How Private Mortgages Can Beat Property Rental in Gross Yields
There are many reasons why private mortgages are becoming increasingly popular as an alternative investment style among private investors and SMSF's, and the most recent reason is the following study.
According to recent analysis published by Smart Investor magazine, property investor's gross rental yields rarely exceed 7%, even in the top suburbs of Australia.
The analysis was published along with a list of 601 suburb hotspots, out of which only 47 suburbs offer rental yields of over 6% p.a., and only 8 suburbs offer 7-8.7%.
This shows that when comparing apples to apples, private mortgages easily beats property rental investments in terms of returns, with private mortgage investments yielding a minimum of 8%, and up to 12% p.a.
So, while the median price of a house in a hotspot suburb like Brisbane units in Queensland is $430,000, and the median gross rental yield is 6.5%, the median price of a private mortgage is around $95,000, and the gross yield starts at 8% p.a.
Another important factor in the comparison is the cost of initial investments, to get the mentioned above returns in property rentals you'd have to own a property in one of the hot suburbs, with median prices ranging from $200,000-450,000, while private mortgages pay-out their yields with as low as $50,000 investments.
And when it comes to the safety of the investment, private mortgages are unarguably more secured, as it typically funds up to a maximum of 75% of the security value, meaning that while any decrease in the original property value would result in a paper loss for the typical property investor, a private mortgage buyer would be safe and still profiting, even with severe property decreases of up to 20-25%, which are not very common.
Moreover, while it costs money, time and effort to maintain and manage a rental property, a private mortgage does not require any management or upkeep costs, with interest paid in advance and no fees required from the investor.
Therefore it's becoming more prominent why an increasing number of private investors and SMSF's are starting to transfer parts or all of their portfolios from property investments, and into private mortgage investments, capitalizing on the many advantages of this safe and lucrative investment scheme.
According to recent analysis published by Smart Investor magazine, property investor's gross rental yields rarely exceed 7%, even in the top suburbs of Australia.
The analysis was published along with a list of 601 suburb hotspots, out of which only 47 suburbs offer rental yields of over 6% p.a., and only 8 suburbs offer 7-8.7%.
This shows that when comparing apples to apples, private mortgages easily beats property rental investments in terms of returns, with private mortgage investments yielding a minimum of 8%, and up to 12% p.a.
So, while the median price of a house in a hotspot suburb like Brisbane units in Queensland is $430,000, and the median gross rental yield is 6.5%, the median price of a private mortgage is around $95,000, and the gross yield starts at 8% p.a.
Another important factor in the comparison is the cost of initial investments, to get the mentioned above returns in property rentals you'd have to own a property in one of the hot suburbs, with median prices ranging from $200,000-450,000, while private mortgages pay-out their yields with as low as $50,000 investments.
And when it comes to the safety of the investment, private mortgages are unarguably more secured, as it typically funds up to a maximum of 75% of the security value, meaning that while any decrease in the original property value would result in a paper loss for the typical property investor, a private mortgage buyer would be safe and still profiting, even with severe property decreases of up to 20-25%, which are not very common.
Moreover, while it costs money, time and effort to maintain and manage a rental property, a private mortgage does not require any management or upkeep costs, with interest paid in advance and no fees required from the investor.
Therefore it's becoming more prominent why an increasing number of private investors and SMSF's are starting to transfer parts or all of their portfolios from property investments, and into private mortgage investments, capitalizing on the many advantages of this safe and lucrative investment scheme.
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