The Reality About Rental Investments

"There are landlords who were reported to have lost over $43 billion within the last decade from rental investments"

The wealthiest investors have one thing in common, they are always eager to learn new strategies. We have the strategy for the mum and dad investors:

In a recent Australian newspaper article, there are landlords who were reported to have lost over $43 billion within the last decade from rental investments. Most of the properties they purchased are residential properties. This problem may seem like it’s not supposed to happen to them, surely they were able to achieve financial freedom when they invested in real estate. However, purchasing properties is not as simple as it looks. 

Before a home owner can make money from the real estate they invested in, they need to earn the amount used to cover the cost of the property. In a negative gearing market, the most profitable properties are commercial instead of residential. This is due to how commercial tenants can ensure a positive cash flow in comparison to residential tenants.

From the first day they occupy the space, you can already determine if they are able to generate enough income to cover the rent. Now, Investing in real estate requires proper planning if you want to create a positive cash flow it. As mentioned above, you cannot just purchase any property and expect it to make money right away. There are certain things to consider when looking for a commercial property.

Below are some of the things to consider when choosing a commercial property:

1. Determine the amount you are going to spend. Keep in mind of the 30 to 40% for deposit or equity of the commercial property.

2. Determine the type of property you are going to invest in. These can be a retail, industrial, or medical property.

3. Determine the right location for the property. Consider the cost of the space and the surroundings. When looking for a location for your property, you can also check other similar commercial establishment in the area. This can help you determine if your investment can generate a positive cash flow or not.

4. Determine the total cost of the property as well as the taxes when you are able to choose the three things mentioned above. Try to ask other commercial establishments how much the rent they are paying is. This will help you know the right amount to charge your tenants with.

5. The last thing to consider is to learn more strategies in investing in commercial properties. The wealthiest investors have one thing in common, they are always eager to learn new strategies. One strategy to consider is to utilise the tax deduction you will receive when you purchase any property.

This is only a short-term plan which should give you enough time to find the right tenants. For a long-term strategy, look for a commercial property which seems likely to generate a positive cash flow. If you have one which is able to generate at least a net of 8.5% in profit and the mortgage interest rate 6%, you are now earning money.

To clarify the sample mentioned above:

Your property might cost about $200,000 and the rent paid to you is about $20,000 per year. Your net return here is 10%. Now, if you purchase the property with a loan which has an interest rate of 7% per year, you can still earn $6000 per year which is 3%.

By following everything mentioned above, you should be able to break away from a negative gearing market and start creating a positive cash flow from your properties.

So why not contact Beyond Granny Flats today to find out how you can profit from rental investments

Source by created property mag: property investor.