Capital gain in the real estate business
When we think about investing in a department, we know that the business is that the dividend of your mortgage is “paid alone” with the value of the lease, but the truth is that the benefits of this investment practice go beyond.
The capital gain in the real estate business is one of the main benefits of buying an apartment, either to live or to rent. Do you know it? Next, we explain to you what it is and what it depends on.
The capital gain is the positive difference in the acquisition value of a product and its sale value. That is to say, imagine that today you buy an apartment at 3,000 UF and in about 5 more years its value has increased to 4,000 UF and you decide to sell it. Those 1,000 UF difference that you earned without any effort are the added value of that real estate, is an increase in price that was given by causes external to you.
But not only do you win by the increase in value, but also the first 8,000 UF of capital gains you earn will be tax exempt. For more information on this tax benefit you can go to this link.
What factors affect the surplus value of a Real Estate?
The factors that affect the capital gain of a real estate are external to the control of the owners of that property. External causes related mainly to the development of the city are those that may positively affect its price. Here are some examples:
Accessibility to the building or the house:
The construction of new roads and highways that improve access to the site will play a positive factor in its price. However, this will happen only if they do not affect other benefits such as an environment free of noise and hazards.
Here, too, public transport plays a very important role. The proximity to subway stations and bus stops generates a great surplus value in the real estate located there.
In Santiago, many real estate companies are buying land and building in places close to the projected new metro lines, as the opening of these will generate a high demand for buying real estate in the area and, for investors, a high demand for leases with better prices.
Chile has an enormous territory and much of it is classified as “rural”. This means that the land can be subdivided into larger plots than in an urban area; moreover, certain services such as water and electricity may be a little more difficult to obtain.
As cities expand, land use can change from rural to urban, so your land will significantly increase in value as it can be, for example, subdivided into smaller pieces that allow condominiums to be made.
Aquí nos referimos a servicios básicos como el alcantarillado, electrificación, alumbrado y agua potable.
En zonas rurales, por ejemplo, estos servicios pueden ser difíciles de conseguir, y al llegar grandes empresas a instalarse pueden bajar su valor y al mismo tiempo aumentar la plusvalía de tu terreno o inmueble.
Location in the city and urban development plans:
There are communes and developing areas within cities that are known to the inhabitants. The rapid growth of Santiago and other cities in Chile has led to the expansion of cities and the emergence of new needs for schools, hospitals, green areas, recreation areas, restaurants, supermarkets, etc.
If you bought a real estate in an area with a high probability of development and effectively begin to install this type of services, it is very likely that the value of your investment will increase significantly.
However, be careful. There are developments that if not well planned can bring problems to the area, such as high traffic and low security. This usually happens with shopping malls, although current regulations try to avoid these situations by demanding.
The apartments in the same building can have very different prices due to the views they have, which is also affected by the floor of the building in which they are located. An apartment with a view of the mountains is not the same as an apartment with a view of the neighbor’s room in front.
Before choosing an apartment, consider the likelihood of other tall buildings being built that may take your eyes off your own property.
What if I don’t have any added value? Am I losing money?
When the real estate values are in UF your money will never lose value, because they are real and not nominal values. By this we mean that the value of the UF changes in conjunction with inflation in the country.
Can my apartment lose value?
It is very rare that real estate loses value, as they tend to increase in price over the years thanks to the developments and factors mentioned above.
However, a negative development for the area (such as the construction of a prison or the installation of a landfill) or a natural catastrophe (such as a flood) can negatively affect the value of your property or land. Outside of these extreme cases a “handicap” does not occur and property values and leases tend to increase over the years.