I have chosen to invest in rental real estate. This will enable me to earn additional income and build up my wealth. However, in which city should I invest? Should I rent year-round or seasonally?
The most attractive cities for real estate investment are those with sustained economic dynamism and strong urban growth. These are large cities where people rent year-round, such as Casablanca, Rabat, Marrakech, Tangier, Fez or Agadir. This also implies a higher price per square meter in these cities.
On the other hand, seaside or mountain towns such as Bouznika, Assilah or Ifrane are attractive for seasonal rentals, with a lower cost than in the big cities, but with the requirement of furnishing the property.
If your property is located in an area that attracts tourists, you can benefit from a higher daily, weekly or even monthly rental price than a long-term rental, with prices per night that can be very profitable depending on the area and type of property.
On the other hand, renting seasonally also reduces the risk of non-payment, as tenants will generally pay you in advance. However, for the property to be profitable, you need to fill out the rental calendar and ensure that the property is sufficiently booked throughout the year, which is not a given for a seasonal rental.
As for long-term rentals, while they may seem less profitable, they nevertheless allow good visibility, since the rent is fixed and the rental period is known in advance. However, unlike seasonal rental, it presents a greater risk of non-payment.
Whether it's a studio, an apartment or a villa, to find the right deal, you should not dwell on the gross yield of a rental property, but rather look at the net profitability and return on investment. Once you have deducted utilities, council tax, insurance and an annual share for refurbishment from the rent, you get the net profitability of the rental property.
Tenant turnover can be much more significant for smaller properties, and maintenance work is more frequent as tenants may pay less attention to the upkeep of the property. So make sure you leave enough time to deal with changes of tenants and any maintenance work needed to prevent the property from falling into a rundown state!
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