Yield the most from your property portfolio
There’s two main strategies in the investment game: yield vs capital growth. They’re different, but the goal is the same: to make the investor money.
What is yield?
This is complicated for the new players in the investment game. Agents will speak about ‘yield’, the percentage of an asset’s market value. There’s gross yield (before expenses) and net yield (after expenses are deducted). Your Investment Property gives us the formula below:
Weekly rent x 52 / (value) x 100
The result is your annual return, or yield, of that property.
What is capital growth?
One common strategy in property is to buy the house, hold it as an investment for a period of time and then sell it for a higher price. The surplus is called ‘capital growth’. But this strategy isn’t for those looking to ‘get rich quick’. Capital growth occurs over a decade or more. In this time the area demographic changes thanks to developments. This includes land/apartment buildings, schools, and public transport.
As always, with whatever strategy you choose, make sure you listen to your advisors (accountant, property manager etc). They’re the experts for a reason.
Do your research
If you want capital growth, you might choose to buy in a satellite city or an up-and-coming suburb. Research trends in the areas you want to buy. These include:
- Schools
- Apartment/land development
- Shopping centres
- Retail outlets (cafes and boutiques)
Are there cafe’s in the area you’re house-hunting? What will appeal to potiential tenants?
Positive gearing
Positive gearing happens when you receive income from your tenants after paying maintenance fees. This type of investment gives you cash flow but the disadvantage is paying tax and a slow rate of capital growth.
But some investors will snap up positively geared properties to yield the benefits of the income. Because they’re earning money, it makes them more attractive to lenders. They have the potential to buy another home and grow their portfolio in a shorter period of time.
Plug the gaps
After you’ve done your research you’ll know that there’s rules and regulations that other landlords are imposing on tenants. What can you do differently? Your Investment Property did a survey asking tenants what they look for and the results show that:
- 38% of tenants look for parking
- 31% want cable internet connections
- 32% look for pet-friendly properties (dogs are family too!)
- 25% want a strong mobile connection
- 22% check for an abundance of powerpoints
So after reading this, what would you do to build a strategy to yield the most from your portfolio? If you want more advice, read these articles:
- Residential properties that guarantee an ROI
- What $500,000 can buy you in the 2017 property market
- Rental property depreciation mistakes to avoid
