Which Countries are the Best to Invest in Real Estate

In which countries is real estate now more profitable to invest in? Where is the income from renting out apartments higher, and where is it lower? These questions can be answered by determining the return on investment (ROI) in different countries. We chose 5 popular countries and analyzed their ROI, thus figuring out where the return on investment would be higher.

ROI (Return on Investment) measures how much money or profit is received from an investment as a percentage of the value of that investment. In the case of real estate, it is the income ratio, expressed as an average rental rate, to the average price of the apartment.

How do you Calculate ROI in the Real Estate Industry?

To calculate the return on investment in real estate, you need to take the annual rental income minus property taxes, insurance costs, and other spending on that property, and then divide it by the total amount of investment you put into the property in the beginning.

Let's say you spent $110,000 to buy the condo and cover additional expenses, and your annual rental income (after deducting spending on property taxes, insurance, and other expenses) was $9600. So your ROI would be 8.7% ($9600 ÷ $110,000). 

So, let's move on to our analysis.

Poland

The average cost of a one-bedroom apartment (50 sq.m.) in the center of Polish cities is about 200,000 USD (one square meter costs about 4000 USD); outside the center, the cost of an apartment is 140,000 USD (a square meter costs about 2800 USD).
The cost of renting a one-bedroom apartment in the center of Polish cities is 770 USD; outside the center, it is 610 USD.

In Poland, rental income is taxed at a flat rate. Rental income up to 100,000 PLN per year (about 25,500 USD) is taxed at 8.5%. Rental income above this threshold is taxed at 12.5%.

So, the return on investment (ROI) in Poland, or, in other words, the gross rental income from real estate in percent:

• ROI (in city centers): 4.23%
• ROI (not in the center): 4.78%

ROI in Poland's largest cities:

Czech Republic

The average cost of a one-bedroom apartment (50 sq.m.) in the center of Czech cities is about 240,000 USD (the cost of one square meter is about 4800 USD); outside the center, the cost of an apartment is 180,000 USD (a “square meter” costs about 3600 USD).

The cost of renting a one-bedroom apartment in the center of Czech cities is 850 USD, outside the center it is 670 USD.

In the Czech Republic, income from renting out housing is subject to income tax. Rental income up to CZK 1,582,812 per year (about 70,000 USD) is taxed at 15%. Rental income that exceeds this amount is taxed at 23%.

Return on investment (ROI) in the Czech Republic (gross rental income from real estate in percent):

• ROI (in city centers): 3.63%
• ROI (not in the center): 3.80%

ROI in the largest cities in the Czech Republic:

Montenegro

The average cost of a one-bedroom apartment (50 sq.m.) in the center of Montenegrin cities is about 100,000 USD (the cost of one square meter is about 2000 USD); outside the center, the cost of an apartment is 78,000 USD (a “square meter” costs about 1560 USD).

The cost of renting a one-bedroom apartment in the center of Montenegro is 600 USD, outside the center it is 450 USD.

In Montenegro, rental income is taxed at the rate of 15%, and the costs incurred to generate the income are deductible. 

Return on Investment (ROI) in Montenegro (gross rental income from real estate in percent):

• ROI (in the center of cities): 6.05%
• ROI (not in the center): 5.92%

ROI in the most popular cities in Montenegro:

Turkey

The average cost of a one-bedroom apartment (50 sq.m.) in the center of the cities of Turkey is about 53,000 USD (the cost of one square meter is about 1060 USD); outside the center, the cost of an apartment is 32,000 USD (a “square meter” costs about 640 USD).

The cost of renting a one-bedroom apartment in the center of the cities of Turkey is 330 USD, and outside the center — 230 USD.

In Turkey, income from renting out residential real estate is subject to a progressive tax, the rate of which depends on the amount of income. Income up to 33,000 Turkish Liras (about 1025 USD) is exempt from tax, income from 33,000 to 70,000 Turkish Liras is subject to 15% tax, from 70,000 to 250,000 Turkish Liras is subject to 20% tax, from 250,000 to 880,000 Turkish Liras is subject to 27% tax.

Return on Investment (ROI) in Turkey (gross rental income of real estate in percentage):

• ROI (in city centers): 6.43%
• ROI (not in the center): 7.76%

ROI in Turkey's largest cities:

United Arab Emirates

The average cost of a one-bedroom apartment (50 sq.m.) in the center of UAE cities is about 160,000 USD (the cost of one square meter is about 3200 USD); outside the center, the cost of an apartment is 110,000 USD (a “square meter” costs about 2200 USD).

The cost of renting a one-bedroom apartment in the center of UAE cities is 1650 USD, outside the center, it is 1100 USD.

In the UAE there is no tax on rental income, instead, there are municipal taxes, which are paid by the tenant, municipal taxes depend on the location — each emirate has its own value of rent. 

Return on Investment (ROI) in the UAE (gross rental income from real estate as a percentage):

• ROI (in city centers): 12.38%
• ROI (not in the center): 12.00%

ROI in the UAE's largest emirates:

To summarize: the leader in ROI among the analyzed countries is the United Arab Emirates — depending on the city, in the UAE, you can expect an average of 6-9% in the city center and 5-10% outside. Other countries look less attractive, but it should be borne in mind that these are average figures, and, as in any other investment, it is worth considering many factors to maximize the benefits.