10/08/2024
Información sobre tasa de capitalización de mercado requerida por inversionistas compradores de Activos Inmobiliarios en el mercado de activos.
Information about the capitalization rate required by investors purchasing Real Estate Assets in the asset market.
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The table shows the average price per square meter for apartments in san salvador metropolitan area, which are $1553.48 in the city centre, and $1023.14 outside of centre. We would consider the centre, not the downtown san salvador area, but the central business district of the san salvador metropolitan area which would be located mainly in the san salvador, antiguo cuscatlan and santa tecla districts, which contain the best quality office buildings and residential areas. while the san salvador district is still a mystery for me, because the data indicates that people are leaving the zone, whilst more and more high rise apartments are beeing built, other areas like antiguo cuscatlan and nuevo cuscatlan are receiving much of the people who are migrating. in my view, the prices per square meter for rentals of apartments are quite accurate, but there is not so much supply of 1 bedroom apartments, but some developers have identified the trend of people tending to live alone or couples not having babies, so it makes sense to analyze apartments of one bedroom. it seems that the price per square meter to achieve the target gry is quite high, but not impossible, which would mean that you would have to sell 50 square meter apartments with one bedroom in $2450 dollars per square meters and go into the market with prices of $122k one bedroom apartments, which is quite possible but means that you would need very young people with that capacity to buy such expensive apartment. it would not be for middle class but tend to be middle high and high class people. as an investment it seems like the best option, and it seems that it could be easy to get tenants that pay $690 per monthy and would have to have incomes of $2100 per month, which is quite possible. the cap rate of 3.71% seems quite attractive even if you compare it internationally. Net operating income has been calculated as 55% of AGI or gross rental income, and seems a quite accepted rule of thumb. On the other side, 3 bedroom apartments of 110 square meters, outside of the city centre, at $652. 68 per square meter seems very difficult to achieve for a developer, mostly because of the construction costs and not because of the land cost, because the land factor becomes more irelevant if you build high rise buildings and you can find cheap land, but the cost of construction has little or no elasticity. So it would be risky to find cheap materials, maybe building the apartments and selling them with nothing so the buyer could finish them, to be able to acheive construction cost economies. the other alternative would be to build cottages or more rustic and cheap buildings in rural zones that surround the city. that seems like a good idea. a monthly rent of $812 for a 3 bedroom apartment outside of the city would be super attractive and would find lots of tenants, so the risk of not renting the apartment for an investor would be very low. a property value of $71k would also have a lot of market, with a lot of investors willing to buy that type of property because of the cheap price per square meter and the market it could have. a cap rate of 7.47% seems quite well if we asses the risk of investing outside the city center.
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Revised Analysis and Comments
Introduction
This analysis examines the potential profitability of residential real estate investments in the San Salvador Metropolitan Area, focusing on 1 and 3-bedroom apartments in both the city center and outside areas. The analysis incorporates average property prices, rental income, gross rental yields (GRYs), and cap rates to assess investment opportunities.
Key Findings
Apartment Size and Location Impact Profitability
One-bedroom apartments in the city center present an intriguing investment opportunity. Despite requiring a higher initial investment due to the premium price per square meter ($2,450.89), the potential for higher rental income ($690.47 per month) and a reasonable cap rate of 3.71% make this property type attractive, particularly for targeting young professionals or couples without children.
Conversely, three-bedroom apartments outside the city center offer a potentially higher return on investment. The lower price per square meter ($652.68) and the potential for strong rental demand due to lower monthly rents ($812.87) contribute to a higher cap rate of 7.47%. However, careful consideration of construction costs and market demand is necessary.
Market Dynamics and Investment Considerations
The San Salvador Metropolitan Area exhibits distinct property market dynamics. While the city center is experiencing an influx of high-rise apartments, data suggests a population shift towards areas like Antiguo Cuscatlan and Nuevo Cuscatlan. This trend could influence future rental demand and property values.
Achieving the target price per square meter for one-bedroom apartments in the city center requires a significant investment, catering primarily to high-income individuals. However, the potential rental income and cap rate justify this premium.
Developing three-bedroom apartments outside the city center presents challenges due to construction costs. To mitigate these costs, exploring options like building cottages or unfinished units could be considered. Despite these challenges, the potential for strong rental demand and a higher cap rate makes this investment segment attractive.
Conclusion
The real estate market in San Salvador offers investment opportunities in both the city center and outside areas. One-bedroom apartments in the city center present a lucrative option for investors targeting high-income individuals, while three-bedroom apartments outside the city center offer a potentially higher return but require careful consideration of construction costs. Further analysis, including factors such as vacancy rates, property taxes, and market trends, is essential for a comprehensive investment decision.
