INVESTING
from rental income , we use the Net Rental Yield formula . It considers the annual rental income minus all the property expenses ( excluding debt services like mortgage payments ) as a percentage of the property ’ s purchase price or market value . To get a complete picture of your unleveraged returns on a property , make sure to add your capital appreciation to the Net Rental Yield .
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Reason # 2 : The Power of leverage to grow your property empire
Leverage is simply borrowing and using other people ’ s money ( OPM ) to finance a portion of a property ’ s purchase price or fund renovations and improvements . Whether from a bank or private investor , leverage can turn low returns into high returns !
Property is one of the best investments to leverage because of its stable growth characteristics and ability to keep its value well . With property , it is also possible to finance up to 100 % of the property through the bank . This means that you can acquire assets and build your asset base without putting any ( or very little ) of your own money down .
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Reason # 3 : Property Investment provides low-risk , passive income
When we tell people to invest in property , their eyes tend to go WIDE ! But the truth is that investing in property provides investors with low risk and relatively passive income .
Property is a long-term investment and will always be in demand ; therefore , it ’ s low risk . Investing in property also provides diversification for your investment portfolio . It adds an asset class with a different risk and return profile than traditional investments like stocks and bonds . Diversification helps reduce overall portfolio risk by spreading it across multiple investments . And you ’ re winning all the way …
If you buy intelligently , property investment also provides passive income streams through rental income , property appreciation , and long-term growth potential . Whether you outsource your property management tasks or do it yourself , you can enjoy the benefits of passive income without extensive effort with property investment .
45 AUG / SEPT 2023 SA Real Estate Investor Magazine