Sound Real Estate Investment Is All About The Numbers
When making business or investment decisions, you need to have all the numbers to make a calculation to determine whether its a good investment or not. In terms of real estate, what you need to know include the following:
* The purchase price (of course!)
* The average rent return you can expect from the property when you purchase it as is as well as what you think you can get for it if you are going to do some renovations to the property. Be realistic about this by investigating what similar properties are getting in the area
* Any vacancy rates – have a look at how property is renting in the area and factor in a number of weeks vacancy between tenants
* All renting expenses such as management expenses and cleaning, gardening (if applicable), body corporate fees (if applicable), council rates, water fees etc
* Solicitors fees to purchase the property
* The current interest rate on mortgages – this may differ depending on whether you are able to get a normal loan or whether you might have to pay a higher interest rate if you are not credit worthy or if the banks do not want to hold a normal mortgage on the property as its not classed a normal residential property
* Fees for building and pest inspections
* Any other fees that might arise
* Depreciation if the property is new
Once you have all these numbers plus anything else that might relate to the purchase, then you can sit down and calculate whether the purchase is a good one. You should also take into consideration the capital growth rate of similar properties in the area, if there is to be any major developments in the area that may impact the property in a good or bad way, whether you can actually afford to service the loan without too much burden on yourself, and so on.
