of passive income. Key concepts of rental investment include:
- Purchase price : The amount paid to acquire the property.
- Monthly rent : The income generated from renting the property.
- Gross yield : A performance indicator calculated by dividing the annual rent by the purchase price of the property and then multiplying by 100 to get a percentage.
- Expenses and taxes : Costs related to owning and managing the property, such as maintenance fees, property charges, and property taxes.
Practical example
Let's take the example of a studio in Casablanca purchased for 1,000,000 DH and rented out for 6,000 DH per month. Here’s how to calculate the gross yield:
- Monthly rent : 6,000 DH
- Annual rent : 6,000 DH * 12 = 72,000 DH
- Gross yield : (72,000 DH / 1,000,000 DH) * 100 = 7.2%
This means that this studio generates a gross yield of 7.2% per year. However, it is important to deduct expenses and taxes to obtain the net yield, which provides a more accurate picture of the actual profit.
Attractiveness of rental investment in studios
Rental investment in studios offers several advantages that make it particularly attractive:
- Financial accessibility : Compared to other types of real estate, studios are often more affordable, allowing a larger number of investors to enter the real estate market.
- High yield : Studios, due to their relatively low purchase price, can offer higher yield rates than larger properties.
- Sustained rental demand : Studios are highly demanded by young professionals, students, and expatriate workers, ensuring high occupancy and stability in rental income.
- Flexibility of use : Studios can be rented traditionally or seasonally, depending on their location and tenant profile.
- Low maintenance costs : Generally, studios require less maintenance than larger properties.
Why invest rather than let your money sit idle?
Investing in rental real estate offers significant advantages compared to letting your money sit idle in a bank account:
- Protection against inflation : By investing in real estate, the rents received and the property value generally increase with inflation, protecting your purchasing power.
- Higher yield : Interest rates on savings accounts are often low, especially when adjusted for inflation. In comparison, rental real estate can offer much higher yields.
- Passive income : Rental investment generates regular income through rents, creating a source of passive income.
- Capital appreciation : In addition to rental income, the value of real estate tends to increase over the long term, allowing for capital gains upon resale.
- Wealth diversification : Investing in real estate allows for asset diversification, reducing the overall risk of your financial portfolio.
Focus on the real estate market in Morocco : Casablanca, Marrakech, Tangier, and Rabat
To determine the best neighborhood to invest in a studio, it is essential to compare sales prices with rental prices to identify areas with the best yield potential. Agenz teams have collected nearly 5,000 listings and transactions of studios in the cities of Casablanca, Rabat, and Marrakech over the past 12 months to determine an average price per square meter of studios by municipality and neighborhood in these three cities.
Casablanca :
- Casablanca Finance City : Average sale price of 25,800 DH/m², average rent of 8,900 DH/month.
- Maarif : Average sale price of 20,600 DH/m², average rent of 7,000 DH/month.
- Ferme Bretonne : Average sale price of 19,000 DH/m², average rent of 7,500 DH/month.
Marrakech :
- Guéliz : Central and attractive neighborhood for expatriates and tourists.
- Hivernage : Known for its luxury and comfort.
- Palmeraie : A popular resort area for seasonal rentals.
Rabat :
- Hay Riad : Growing business district with strong rental demand.
- Agdal : Known for its amenities and accessibility.
- Souissi : High-end residential neighborhood.
Market evolution for the coming years
The rental investment market in Morocco remains stable and attractive, particularly in times of economic uncertainty. Real estate remains a safe haven against inflation, providing protection against the erosion of purchasing power and ensuring regular income. With current scenarios predicting sustained inflation, real estate positions itself as a safe and profitable investment.
Good to know : focus on laws related to rental investment
Taxes and fees in rental real estate :
- Rental income tax : Income generated from renting real estate is subject to income tax.
- Deductible expenses : Some expenses can be deducted from rental income to reduce the taxable amount.
- Housing tax : An annual tax paid by the property owner.
- Corporate tax (IS) or tncome Tax (IR) : Depends on whether the rental investment is made through a company or individually.
- Value added tax (VAT) : Generally, renting bare housing is not subject to VAT.
- Capital gains tax : Upon resale of the property, a capital gains tax may apply.
Conclusion
Investing in rental real estate in Morocco, particularly in studios in Casablanca, Rabat, Marrakech, and Tangier, offers numerous advantages, from protection against inflation to high yields. At Agenz, we support investors by providing precise market analyses and practical advice to enable them to make informed and optimal decisions for their rental investments.
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