Real estate profitability has emerged as an attractive source of financial growth in the current economic landscape. In particular, the U.S. housing market has proven to be fertile ground for investors.

However, to make the most of these opportunities, it is essential to understand how to estimate real estate profitability effectively. For that, key factors such as the investment horizon, the investment portfolio and credit conditions must be considered.

Advantages of Investing in the U.S. Real Estate Market

  1. Stability and continuous growth. The U.S. housing market has shown steady growth over time. This gives investors confidence that their real estate assets will gradually appreciate. In addition, investments in real estate are less volatile than other types of investments, which represents an advantage for financial stability (El Heraldo, 2023).
  2. Geographical diversification. The United States is a vast and diverse country, allowing investors to diversify their real estate portfolio. This helps to reduce the risk associated with this type of investment, as it diversifies the portfolio and avoids dependence on a single local market.
  3. Positive cash flow. Many properties in the United States, especially those intended for rent, can generate positive cash flows. Rental income often exceeds operating and financial expenses. This is important when investing in Miami, a desired destination for tourism and housing.
  4. Access to financing. The opportunities to apply for credit in the United States are wide, especially for real estate investors. This includes mortgage loans with competitive interest rates.
  5. Tax benefits. The U.S. tax system provides several tax benefits to investors. Some of them have to do with deductions for depreciation and maintenance expenses.
  6. Legal security. The legal system in the United States is known for being transparent, robust, and respectful of property rights. This means that foreign and local investors can trust that their real estate investments are backed by a solid legal framework that protects their interests.

These advantages make the U.S. housing market attractive to investors seeking passive income or a long-term appreciation of their personal wealth.

How is real estate profitability estimated?

If you already have the turnkey in hand, there are several approaches to calculate real estate profitability. Two of the most common are cash flow performance and total return on investment.

Cash flow performance is based on the difference between rental income and operating expenses. Thus, a clear picture of the net benefits generated is provided (Dobaño, 2023).

On the other hand, there is the total return on investment. It considers both value appreciation and rental income over time. The basic formula to calculate this value is:

ROI*= (total profit − total cost) / total cost × 100

*Return on investment.

When estimating real estate profitability, it is essential to take into account additional considerations. For example, taxes, maintenance costs and possible fluctuations in the market.

Additionally, it is important to note that thorough research and understanding of the risks should be conducted before making significant financial decisions. This applies to any type of investment.

References

  • Dobaño, R. (2023). Investment cash flow: what it is and how to calculate it Quipu. https://getquipu.com/blog/flujo-de-caja-de-inversion/#como-calcular
  • The Herald. (2023). These are the advantages of investing in residential properties in the USA. The Herald. https://www.elheraldo.co/informes-comerciales/inversion-inmobiliaria-en-estados-unidos-segura-rentable-y-de-bajo-riesgo