By Michelle Lim on Sep 9, 2019 11:01:00 AM
There's a lot of ways to make money, and real estate is one of the most profitable the way to go. Though, it's also high-risk!
There are several reasons why many choose to break into or be a part of the real estate industry.
One of the major ones is passive income, which means to increase their profit and revenue as they turn the rented out property from a liability into an asset. The increased income benefits the landlord in terms of spending and expenses, whereas the tenant has a place to stay and live in.
Another is that they are migrating, but still wish to retain their local property as they either do not want to see it turn to waste or due to uncertainty of their future at their destination of migration.
Building equity or value is also a reason why many choose to be landlords and rent out their property.
1. Know the right market
You gotta know what market you wanna go into when you want to earn money from your property. Can't be lazy about this as this affects you financially and stuff. It'll determine your return on investment (ROI).
What you should know:
- Type of property you're buying
- Potential tenant (who, background etc)
- Location of the property and its amenities
2. Calculate Rental Yield
While searching for property investments, you might have come across "rental yield". It basically means the return rate of the income based on your investment cost. Rental yield is usually calculated and presented in percentages.
Calculating the rental yield helps tell you if your investment will be fruitful or not.
But!!! Bear in mind that current yields are not 100% accurate indicators of future performance cause the property market is subjective. There's a lot of factors like the economy that play into it, so yeahhh.
3. Rent to own
Rent-to-own is an option if both buyer and seller agrees to give the buyer the right to buy the house during a fixed period. During this period the buyer rents the home from the seller. After that, they can choose to buy the home.
Advantages for the Seller
- Higher price above market value
- Better and larger access to buyers
- Can collect rent
- Can sell off the property
Advantages for investors
- Limited liability
- Highly leveraged cause you control the property AND profit!
- Lower financial risk
- Even if your tenant/buyer doesn't buy the place, you get positive cashflow monthly!
SPEEDHOME has partnered with IJM and Newsfields to put together an exclusive list of listings for interested home-buyers! You can check them out here.