Buying to rent: Is it really profitable in Morocco?

Sep 16, 2024

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Buying a property to rent out is an investment strategy that attracts many Moroccans. But is this option really profitable?

Whether you are a novice investor or a property owner looking to diversify your income, it is essential to understand the mechanisms of rental real estate to assess its profitability.

We will guide you in this thought process to determine if buying to rent in Morocco is really a good idea.

Factors that influence the profitability of rental real estate

Investing in rental real estate can be very profitable, provided you choose your property carefully and consider some essential elements. Several factors influence the profitability of a rental investment in Morocco:

Location: The Key to Success

In Morocco, location is the number one criterion for assessing the profitability of a property. Major cities such as Casablanca, Rabat, Marrakech, and Tangier are dynamic markets with high rental demand. Indeed, students, young professionals, and families are constantly looking for housing in these cities, which guarantees a high occupancy rate and attractive rents.

An apartment located near universities, business centers, or public transport is more likely to be rented quickly and at a good price. Moreover, developing neighborhoods often offer interesting investment opportunities, as purchase prices are still affordable.

The type of property

Choosing the type of property (apartment, studio, house, villa, etc.) directly influences rental profitability. Studios and small apartments are generally easier to rent, especially in large cities. On the other hand, villas and houses can offer higher rents, but their occupancy rate may vary.

Purchase price and additional costs

Rental profitability also depends on the purchase price of the property and additional costs (notary fees, taxes, condominium fees, etc.). For the investment to be profitable, it is crucial to evaluate the rental yield, i.e., the ratio between the annual rent and the total purchase cost.

If you buy an apartment for MAD 1,000,000 and rent it out for MAD 6,000 per month, the gross yield would be: Yield = (Annual rent / Purchase price) x 100 = (72,000 / 1,000,000) x 100 = 7.2 %

Rental demand

It is important to study the rental market in the area where you want to invest. In major Moroccan cities, rental housing demand remains high, particularly for small and medium-sized units. However, in rural or less developed areas, the rental market may be more limited, affecting the investment’s profitability.

Expenses and taxes

Expenses related to property management (maintenance, repairs, condominium fees) and taxes on rental income can impact profitability. In Morocco, landlords must declare rental income and pay the corresponding taxes. However, there are mechanisms to reduce these expenses, such as the deduction of loan interest, management fees, or expenses related to maintenance work.

The advantages of buying to rent in Morocco

Despite the various factors to consider, rental investment offers many advantages in Morocco.

Regular passive income

One of the main attractions of rental real estate is the ability to generate passive income. Each month, the rent received covers the costs associated with the investment (credit, expenses, etc.) and generates additional income. In the long term, once the credit is repaid, the entire rent becomes net income.

Building lasting wealth

When buying a property, you build a solid and lasting asset. Unlike financial investments, which can lose value in times of crisis, a property always retains some value. Moreover, it can be passed on to your children, giving them a tangible inheritance.

The appreciation of the property

In developing areas or sought-after neighborhoods, property values tend to increase over time. By investing today, you can benefit from rental income as well as realize a capital gain upon resale.

The leverage effect of mortgage credit

Real estate is one of the few investments that allows you to take advantage of the leverage effect of credit. You can buy a property with a limited down payment and finance the rest with a bank loan. The rent collected each month helps repay the loan while allowing you to become the owner.

Risks and precautions to take

Like any investment, rental property has risks that are important to know in order to anticipate them.

Unpaid rents

The risk of unpaid rent is one of the main concerns of property owners. To minimize this risk, it is recommended to carefully select tenants by checking their solvency and to take out insurance against unpaid rent.

Renovations and maintenance

A property requires regular maintenance and sometimes renovation work. These costs can affect the profitability of the investment if not anticipated. Plan a budget for possible repairs and maintenance costs.

Market fluctuations

The value of real estate can fluctuate according to market trends. Although real estate is a relatively safe investment, prices can fall in certain neighborhoods or in the event of an economic crisis. That's why it's essential to study the market well before buying.

So, is buying to rent profitable in Morocco?

The answer depends on several factors, including the location of the property, the type of property, purchase costs, expenses, and rental management. However, with good preparation and thorough market analysis, rental property can prove to be a profitable and sustainable investment in Morocco.

To maximize the profitability of your rental investment, choose dynamic neighborhoods with high rental demand, negotiate the purchase price and carefully evaluate potential rents. Do not hesitate to be accompanied by professionals to find the property that meets your expectations and financial goals.

Discover the best rental real estate offers!

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