You may be planning on buying a property hoping that it offers good returns, but there are various factors that are to be taken into consideration so you can determine whether or not the property offers the desired returns. Yes, real estate investments do offer decent returns in the long haul, but then again, some real estate markets are volatile, making location and timing, among other factors key considerations in estimating the prospective returns.
What’s a good investment property?
There are two channels through which you get your returns on your investment. One, is the revenue generation stream, that you can appreciate by leasing the property. A good investment is one where the asset’s maintenance costs are low, and you make a reasonable amount of profit every month, after taking the other expenses into account. Another factors to take into account is the profit that you make at the time of sale. Make a brief estimation of how long you plan on holding the asset before selling. This should be over seven years at least. Then make an estimation of what the average appreciation rate for the property will be within that period in that location. Make an estimate of the capital gains tax and rate of ROI. This should be able to give you a good idea on whether it’s worth investing in the property.
A good investment property is all about good timing and choosing the right market. Ideally, if you could purchase a property at the bottom of the real-estate market and then take good advantage of the thriving rental market, you should be able to appreciate good returns. The geographical location will also greatly determine the rental market returns and the real-estate transaction profit that you make in the future.