📈Yield Calculation For Holiday Properties

Holiday properties are attractive capital investments that have become very popular. Ideal for partial owner-occupation, as a retirement property or financial provision in old age, holiday properties are usually more suitable than many other financial investments. An accurate yield calculation for holiday properties is necessary, however, because not every in-demand holiday property is equally lucrative as an investment. Apart from the location, amenities and size of the holiday properties, investors are therefore primarily interested in the financial aspects of the investment. How much return can you achieve with a holiday property? We show you what options there are for calculating the return on a holiday property and how you can determine it yourself.

What is the gross yield and how can it be calculated?

The gross yield or gross rental yield indicates what percentage of the purchase price of the holiday property the annual rental income represents. For example, the income in the form of a basic rent from letting the holiday property amounts to 24,000 euros or $24,596 USD per year. If the purchase price is 350,000 euros or $357,837 USD, this means that the gross yield is 6.86 percent. To calculate the gross yield, simply multiply the annual basic rent by 100 and then divide by the purchase price. The gross yield thus compares the rental income with the purchase price. It serves as a simple yield calculation of a holiday property, but does not take into account the utility costs and maintenance expenses.

  • Example calculation of gross yield: 24,000 euros/$24,596.34 USD basic rent x 100 / 350,000 euros/$357,836.64 USD purchase price

What factors influence the net yield?

In addition to the calculation base of the gross yield, the net rental yield also takes into account the incidental acquisition costs and other consequential costs. After all, it is not only the value of a property that is taken into account when calculating the yield. The purchase of a holiday property entails incidental acquisition costs that are part of the investment. The rental itself also incurs consequential costs. These are therefore important elements when calculating the exact yield of holiday properties. This is because they are part of the non-apportionable operating costs borne by the owners of a holiday property and not its tenants. To calculate the net yield, reduce the annual rental income by the non-apportionable operating costs and the annual reserve for maintenance work. The result is the net rental income. Multiply this again by 100 and divide by the investment costs.

  • Calculation of net rental income = basic rent – operating costs – reserves
  • Calculation of investment costs = purchase price + incidental acquisition costs
Hamburg - Holiday properties are attractive capital investments that have become very popular. Ideal for partial owner-occupation, as a retirement property or financial provision in old age, holiday properties are usually more suitable than many other financial investments.

What are the costs for a holiday property?

Depending on the holiday region, the exact location and the type of holiday property, the purchase prices can vary significantly. A villa with a wellness area and pool as well as a fantastic panoramic view costs a lot more, but at the same time yields higher rental income. A small apartment is much more affordable. On the other hand, the rental income is lower and there may be shared costs for communal facilities. The yield calculation shows in each individual case which holiday property is suitable as a yield property. Even the purchase of a holiday property incurs additional incidental costs. This includes, for example, the notarial purchase agreement and the land register entry. Regardless of whether you only let the holiday property or partly use it yourself, you will incur basic charges for electricity, water, gas, telephone and internet. Likewise, the property manager, the cleaning staff and the garden maintenance staff also need to be paid. These expenses are ongoing, regardless of whether the holiday property is let or vacant. The higher the occupancy rate, the more wear and tear on the holiday property. Depending on the condition and age of the holiday property, expenses for maintenance and renovation may be incurred over time. You should make provisions for these in good time. The following costs are to be expected when investing in a holiday property:Incidental acquisition costs:

  • purchase price
  • notary fees
  • brokerage fee
  • land register entry
  • property transfer tax
  • financing costs

Non-apportionable operating costs:

  • development costs
  • road construction
  • garden redevelopment
  • furnishing      
  • property management
  • cleaning
  • maintenance
  • insurance
  • depreciation
  • reserves
  • utility costs during vacancy

Detailed yield calculation for a holiday property

While the gross yield only takes into account the actual purchase price of the property as well as the net rental income, the net yield is much more meaningful. It takes into account all investment and operating costs as well as reserves for future repairs. If you want a very detailed yield calculation for your holiday property, you can also take into account a vacancy rate or the owner-occupancy rate. Depending on the holiday region and location, you can expect different rental occupancy rates. While holiday properties in ski regions are suitable for rental in summer as well as winter, most holiday apartments and houses generate the highest yield in the summer peak season. Tax incentives make the purchase of a holiday property even more attractive. It should be noted here that owner-occupation can reduce or eliminate the tax rebate if you fall short of the required local minimum occupancy rate. If you are planning a longer period of owner-occupation during the peak season, you may miss out on valuable rental income. And this in turn then affects the yield of your holiday property.

What is important when buying a yield holiday property?

If you know how you want to use the holiday property, you should choose the best location for it. A pure capital investment usually brings the best return in popular holiday regions that make high occupancy rates possible. Beachfront or seaside holiday properties require a higher investment. As a rule, you will achieve significantly higher rental income in prime locations than in peripheral locations. Nevertheless, even holiday properties in peripheral locations can achieve an attractive return if the purchase price and the general conditions are correspondingly good. Holiday properties intended to serve as retirement domiciles later on require a corresponding infrastructure as well as age-appropriate furnishings. Accordingly, senior citizens are particularly suitable as a target group for these holiday homes and apartments when it comes to letting them out. Families with children, on the other hand, prefer outdoor pools, playgrounds and other tourist attractions in the surrounding area. Romantic holidays or a quiet location in the countryside is optimal for holidaymakers seeking peace and quiet. When choosing a holiday property, you should consider your investment potential on the one hand and the target group and their requirements on the other. The legal aspects should also be examined before buying a holiday property. Can the property be used for any purpose? May a holiday apartment be let out or used as a retirement domicile under the terms of the owner’s agreement?

As a Broker with Engel & Völkers, I will be happy to advise you in more detail on the subject of calculating the yield of holiday properties. Take advantage of our many years of expertise and find your high-yield holiday home or lucrative holiday apartment with us that meets all your requirements.

June Economic Commentary: Consumers bearing the brunt of policies’ unintended consequences

John Beuerlein 
Chief Economist 
Pohlad Companies

The Federal Reserve’s declaration of war on inflation has increased market volatility as investors position themselves for the anticipated economic slowdown resulting from the Fed’s tighter monetary policy. Except in a few instances, it is too soon to see the impact in economic data; however, consumer spending indicates an imbalance between supply and demand. The Fed’s actions are focused on slowing demand for products and services, but the supply side of the economic equation also continues to aggravate inflationary pressures.

Why Multifamily Real Estate is a Good Hedge Against Inflation? 

With inflation already a major concern, investors are looking for ways to protect their portfolios or even benefit from rising costs. One asset class that is becoming increasingly popular as an inflation hedge is multifamily real estate. The multifamily sector has some unique benefits, making it an exceptionally attractive investment.

Ability to Adjust Rents: The leases in multifamily properties typically last only one year, which allows property owners to respond quickly to inflationary pressures and adjust rents accordingly.

Necessity-Based Asset Class:  Multifamily real estate is a necessity-based asset and hence it is less likely to lose value during an economic downturn than other types of assets. Most people will pay their rent before paying for other expenses 

Maximizing Returns Through Value-add: The value of multifamily real estate is soaring, but investors can still find great opportunities by using a value-add strategy. This strategy allows an investor to purchase an underperforming property at a discounted price and significantly increase its value through renovations, improved management efficiencies, and rising rents.

Growing Demand: Home prices have increased dramatically over the past 18 months, and many signs point to this trend continuing. This is great for homeowners but bad for buyers, many of whom cannot afford to purchase a home. Since owning a home has become increasingly unattainable for many people, demand for rental units in multifamily properties has increased.

James Kandasamy

Your Guide to Home Staging

If you are beginning your home selling journey, first and foremost, congratulations. While undoubtedly stressful, this is also an exciting time, and I want to ensure you’re equipped with the tools you need for your journey.

According to the National Association of REALTORS® (NAR), homebuyers’ expectations are higher than ever before. Whether this is because of ever-popular home design television shows or easy access to home design inspiration, potential buyers arrive at showings with every intention of finding exactly what they have imagined. 

Deliberate and thoughtful home staging enhances your property’s unique features, ensuring your home stands out from other listings. Through proper staging, the physical landscape of the home becomes highly enticing to potential buyers who can already see themselves living there. Small changes here and there can have a huge return on investment and play a major role in differentiating your home.

When buyers are eager to jump at a house that they can imagine themselves calling home, why not do what you can to deliver it to them? With this in mind, Engel & Völkers and I are excited to present our new Home Staging Guide.

The Home Staging Guide

In the pivotal time before listing your home, reach out to real estate professionals and interior designers to make it the best debut possible. As a top advisor with Engel & Völkers, I know what home buyers are really searching for and the most effective ways of presenting homes. Within our Home Staging Guide, we have compiled key tips, tricks, and hacks into one comprehensive guide—just for you.

What to Expect Inside

The Home Staging Guide details the nuances of optimizing your home for buyers’ imagination. Doing so will protect the memories you have made, increase the value of your home, decrease the time spent on the market, and prepare you for your next chapter as best as possible. With the help of our Staging Guide and expert advisors, you can expect: 

  • Industry observations on what buyers expect to find.
  • Access to insider tips and tricks.
  • The resources to build a bespoke staging strategy.

Selling or Buying a Home? Here’s Your Guide.

Low housing inventory and tremendous demand for homeownership have created an exceptionally competitive marketplace. Entering the real estate market can be intimidating whether this is your first or second home. Buyers and sellers who come equipped with the essential knowledge, tools, and skills have an edge over others.

While being local market experts is our job, it’s important that both buyers and sellers understand what to expect throughout the process. As such, Engel & Völkers Americas is excited to present our Home Buyers Guide and Home Sellers GuideOur network of trusted advisors, spread across the globe, allows us to provide local expertise, global reach, and unparalleled service in real estate. Whether buying or selling, whether it’s a new adventure or the final pages of this chapter, Engel & Völkers is uniquely positioned to help you in each cul-de-sac, community, and country. 

The Home Buyers Guide

Your decisions when purchasing a home are among the most important in your life. A trusted sphere of dependable industry professionals is key to finding the right property—whether it is a first home or a dream home. Our advisors can help you find the homes that check all your boxes, as they understand the balancing act of purchasing a home that fits both your vision and budget. 

What to Expect Inside

The Buyers Guide details the nuances of the buying process from deciding the right type of property to evaluating the benefits of home equity, home financing options, and procedures. With the help of our Buyers Guide and expert advisors, at Engel & Völkers you will come to expect: 

  • Expert real estate advisors with extensive local knowledge.
  • Insights on how to leverage your buying power. 
  • A customized buying strategy based on specific budgets, needs, and goals.

The Home Sellers Guide

You may be wondering: how can I make the most of this unprecedented real estate landscape. Look no further than Engel & Völkers Home Sellers Guide. The key to an optimal experience is partnering with the best in the business. 

What to Expect Inside

Industry experts have reiterated the importance of capitalizing on the current seller’s market. We would be remiss to see your home sell for a lower price than it could with Engel & Völkers’ bespoke selling strategy. Prepared with the strength of an advisor’s local expertise and the reach of our global network, your home’s listing could be on the precipice of the most innovative selling strategies out there from revolutionized staging practices to the most up-to-date digital marketing methods. With the Sellers Guide and an Engel & Völkers advisor, your strategy will encompass: 

  • Extensive local knowledge and expertise.
  • Access to the most robust real estate market data available.
  • Exposure to potential buyers around the world. 
  • Customized marketing strategy developed for your property and more.

No matter where you are in the homeownership journey, let us do the work we do best—so all you have to focus on is making your next house a home. 

Find a home

2022’s Overarching Design Trend: Curves

“It takes more effort and care to create curves.” -Mario Bellini

Throughout the twentieth century architects, interior designers and homeowners alike have been enamored with modernism’s sleek, clean angularity. Which should come as no surprise as our world has continued to shift with global changes and technological advances that have introduced many to a new way of living and embracing the world.

While modern and minimalist homes continue to be trendsetters, the early years of the twenty-first century have left us wondering—is there room for more? Designers’ unwavering confidence in modernism has started to make room for organic, curvilinear architecture along with furniture and home decor that innately bring warmth and life to our homes.

“It takes more effort and care to create curves.”

Mario Bellini

A Modern Take

Architecture’s permanency implores designers to fashion long-lasting spaces that define generations. Early into 2022, many architects and clients are investing in new homes that, pivoting their design interests to include modern takes on arches. Historically rich, arches are a striking home element which help characterize the spaces we live in.

Interior Design & A Space for Play

Interior designers are reveling in the chance to create spaces that prioritize feeling over aesthetic.

Just as beautiful as their counterparts, these interiors are created with visual comfort and energy in mind. As homes become a mainstay for leisure, social and professional time, designing them to include spaces with functional appeal and positive energy is a must for many homeowners. 

Arched doorways, curved walls, and spiral staircases are examples of whimsical elements which oppose the assumption that white-box rooms are the way to go. These contoured aspects of interior design welcome guests into the home through their unique warmth and personality.

Furniture Designers & Redefining Luxury

Through furniture, nature and culture converse. The softness of sculptural, organic furniture encapsulates a desire for safety, warmth and benevolence. Designers have played a major role in establishing comfort as the ultimate luxury, creating sought-after organic homes with furniture resembling rolling hills, ponds and raindrops.

Designing the Ultimate Chef’s Kitchen

With people spending more time at home there has been an increase in home renovation projects across the Americas. In fact, home remodeling searches more than doubled in 2021, with kitchens remaining the most remodeled room.

As one of the most used rooms in the home, it’s not surprising that homeowners want to personalize their kitchens to better suit their needs, spending $12,000 USD on average. When remodeling the kitchen, culinary experts pay special attention to the oven, fridge, sinks, and cooking surfaces as these elements determine just how efficient a chef can be in their space.

The Oven

The oven is one of the most important appliances in the kitchen. While homeowners may not need all the advanced oven features that their favorite restaurants use, a higher quality oven does give home chefs more options. Cooking enthusiasts should consider buying convection or steam oven models for the most efficient cooking. A speed oven, which is a smaller oven that combines convection and microwave cooking elements, may also be a worthwhile purchase.

Models like the Miele M-Touch Series H6700BM come with a touch display, MasterChef automatic programs, precise temperature-controlled roasting and even a popcorn button.

Passionate cooks may consider investing in more than one oven to ensure multiple dishes can be cooked at the same time. Not only does this make cooking quicker, but it also increases the variety of meals that home chefs can create. 

The Sink

While every kitchen has a sink, a premium chef’s kitchen should have at least two, with one located on the island. Deep sinks are best for washing dishes and filling pots; so, ensure at least one sink can accommodate larger cookware. Ruvati’s low-divide double bowl sink features one deeper bowl to fit large dishes and one more shallow bowl for easier to clean items. The brushed stainless steel sink also includes rounded edges for easier cleaning and a sloped bottom for better drainage.

Depending on individual needs, homeowners may also consider buying sinks with other premium features like offset drains, integrated cutting boards, hands-free faucets, and multi-level interiors. If lugging heavy pots around the kitchen is a concern, position sinks near the stove or install pot fillers (small faucets) into the stove’s backsplash.

The Fridge

No chef’s kitchen is complete without a Sub-Zero, or equally advanced, refrigerator. In order to accommodate for large-scale cooking, consider investing in an oversized model with enough space for multiple large dishes.

Beyond size, homeowners should take features such as the fridge’s air purification system, vacuum sealer, and door style into account as well. For example, refrigerators with glass doors are currently growing in popularity as they allow home chefs look to assess what ingredients they have in one quick glance. 

Cooking Surfaces and Countertops

A chef’s kitchen cannot function without sufficient counter space which is essential for both prep and cooking itself. A simple way to increase counter space is the addition of an island that serves as a centerpiece for the workplace, around which all cooking activities will flow. When selecting the materials for countertops and islands, choose durable options—like butcher block, granite, or quartz—that require minimal maintenance and will last throughout the years. 

Home chefs may also want to consider adding a built-in trash chute to the kitchen island or countertops. Built-in trash chutes, like this one designed by Kegworks, are used by professional chefs to keep workstations sanitary and organized and can be a great addition for home kitchens as well. 

Homeowner Resources

HOME TEAM HOME INSPECTION has rounded up some helpful articles for homeowners. Read on for ways to determine if your pipes need repair, tips on how to prepare your home for winter, how plants can improve your health, and suggestions for refinishing hardwood floors.

7 signs your water pipes are in trouble

While spending more time at home, you’ve probably started noticing repairs you need to make. You may have even tackled a few projects to improve your home. However, there are some home improvements you might not consider, because they’re hidden until they reach their breaking point – like your home’s plumbing system.

You rely on the pipes to bring safe water into your home for cleaning, laundry – and drinking – every day. Unfortunately, you can’t usually tell something is wrong until they leak, creating water damage costing thousands of dollars.

The good news is, there are signs that indicate it’s time to repipe your home. And when you do it right, that one project can save thousands of dollars and lots of future headaches by preventing leaks, water damage – and unsafe drinking water.

Here’s what to look for:

1. Is your home over 50 years old?

If the original pipes weren’t replaced, repiping is a good idea – before large-scale water damage occurs. Older homes typically used galvanized pipes prone to corrosion, leaking and bursting.

If your house was built even earlier – around the 1920s – the pipes were probably made of polybutylene and/or lead. These materials are dangerous and should be replaced immediately. Polybutylene is highly prone to breaking and leaking, so it’s only a matter of time before a serious problem occurs. And lead seeps into drinking water, which can cause serious health problems for your family.

2. Do you have low water pressure?

When pipes contain rust or mineral buildup, it eventually restricts water flow into the house. By the time it affects your water pressure, it’s the result of years of buildup – a clear sign repiping is needed.

3. Have you had leaks?

Bigger problems start small. If you’ve welded or patched leaks in small sections of pipe, this can indicate your entire system is at risk.

4. Do you see a problem?

Stains, flaking, indentations or rust on the pipes signals corrosion. Corroding pipes may leak and should be replaced. Rusty pipes can also turn water reddish or brown, indicating the need to repipe to make your water healthy to drink.

5. Does your water taste or smell bad?

An unappealing smell or taste may also mean your water is unsafe, because of a breakdown of your pipes. It’s best to have them inspected immediately – and drink bottled water in the meantime.

6. Is it making odd noises?

If your plumbing rattles, clanks or bangs, this is a sign of a larger problem. You should have your pipes checked right away.

7. Does it run hot and cold? 

If your shower quickly switches from icy cold to burning hot, corroded materials may have broken off inside the pipes and jammed the anti-scald device or valve regulating your water temperature.

The inspection

If any of these signs sound familiar, take action and get help. Each house is different, requiring a unique repiping solution.

Experts should do a thorough site analysis first, checking your home for signs of leaks, such as moisture, mildew, foundation cracks and a running water meter. They should also conduct a water-usage review. Their inspection and recommendations will allow you to be proactive and prevent problems before they occur.

The solution

Once the problem is identified, it’s vital to replace pipes with a more durable material. An innovative solution to repiping homes is using Uponor AquaPEX, a flexible polymer piping material that resists corrosion, pitting and scale buildup while also offering greater resiliency in freezing conditions. Flexible crosslinked polyethylene (PEX) pipe lasts longer and also makes repiping less invasive. The pipe can bend around corners and fit into tight spaces without having to cut large holes in drywall.

Courtesy of Brandpoint Content

Warm wishes to you and your loved ones.

I’m excited and optimistic as we move into 2022. There are wonderful opportunities for us all to explore and I would love to assist you in yours!

Bespoke experience

When it comes to real estate, this means handcrafted attention to every detail, expert knowledge and insight, and meticulous white-glove service tailored discreetly for you.

Whether buying or selling a home, I, as well as  Engel & Völkers, ensure an experience of the highest caliber.

Sophisticated systems and smarter strategies are just starting points. It’s my standard of service exhibited by all of Engel & Völkers real estate advisors and license partners that sets me apart…and my standards are high.

As a global leader in luxury, Engel & Völkers provides our network with the brand power, expert knowledge base, and premium technology to ensure a bespoke client experience of the highest caliber and competence, each and every time. Having exclusive affiliation with the Engel & Völkers name, each brokerage is truly unmistakable within its market.

Global network

Across the street, across the country or across the world, our global network gives you the reach and coverage, premium experience and resources, and peace of mind you need when buying or selling a home.

Even more dynamic is the collaboration, idea-sharing, and referral benefits that truly connect us to each other and to the growing class of global homebuyers.

Reclaimed luxury

Luxury is more than an object or property, but rather, the fullness of life that begins and ends the day in the most important space we know: home.

The true meaning of luxury has been lost and in many ways tarnished by excess and price. It’s simply the enjoyment of the best in life; an experience of beauty and knowledge; and the intimate relationship of context, comfort and craftsmanship.

Every market is different, and every person distinct. From starter homes to dream homes and even castles (yes, I can help with those, too), I help you make luxury personally yours by discovering what it truly means to you.

Global Reach

Engel & Völkers offers one of the strongest global referral networks in the industry, with over 11,000 real estate professionals in more than 30 countries, actually working collaboratively to help our clients find their dream home.

Drawing on a rich European heritage, the Engel & Völkers brand and iconic signature shops are recognized, respected, and renowned the world over for delivering exceptional listings and bespoke client experiences. With each shop led by experts in their local market, Engel & Völkers delivers specialized, boutique customer care and attention—on a global scale.

Whether buying or selling a home, Engel & Völkers ensures an experience of the highest caliber and competence, exclusive expertise, and passion for all that we do, from Miami to Majorca, Boston to Belize, and everywhere in between.