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 real estate purchase can bring in, using Poland as an example. Purchasing an apartment in Poland is quite simple for a foreigner; no additional permits are required.
A two-bedroom apartment in a city with a population of about 200,000 costs around 550,000 zlotys ($137,000), and renting it out could bring in 2,000 zlotys ($500) per month or 24,000 per year. After taxes, that's 24,000 - (24,000 * 0.08) = 22,080 zlotys
It is easy to calculate that the maximum profit that can be obtained from the invested money and with the presence of permanent tenants will be 4% per annum.
The profit can also be supplemented by the increase in the price of the apartment itself, which on average in Poland is 12%.
This means that the potential return on investment 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
Interest rates on deposits have increased significantly in recent years, making this option increasingly popular.
Today, Polish banks offer up to 7% on deposits for a year, but this is more of a marketing ploy and 7% is only accrued for 3 months during the year, and for 9 months you will receive lower interest on the deposit.
It is possible to open a deposit with a fixed rate of 5% per annum, from which, after accrual, a 19% tax will be deducted.
As a result, the net profit on a bank deposit will be 4% per annum .
What to choose, a deposit or real estate?
At first glance, the answer seems quite obvious: real estate clearly wins in terms of probable profit with a score of 16:4.
However, given that real estate price growth has slowed significantly over the past year, and many experts are predicting a fall in prices in this market, I would, for now, prefer to keep my money in a bank deposit.
Moreover, you can save not only in a bank account, but also in brokerage accounts; for example, the broker RoboMarkets offers up to 10% per annum.
