As a young investor you may be more focused on the rise in capital value; whereas someone in their golden years can be more focused on generating income. Property is one asset class that does both, rising in value and generating income. It is often referred to as the “IDEAL” investment.
“IDEAL” is a simple acronym that highlights just some of the key benefits of owning real estate:
Property Investing: Income
One of the key benefits of property investment over many types of investments is its inherent ability to generate passive income. When investing in property the key thing is to focus on net income. Many real estate agents will quote gross yield figures i.e. the annual rent as a percentage of the property price. Whilst this is a reasonable indicator of your potential return on investment, I prefer to focus on net yield or net income. You absolutely must have net positive cash-flow otherwise you haven’t got an investment on your hands but a burdensome liability. The challenge in property investment is to minimise the down payment (which will maximise your mortgage) whilst at the same time generating positive cash flow each month.
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To the readers: Do you get a good net income from your property investment? What are the main things to consider when investing in a property? Looking forward to your comments!
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