Tycoon Reveals a Key to Income Stream - Allows Advantage to Profit
Know where your main income stream comes from Knowing where your main income stream comes from allows you to take advantage of the demand from this sector.
This knowledge will ensure that you buy the kind of property that you can rent out at an affordable percentage of the average income.
You need to aim for affordability and enhance your property's earning capacity.
This means that you need to ensure that the property meets the needs of your target market.
The two biggest factors securing a continuous rental income and tenants that are happy to stay are: 1.
Investing in an area with a high and preferably growing demand for rental property and; 2.
Charging affordable and also competitive rents.
According to the Urban Land Institute, there are six main reasons why people choose to live in a particular area: These reasons are listed as: 1.
Proximity to schools 2.
Security for the family 3.
Adequate public transport 4.
Proximity to shopping 5.
Availability to employment 6.
Access to recreational facilities Do your homework first! (Where have we heard that before?) These six findings don't ever seem to change over the years and they make pretty good sense and they are usually a useful guide to the type of residential area that can and will sustain a high demand for rental property.
Be wary of "bargains" and "unbeatable value" phrases.
If the unemployment figures in the area are in the double digits, youth crime rates are high and a lot of other properties are vacant - walk away from the investment! There are plenty of other investment opportunities that will come your way.
Don't allow reckless developers and marketeers to sell you grossly over valued properties; which will initially give you nothing but negative capital growth, low rental demand and return and a cashflow nightmare.
Vacancy Factor The rental vacancy factor is the percentage of the total rental properties in a particular area that are vacant at any given time.
It is a pretty fair reflection of demand for rental property in that area and can therefore be used as a barometer of how consistent your rental income will be.
The easiest and most accurate way of determining the vacancy factor in an area of interest is to contact a couple of the local real estate agents and ask a couple of simple questions.
Questions like: 1.
How many rental properties do they have on their books in total and; 2.
How many of them are vacant at the moment? Personally, I would not invest in an area where the rental vacancy factor is higher than 3%.
If your property is empty then it is income idle.
One sure way to maintain consistent and secure income is to ensure that there is a continuous supply of tenants - so check the suitability and vacancy factor of the area before you buy.
Another factor to avoid is being greedy about the rent.
If your rent is no more than about 30% of the average wage it makes it affordable to most people with a job.
Investors, who insist on receiving market rental value for their property or more, might have to wait 4 to 6 weeks for a tenant that converts to a lot of downtime and no support of rental income.
Even 3 to 4 weeks is a long period of time if you have to pay the mortgage without any form of rental income Affordability on your side I recommend building a portfolio of property within a range where the property is most affordable.
Establish what you consider an affordable purchase price.
The price of the property will determine the rent you will be able and are willing to charge, and you want that to be accessible to at least 90% of your target market.
Once the price of property in a particular area exceeds the affordability level of the market, it is a good time to stop buying in that area.
Affordability is linked to average weekly earnings - and wages do not generally tend to fall.
Purchasing mistakes can be recovered and redeemed if you have purchased a modest house on land, but not so much in units where you lack the "cushion" of the land content, because, again, it is the land that offers the capital growth! The house is just a vehicle for generating income and tax deductions, in order to offset our outlays on acquiring the land.
Affordability mitigates the affects of property cycles and ensures that when you decide to sell you know that anybody with a job will be able to buy it.
This knowledge will ensure that you buy the kind of property that you can rent out at an affordable percentage of the average income.
You need to aim for affordability and enhance your property's earning capacity.
This means that you need to ensure that the property meets the needs of your target market.
The two biggest factors securing a continuous rental income and tenants that are happy to stay are: 1.
Investing in an area with a high and preferably growing demand for rental property and; 2.
Charging affordable and also competitive rents.
According to the Urban Land Institute, there are six main reasons why people choose to live in a particular area: These reasons are listed as: 1.
Proximity to schools 2.
Security for the family 3.
Adequate public transport 4.
Proximity to shopping 5.
Availability to employment 6.
Access to recreational facilities Do your homework first! (Where have we heard that before?) These six findings don't ever seem to change over the years and they make pretty good sense and they are usually a useful guide to the type of residential area that can and will sustain a high demand for rental property.
Be wary of "bargains" and "unbeatable value" phrases.
If the unemployment figures in the area are in the double digits, youth crime rates are high and a lot of other properties are vacant - walk away from the investment! There are plenty of other investment opportunities that will come your way.
Don't allow reckless developers and marketeers to sell you grossly over valued properties; which will initially give you nothing but negative capital growth, low rental demand and return and a cashflow nightmare.
Vacancy Factor The rental vacancy factor is the percentage of the total rental properties in a particular area that are vacant at any given time.
It is a pretty fair reflection of demand for rental property in that area and can therefore be used as a barometer of how consistent your rental income will be.
The easiest and most accurate way of determining the vacancy factor in an area of interest is to contact a couple of the local real estate agents and ask a couple of simple questions.
Questions like: 1.
How many rental properties do they have on their books in total and; 2.
How many of them are vacant at the moment? Personally, I would not invest in an area where the rental vacancy factor is higher than 3%.
If your property is empty then it is income idle.
One sure way to maintain consistent and secure income is to ensure that there is a continuous supply of tenants - so check the suitability and vacancy factor of the area before you buy.
Another factor to avoid is being greedy about the rent.
If your rent is no more than about 30% of the average wage it makes it affordable to most people with a job.
Investors, who insist on receiving market rental value for their property or more, might have to wait 4 to 6 weeks for a tenant that converts to a lot of downtime and no support of rental income.
Even 3 to 4 weeks is a long period of time if you have to pay the mortgage without any form of rental income Affordability on your side I recommend building a portfolio of property within a range where the property is most affordable.
Establish what you consider an affordable purchase price.
The price of the property will determine the rent you will be able and are willing to charge, and you want that to be accessible to at least 90% of your target market.
Once the price of property in a particular area exceeds the affordability level of the market, it is a good time to stop buying in that area.
Affordability is linked to average weekly earnings - and wages do not generally tend to fall.
Purchasing mistakes can be recovered and redeemed if you have purchased a modest house on land, but not so much in units where you lack the "cushion" of the land content, because, again, it is the land that offers the capital growth! The house is just a vehicle for generating income and tax deductions, in order to offset our outlays on acquiring the land.
Affordability mitigates the affects of property cycles and ensures that when you decide to sell you know that anybody with a job will be able to buy it.
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