What's in it for me?
Dipping your toes into the world of property investing can appear daunting. Particularly the lack of knowledge surrounding what you'll get back.
After all, knowing about your returns is what investments are all about. But choosing the kind of investment loan, where you buy and whether you engage the services of a property manager are just some of the decisions you'll be making.
But what are the main types of returns to be had from from investing in property? Let's have a look at the two main ways you can benefit from taking the plunge.
The key to generating a steady income is to get reliable tenants into your property and then finding a way to keep them.
Much like some sharks need to keep swimming to stay alive, it is imperative that your rental income keeps flowing. Otherwise, you may need to step in and stump up your own money towards loan repayment obligations. But that's not part of the plan. There are many things you can do to improve the likelihood of avoiding long periods of vacancy and the stress that this could bring.
When choosing an investment property to purchase, one of the chief criteria governing your decision should be how attractive the place would be to prospective tenants.
As an example, an incredibly designed house with stunning ocean views may appear irresistible to anyone, but proximity away from transport options could be hard to sell.
Another way that a property can generate a return is through capital gain - you buy it for one price and at some stage in the future you manage to sell it for more.
But whether or not a given property will appreciate in value depends on many factors -including property sector trends, the state of the economy, demographic growth and even dumb luck!
For instance, the expansion of public transport routes within a suburb can improve its attractiveness in the eyes of those working in employment centres in neighbouring suburbs. As they start to buy up properties, the increase in demand can drive prices up all across the area.
Another scenario is that a relaxing of interest rates can encourage more first home buyers to enter the market, which could boost activity in many different locations, having a subsequent effect on median house prices.
Time is a critical factor when it comes to capital gains and the length of time owners wait before seeking to profit from the sale of their investment properties can have a significant impact on their return.
That's because the property market is not a straight line on a graph but tends to more closely resemble the printout of a Richter scale reading after a series of small seismic events.
There are often a lot of ups and downs over the short term. These can make for exciting opportunities for the fleet of foot, yet usually the longer you hold on to a property the more likely you are to benefit from the tendency of property to appreciate over the long term.