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For those of you who didn’t know, the Terra Caribbean real estate company releases a monthly newsletter. In this month’s newsletter, Hayden Hutton, writes about Residential Capitalisation rates. Click here for a link to Wikepedia’s definition.
In a nutshell, Hayden reminds us that in the past, holiday home purchasers have invested in Barbados with the expectancy to benefit from double digit increases in the capital value of their home. This is further highlighted by the low return experienced and projected from rental income versus the costs associated with owning a holiday home. Some of these expenses are down to house management, full time staff, and maintenance.
The market capitalisation rate does not rely on the income from rent to determine the true return on one’s investment as it takes into consideration the capital increase in value.
With current market conditions considered, Hayden reports that recently perspective purchasers are looking much closer at the operational side of a purchase.
Important advice for developers and homewoners looking to sell up!