What is more profitable: deposit or real estate for investment?
Growing geopolitical tensions and the worsening economic crisis do not add optimism, and the question of the safety of savings is becoming more pressing.
Investors are trying to choose investment objects that will help them get maximum profits and compensate for rising inflation .
Today, some of the most popular investment options are bank deposits and residential real estate.
In this case, the profit on deposits is interest, and the profit from investments in real estate is both the increase in the value of the property itself and the income from its rental.
Profitability of real estate investments
Let's consider how much a purchase of real estate can bring using the example of a country like Poland. It is quite simple for a foreigner to buy an apartment in Poland; no additional permits are required.
The cost of a two-room apartment in a city of about 200,000 people is about 550,000 zloty ($137,000), and renting it out can bring in 2,000 zloty ($500) a month or 24,000 a year. Minus taxes it will be 24000-(24000*0.08)=22080 zlotys
It is easy to calculate that the maximum profit that can be obtained from the money invested and in the presence of permanent tenants will be 4% per annum.
You can also add to the profit the increase in the cost of the apartment itself, which on average in Poland is 12%.
That is, the potential profit from investing in real estate in Poland is at the level of 16% per annum .
The bitter truth about real estate investing.
Profit from keeping money on deposit
Recently, interest rates on deposits have increased significantly, and therefore this option is increasingly gaining popularity.
Today, Polish banks offer up to 7% on deposits throughout the year, but this is more of a marketing ploy and 7% is accrued for only 3 months during the year, and for 9 months you will receive lower interest on the deposit.
It is realistic to open a deposit with a fixed rate of 5% per annum, from which, after accrual, a tax of 19% will be deducted.
As a result, the net profit on the bank deposit will be 4% per annum .
What to choose, deposit or real estate?
At first glance, it seems that the answer is quite obvious; real estate clearly wins the probable profit with a score of 16:4.
But, taking into account the fact that the growth in real estate prices has noticeably slowed down over the past year, and many experts predict a fall in prices in this market, for now I would prefer keeping money in a bank deposit.
Moreover, you can store savings not only in a bank account, but also in brokerage accounts, for example, the broker RoboMarkets offers up to 10% per annum.