Ask Allan: Return on Investment

Hi Allan  

I’m interested in buying a home; what can I expect for a return on my investment?

Karen

Hi Karen

That’s a great question. Return on investment all depends on purchase price and other factors like furnishing. I would say to aim for a 5% return on investment. I know a lot of sales people quote much higher rates, often 10% and more, but from my experience 5% is reasonable and achievable. Of course if you pay list price for something that is overpriced, it’s going to be much harder to maximize profit.

Look for the deals. Also buy from reputable developers and make sure the properties have title. 10 years ago the notion that title could be in question was not as well known as it is now.

We’ve had owners come to us who were concerned that our rental rates were lower than what they wanted as they were told by their real estate agent that their condo would render a 13-15% return on investment. The owners admitted they knew nothing about the market but that they saw rates online which were higher than ours. I explained that just because someone’s list price is higher, that does not mean those are the rates they are getting.

There are many properties in Playa for rent and many new ones coming onto the market. If you buy low – at, or under market price – decorate well and have a good property manager who markets your property well, expect somewhere around a 5% return or higher. 10% is achievable if you steal the unit.  Look for someone who is desperate to sell.

Allan

Allan Lockhart

Co-owner, North American Standards