Optimizing Your Investment Real Estate Returns
Numerous factors contribute to achieving high capital appreciation when investing in property.
To begin with, when deciding upon a location to invest, you should choose an area with a growing population. This will ensure demand for rental homes in that locality, and hence put future pressure on both price growth and rental growth.
To ensure further demand for your rental property, it is best to ensure that you don’t invest in something at either the top or the bottom end of the market. In reality, your best choice is to select a middle-range rental property that will be affordable for most people, or more specifically, the middle-classes.
Millionaire Australian real estate investor Hans Jakobi follows this investment principle. Top end real estate is too susceptible to recessions. During the boom times, high end properties can do very well, but the good times never last, and high end real estate is the first to take a hit at the outset of a recession.
Similarly, low-end properties can under perform the market in terms of capital appreciation because the areas in which they are situated tend to be less desirable. Not to mention the fact that the type of tenant you are likely to draw with a low-end rental home could turn out to be a more high maintenance type of tenant, with a higher chance of defaulting on their rent and a higher chance of taking less good care of your rental home compared to a middle class renter.
The following linked article on selecting high growth investment property covers many other elements that form the recipe of successful property selection. There are also a number of Real Estate investment training courses in the Success University curriculum from renowed experts such as Loral Langemeier, Claude Diamond, Robert Allen, and William Bronchick. You can obtain a 14 Trial access to Success University for only $2 to check them out.
It is also important to analyze the numbers pertaining to your prospective property investments just as you would do with stocks. You need to compare price-earnings ratios; gross versus net yields; internal rate of return; compounding interest, and before and after tax cashflow.
There are numerous software programs that can perform this type of analysis. One of the leading Australian programs is called the Posh Property Software. It allows you to number crunch and compare multiple prospective purchases against one another and produce a comprehensive Inspection Check List which you can print out and take with you when viewing prospective properties.
To conclude, it is not only important but also extremely worthwhile to take the time to become educated about property investing before going ahead with your first, or next, investment. It is important to fully grasp the elements that will contribute to a high level of capital appreciation, and then to find and analyze several properties that meet these factors to be certain that you are stacking all of the chips in your favor.