Smart Property Decisions through Sound Analysis
If you are thinking of purchasing your first investment property, or perhaps adding to your portfolio, making the right decision can be based on a bewildering number of factors. Getting just the right combination of these factors can often be the difference between purchasing a GOOD investment, and a GREAT Investment.
You really can't just rely on the old cliché of location, location, location when it comes to residential property investment. You must consider the RETURN that the investment will be giving you. Is this return satisfactory when you weigh up the RISKS involved (borrowing), and does this return outperform other alternative properties or investments?
The level of return you receive from a property investment is dictated by both its cash-flow, and its ability to generate a capital gain over the period that you own it. We New Zealanders are still lucky enough to benefit from the lack of a Capital Gains Tax, and this fact makes property investment all the more profitable for would be investors. Remember these two vital items when considering any property investment:
CASH-FLOW and CAPITAL GAIN
Example 1
Purchase Price = $275,000
Gross Rent per annum = $30,000
Yield = Gross Rent/Purchase Price
Yield = 0.1090 or 10.90%
Now 10.90% is a relatively healthy return when you compare it to what you would get if you put your money in the bank.
But this return is over simplified.
We have looked at what GROSS INCOME our property is going to generate, but that's not what is going into our pockets.
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