Why invest in residential property?
Investing in residential property is a disciplined way to invest and allows for maximum leverage allowing you to maximise your gains. There are two ways to make money in real estate investing.
A term used to describe the rental income received relative to the value of your investment property. To calculate this figure, you take the total annual rental income and divide it by the value of the property. Generally a lower priced property will have a higher rental yield and as the price of the property increases, the rental yield will fall.
The most important part of investing in property is buying in a good location that will achieve high capital growth. This growth in value is known as a capital gain. This is where significant amounts of money can be made. The benefit of investing in residential property is that the banks allow you to maximise your leverage into the investment. This allows you to achieve compounded capital growth on an asset that is significantly higher than your initial investment. The portion between the value of the property and the owing debt on the property is called Equity. This Equity can be used to finance the next property purchase allowing you to create a property portfolio and ultimately become wealthy.
You have control
As a property investor you are able to control many elements of your investment. These can include deciding on:
- How much cash to put into the investment
- How to structure the borrowings
- What rent you wish to receive
- Managing the property yourself or having a professional property manager do it for you
- Whether you will do the repairs or if you want a trades person to do it for you.
Some factors are not in your control and you should understand how these elements can affect your investment. Some factors that you are not able to control include:
- Interest rates
- Rental and housing market changes
- Global and local Economic conditions.
“No other investment gives me so much control over so many aspects of making money. As a result it gives me total control over my life” Robert Kiyosaki