Price to Earnings (P/E) ratio in real estate

How to check if an apartment is too expensive? The P/E (Price to Earnings) ratio is the investor's simplest radar. It is calculated by dividing the property price by the annual net rental profit. If the ratio is 15, it means the investment will pay off in 15 years. When P/E grows to absurd levels (e.g., 30-40), the market is overheated, and it might be better to rent than to buy. To lower the ratio and speed up the return, buying first-hand is key. The lack of agent commissions lowers the initial purchase price, drastically improving the profitability of the entire venture.