Monthly Archives: July 2011

What is Rental Yield?

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Before I start, I should mention my easy Rental Yield Calculator here so you can verify any investment property yield quickly.

Whenever you are researching an investment property to buy, it is important to determine the rental yield (sometimes known as rental return) of the property.  The rental yield will be a big factor in how much cash-flow you receive (or lose) whilst owning the property.

So what is rental yield and how to calculate rental yield?  Rental yield is simply a ratio that shows the amount of rental income received in a year relative to the purchase price of the property.  For example, if your property would rent for $1000 per month, you would times that by 12 to get the annual income figure of $12,000.

3 Ways to Increase Your Rental Return on a Residential Property

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While it would be nice to charge our tenants whatever we like for renting our precious investment property, in reality we can only charge what the market is willing to pay or risk getting nothing at all.  Since we are professional investors, getting nothing at all is not really an option.

Of course, when you first start looking for an investment property it is wise to find one that has a good rental return as well as good prospects for capital growth.  However, once you’ve purchased that property, you will be at the mercy of the market as to how much rent you will get.

Buying Investment Property in New York City

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Once, one of the most expensive cities in the world to buy property, New York has come down in price since the GFC much like the rest of the United States.  This could represent a good opportunity for property investors to get into this high-end market while prices are at a more affordable level.

Located in the state of New York, New York City lies in the north-east corner of the United States.  It is often described as having 5 “boroughs” which are distinct locales that divide the city, these are: Manhattan (the main CBD with Wall St and Central Park), Queens, Brooklyn, Staten Island and The Bronx.

How to Obtain Quality Tenants

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If you self-manage your investment property, then it is up to you to advertise for new tenants before your property becomes vacant.

Even if you do use a property manager, you may have some say in the tenants that are allowed to rent your property.

A lot of people fear owning an investment property and getting bad tenants.

They are out there and a bad tenant can fall behind on rent, cause damage or just be generally uncooperative with the landlord or property manager.

Review of “Massive Passive Income from Property Investing”

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This is an ebook, written by Keith Mason that teaches how to use wraps and vendor finance to purchase investment properties to generate significant positive cash flow.

Although I’ve heard of this strategy before, I’ve never implemented it myself, but it definitely is a very legitimate way of getting more income from your investment.

What is Loan to Value Ratio?

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Loan to Value Ratio, often abbreviated to LVR is quite self-explanatory but might take you a little while to get your head around if you haven’t thought about it before.

Put simply, if you are buying a property worth $1,000,000 and the bank will lend you a maximum of 90% Loan to Value Ratio, then this means they will lend you $900,000 and you will have to put in the remaining $100,000.

Building an Investment Property Portfolio

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The whole idea around investing in property is to build long term wealth for yourself and your family, but what does this really involve?

Buying just one investment property and holding onto it until retirement won’t make you rich.  If it performs well, it will definitely be a nice asset to have with substantial equity and a small income stream to help out, but if it does not perform well you are left with an underperforming asset.

Use a Fixed or Variable Interest Rate on Your Investment Loan?

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With most mortgages, you can choose whether you want to use a variable interest rate or a fixed interest rate.  The variable interest rate is usually a bit cheaper up front and it will change each time the official cash rate changes.

A fixed interest rate on the other hand is a rate that your financial institution offers you that will not change over the agreed period of time.

For example, for the same investment loan, the bank may offer you 7% variable interest rate or alternatively, a fixed interest rate of 7.3% over 3 years.

Investing for Positive Cash Flow

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Investing for positive cash flow (also known as positive gearing) means buying an investment property that has a high enough rental return in order to cover all holding expenses and still have some cash left over.

This is easier said than done.

In most capital cities, rental yields average around 5%.  Therefore if you are paying 7% on your mortgage and 1% for other expenses (such as insurances, council fees, body corporation fees etc) you are making a 5% minus 8% equals -3% cash loss.  That is negative cash flow and you have to put in your own money every month to hold onto that property.

Managing Risk with Investment Property

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Owning an investment property comes with certain responsibilities with the primary responsibility being to ensure that your tenant is living in a legally safe premise.  Secondly, you need to make sure that you are protected from the tenant and that your property is protected from disasters.

Even if you already own one or multiple investment properties, it’s a good idea to review the potential risks occasionally to make sure you are covered in the event of an accident or disaster.

Buying Investment Property in Vancouver

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Situated on the western coast, Vancouver is one of the prettiest cities in Canada.  Part of the province of British Columbia, Vancouver has a population of around 2.5 million people.   However, it is also one of the more expensive cities in terms of house prices in all of North America and the most expensive in Canada.

Vancouver was hit quite hard during the GFC, but unlike most other cities, it has bounced back incredibly since then.  Since 2009, the median prices have gone up approximately 35%.  This surge has been attributed greatly to international investors such as those from China.

What is a Property Cycle?

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A Property Cycle is simply a term given to the different phases that a property market experiences over time.  Ultimately, any one property market will be subject to a multitude of factors that will determine whether prices are going up, down or sideways but the property cycle can give an indication of what is going to happen next.

And of course, if we can predict the future in a property market, there is money to be made.

But take it with a grain of salt as we don’t want to accept the future of the property cycle to be our only indicator of buying a good investment.

Investing in Boom Towns

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A boom town is traditionally a low demand area that has been revived by a major industry.  Examples of this are a regional town that has had a new mining operation started up which creates a whole lot of new job opportunities.

Other types of industries that can dramatically affect the demand of property in the area are Tourism, Government Departments, Military Bases or even Technology companies (think Silicon Valley).  It’s also possible that a town starts to become more popular due to new infrastructure (such as a train line or highway) that makes accessing it quicker and easier; however this factor by itself rarely creates the start of a boom.

Property Investment in QLD

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Queensland is a state of Australia and has a solid history of property growth.  Queensland’s capital is Brisbane and the most populous city in the state.

If you are looking to buy a propery investment in Australia, whether it be residential or commercial, Queensland definately has areas that have experienced great growth in the past and also offer opportunities for growth into the future.

Investing in Real Estate – A How To

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If you are just getting started with real estate investing, there are some important things you should consider before taking the big leap.

Buying a property can be a daunting idea when you realise all of the things that need to be done.  Looking, researching, negotiating, losing out to someone else, getting finance organised, getting legal advice, getting inspections done (building, pest, strata etc) and finally, draining your bank account to finalise the purchase!

Here we will discuss a few things to think about to help lessen the burden.