By: Ryan Pagal
We believe that property investment can earn you a good return over the medium to long term, and it could make you rich. But, that is only possible with knowledge and hard work, backed by the right professional advice. In order for you to be ready to start this profitable trip and make the right decision, we have prepared some property investment tips.
Positive cash flow is essential
One of the most important elements of successful property investment is positive cash flow. Your investment must generate more than it costs.
That means your income from the property must be sufficient to cover your mortgage or other loan repayments and interest, tax, property insurance, maintenance, and management fees — and provide a surplus.
Appreciation helps, but don’t bet on it
Property rises have continued to rise over time, so, in some ways, assuming the rise will continue could be seen as a reasonable investment strategy.
Combining appreciation with sound cash flow management reduces the risk and can generate good returns over time. Using property investment tips in the equation can create even greater benefits and further reduce risk.
Improve the property to add value
While appreciation can give you a return without any effort on your part, you can take a proactive approach and increase the value of the property through improvements.
At its simplest, you might add value to an older, neglected property by redecorating and refurbishing or replacing older doors and windows. But you can add value to any established property by adding additional rooms, for example, remodeling the interior to create more space, or dividing a larger property to create an additional source of rental income.
Make the most of depreciation
Like any physical asset, you can write off part of the value of the property as annual depreciation to reduce your business tax liability.
Although it’s essential to minimize the overall “running costs” of your property investment, those costs coupled with depreciation could be an advantage, depending on your tax situation.
Leverage your investments in a balanced way
Property investment looks like an attractive way to create wealth from many perspectives, with leverage a key contributor to success. But, it’s important to take a balanced approach and not over-commit.
You need to take account of trends in interest rates, which are currently at an extremely low level, as well as longer-term property values. The current surge in demand for rental properties and low-interest rates may change significantly when the pandemic is under control.
But, combining a balanced approach to leveraging with positive cash flow, a sound depreciation strategy, and high-yielding property improvements could put you on track for wealth accumulation — and might even make you rich! And to make that happen, it is very important to find someone who will give you good and useful property investment tips.
Wanna know some of the top mistakes to avoid when renovating a home? Click here.
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