Real estate today remains a very popular area of investment, invest in real estate in Belgium has the advantage of withstanding inflation. It thus attracts many individuals who are looking to generate additional income or added value.
But how to invest in real estate in Belgium and what is the most profitable type of investment? This is what we recommend you discover here, with some information and tips for a successful investment in real estate.
Why invest in real estate in the United States?
Why invest in new real estate?
What is the best rental investment?
More and more individuals are considering making a rental investment to generate regular income. But which type of rental investment is currently the most profitable? Here is our ranking:
- Classic rental investment: it comprises buying a house or apartment for rent. In some sectors, this type of investment can bring a return of up to 10%.
- Rental investment in a second home: it comprises buying a property in a tourist place in Belgium to make a seasonal rental. Although management is more complex, performance is more important.
- Rental investment in nursing homes or assisted living: they benefit from a high demand with an increase in the population of seniors.
- Investment in professional premises: it involves investing in commercial properties for professionals and in particular in coworking spaces and other offices in sectors with high commercial interest.
- Investment in student accommodation: Finally, students still face difficulties in finding accommodation in cities where major universities are located. Demand is therefore high there and, although risky, this investment can yield up to 10%.
How to calculate the rental return on investment?
The ratio of its cost to the profits it brings calculates the return on investment of a rental investment. The formula to be applied is:
Yield = annual rent - real estate withholding tax (purchase price + purchase costs + work to be done within 5 years)
It proved a profitable investment when this rate of return on investment is over 4%.
I closely related recall here that the profitability of rental investment to the interest rate. The higher the rates, the greater the profitability should be.
How to invest in real estate without contributing to Belgium?
Would you like to invest in real estate but you do not have a capital that can act as a contribution? The ideal solution, in this case, is to apply for a mortgage loan.
Remember, however, that the contribution is often required because it will pay notary fees, agency fees, or serve as a guarantee to the bank.
Of course, the use of a mortgage loan will pledge the property that you are going to buy. It will also require a strong record with a large repayment capacity and low debt.
But this type of loan is interesting if you are buying real estate with a view to profitability because banking institutions usually easily finance rental investments given the income they can generate.
How to invest well in real estate when you are young?
There is no need to wait too long to make a real estate investment. But how do invest well when you are young?
The first thing to do is, of course, to buy your main residence. To do this, start saving as soon as possible with a savings book until you build up a contribution equivalent to a few months of salary. Once you are ready and your income is stable, therefore, start with the purchase of your housing, taking advantage of the current low rates.
If you do not have the opportunity or the means to invest in your main residence, you can also choose to turn to rental investment. This will allow you to invest in a more accessible property, even if it does not meet your needs or is in another city.
Also, make sure in this case to invest in a simple and easy-to-manage property with few works and a possibility of quick resale.
Where to invest in real estate in Belgium?
As mentioned above, the geographical sector in which you are going to invest in Belgium will be decisive for the profitability of your investment.
Among the most profitable municipalities in Belgium for this type of investment, we can, of course, find real estate investment in Brussels and, more particularly, the municipalities of Auderghem, Berchem Sainte-Agathe, and Wolowe Saint-Lambert.
We will avoid some municipalities where real estate is cheaper, such as Anderlecht or Molenbeek Saint-Jean, which suffer from a negative image except for some neighborhoods.
The cities on the outskirts of the Belgian capital are also interesting with Zaventem, Overijse, or Tervuren for houses and Vilvoorde or Dilbeek for apartments.
Finally, some municipalities in Walloon Brabant, such as Rixensart and Waterloo, and cities in Hainaut such as Braine-le-Comte, are also real estate investment places to consider.
How does a real estate investment fund work?
If you do not want to do rental real estate or can not invest in real estate, real estate investment funds represent an interesting alternative.
These are funds in which you can buy shares and which pool the capital of several investors to make joint investments in real estate. This type of investment product thus offers many advantages, including:
- Investments targeting several geographical sectors: real estate fund managers are constantly looking for the best opportunities in Belgium but also in the rest of the world, which makes it possible to diversify risks.
- The correlation between real estate and interest rates: when rates rise, it drives up the price of rents, and when they fall; it represents an advantage for people who want to buy. In both cases, the fund can seize opportunities.
- Management by professionals: finally, a final asset of real estate funds concerns the fact that professionals who exercise active management manage them by selecting the values that will compose the fund daily. So you don't have to worry about anything.
How to invest in participatory real estate?
Another trend in the world of real estate investment is that of participatory real estate. This is a kind of crowd lending that allows individuals to finance a project with their savings by investing as a loan from which they receive a profit.
Of course, projects financed by crowdfunding remain mostly financed by banks for at least half of the loan. The financing of large-scale projects, however, requires a significant contribution of equity from the developer, and this is where real estate crowdfunding comes in.
As for the yield and therefore the interest rate that investors in a real estate crowdfunding can receive, they are sometimes attractive with an average of 5%. Remember, however, that the higher the interest rate, the greater the risk.
Why invest in paper real estate?
Publicly traded real estate, also known as "paper real estate”, is becoming more and more popular and offers many advantages over a classic real estate investment. Here are the different reasons to make this type of investment:
- Low rates: Since interest rates have reached historic lows recently, they will rise again.
- More and more new properties: given that more and more investors are investing in real estate, buildings are multiplying all over the world and especially in some very promising segments, such as serviced residences.
- Less risk: contrary to what one might think, direct investment in real estate presents many risks. These risks may concern the difficulty of renting the purchased property but also a decrease in the latter's value. Another risk is the lack of diversification because most physical real estate investors only hold one or two properties. Finally, the liquidity risk is also important since the fees are high both when buying and selling.
- Several listed companies in Belgium: on the Brussels Stock Exchange, there are currently over 17 regulated real estate companies with very good dividends. The return on these values usually varies between 2.2% and over 3% depending on the sector. This RIS also has the advantage of ensuring a strong diversification.
- Different sectors and objectives: RIS can be of different types, with RIS that focuses on residential real estate, RIS that focus on student residences, and those that focus on commercial real estate and offices or service residential real estate.
- Professional management: invest in real estate in Belgium professionals manage the RIS and the investor, therefore, does not have to take care of anything, not even the administrative formalities.
- Low investment: The last advantage of RIS is that they require little capital. It is an investment accessible to as many people as possible that allows you to develop your portfolio.
What are rental income taxes in Belgium?
Investors who do rental real estate must declare the income from this activity. But the applicable taxation will depend on the object of the property and its use for the tenant. Here, we differentiate private use from professional use and mixed-use:
- For property assigned to housing: if we use the real estate only for private residential use, the owner must declare the cadastral income and not the rent received. This income will be indexed and increased by 40% and then added to other income. If the property is a furnished rental, it will be necessary to add movable income.
- For property assigned for professional use: if they rent your property for professional activity, it will be necessary to declare the cadastral income and the amount of gross rent received. The tax will apply to the gross rent minus the lump sum of 40% which may not exceed ⅔ of the cadastral income multiplied by a coefficient fixed annually.
- For property assigned partly to housing and partly to professional activity: if the tenant of the property uses part of it for his professional activity, it will be necessary to distinguish between the two assignments in the lease. The rules set out above will be applied according to the share of the property dedicated to each use.
How to invest in real estate abroad?
If investing in real estate in Belgium is an excellent way to make an interesting investment and generate additional income, it is also possible to invest abroad.
Indeed, you can quite decide to buy real estate in another country to rent it and get profit from it. The financing of this purchase can be done with a Belgian bank, but in most cases, a mortgage placed on another property in Belgium will be requested. You also have the option of making your home loan with a foreign bank.
But before investing in real estate in Belgium abroad, find out about the taxation applied and, in particular, about the need or not to pay a capital gains tax in case of resale.
Another question to ask when investing in real estate abroad concerns the transfer of the property in the event of death. Is this transferred to your surviving relatives or will it be necessary to pay inheritance tax and in what amount?
Thus, before opting for a real estate investment abroad, it is better to inform yourself well to protect yourself from all possible future problems.
Our 10 tips for starting real estate investing in Belgium
- Do not bet everything on the return: the net return on your real estate investment should not be the only element to consider and it is better to also know the risks.
- Trust your emotions: the purchase of a property must also emanate from a crush. So only buy a property that you like and in which you could live.
- Buy in the right sector: it is essential to choose the geographical sector in which you are going to invest by evaluating the environment, demand, and the number of rents.
- Check the energy performance of the property: the E-level of a dwelling, which represents the energy performance of the property and its fixed installations, must be low because of the recent strengthening of standards in this area. Without it, evaluate the amount of work.
- Check the occupancy of the building: with an investment in an apartment, the owners and not only tenants should occupy at least 50% of the building. This will ensure that the maintenance of the building will be correct.
- Make sure of the quality of the housing: of course, the quality of the construction, its age, and general condition are important elements to consider, especially when assessing the amount of work.
- Think about targeting your tenants: ideally, choose a home that will correspond to a wide target in which demand is high, such as singles or young couples.
- Compare loan offers: If interest rates are currently at the lowest, it is better to make an accurate comparison of the various home loan offers on the market to find the best financing.
- Draw up your lease carefully: if it is quite easy to find standard contracts on the Internet, it is better to ensure your safety by having a legally mastered contract drawn up by a professional.
- Aim for the long term: finally, keep in mind that an invest in real estate in Belgium is a long-term investment. Normally, your property will increase in value every year. It is therefore essential to wait for the right moment to sell it to realize an added value. It is indeed this added value that will represent most of the return on your investment.
