“Don’t wait to buy real estate, buy real estate and wait” — Will Rogers.
There is no doubt to say that real estate is a profitable investment. But can we simply jump into it without understanding the right strategy? First, search for the expected queries that come to your mind. It may include: What time should be suitable and what does the trending real estate market say? Spare time to sort out these queries and then move to the property buying process.
Once you are sure about it, the next step is the awareness of investing in real estate. The property offers high profit but it does not make a promise of it. It depends on the location and current market situation.
In this blog, we will help you to ensure your investment proves worth it. Read below to clarify it further.
1. Capital growth
Capital growth in an investment is a slightly different term from capital growth in real estate. It states:
“It is an increment in the value of an asset over a while”. So, this appreciation over the price of property changes with the time. You should see the growth trends of the market to figure out how much the property would give you after 5 years (or advancing years).
You can use property search tools to invest in capital growth areas. It gives you an idea about past sales, trends in the market, nearby amenities, and lease prices.
2. Rental yield
Another option to invest in real estate is rental income. It is quite ideal for investors who want monthly income streams. For this, you need to look for strong rental demand yield areas.
Rental yield is a figure of how a property is beneficial to you on a monthly basis. It can be calculated by balancing the monthly income from the rent and the cost of buying the property. When you buy a property, you pay for the mortgage fees, maintenance, and insurance. So, you have to select a way that covers these costs.
Consider an example to comprehend the calculation of gross rental yield. If a property worth $500,000 with a rent of weekly $400, the gross yield would be:
$400*52= $20,800
$20,800/$500,000= 4.16%
To calculate the net rental yield, consider the same example. We’ll take annual expenses as $4000.
Annual rent –annual expense
-$20,800-$4,000 = $16,800
$16,800/$500,000=3.36%
Note: The good rental yield should be 3-5%.
3. Location of the property
Location! Location! Location! It is the backbone of a property. If only the location is good, trust me, you can win the game. You can come up with the right location when you place yourself in the position of the client. Easy access to public transportation, facilities including schools, gyms, hospitals, and others plays an important role. Also, locations with nearby shopping malls, coffee shops, restaurants are attractions for the buyers.
A safe and peaceful environment should be the core interest and no risk are allowed. Some areas are under development, but it doesn’t say they will continue to do so. Undergoing development properties are quite affordable and they can pay off in the coming years. You need to be wise enough to figure out what goes best for you!
4. Type of property
You will buy what is pocket-friendly and suitable for you. But the type of the property is as important as the location. Let’s brief this statement
Wide rooms and kitchen might be appealing for a 5-member family, but it does not fit the apartment needs. Likewise, a fully furnished house is good for someone who plans to stay for short terms but not for someone who’ll shift after 4 years. It is crucial to understand the demographics of the area and then decide accordingly.
Buying a property for investment seems costly if you are expecting immediate earnings. On the contrary, leasing a house costs other annual expenses to be paid by you.
These are the examples that clarify the above statement. Buying the property can be a worth or a curse too (depending on how intelligent you are).
5. Age of the property
It is another important factor because it goes straight on your budget. As an investor in real estate, you have to pay other ongoing expenses. So, you should not take the wrong property that drains your time and money.
Older properties require big renovations, but it depends on their condition. Do a complete check of the structures and fittings of the house. Try to get professional houses with complete pest inspection before the final deal. You can go with the minor renovations but the bigger one is not good for your investment.
The depreciation schedule is also a factor in an old property. It says that the value of the property and other goods like carpet will decrease over time. After it, you need to claim tax deductions.
6. Features of the property
Though you would not be living in an investment property, think like the buyer or a tenant. By doing it, you’ll think about the things those potential buyers or renters look for. Amenities like 2 bedrooms with attached bathrooms and a big garage sounds good for rent. The overall design of the property is also a worth-seeing thing. Think of the questions like “Does it include everyday life necessities”? “Does it have natural and subtle lights”?
All the above-mentioned factors are interlinked with each other and not a single among them can be skipped.
Good thing is that the experts at Simply Wealth Group can navigate you through the ins and outs of property investment safely and securely. If you are a first-time investor looking to enter the market sooner, team Simply Wealth can help you get educated and assist you with tailored strategies to kickstart your journey to wealth creation.
Email us at mail@simplywealthgroup.com.au or give us a call at 1300 074 675.
