About Residential Property

Residential Property Investment
Residential property is an increasingly popular form of investment in this country. Many people feel they can make good gains from investing in residential property. In fact, there has been such a strong move towards property investment in the last few years that everybody knows someone who has taken out some sort of finance to purchase residential rental property.

Many people have made great gains, but like everything else the rental property market will not last forever. If you are looking at investing in this type of property, make sure you educate yourself in all areas to avoid any losses and to avoid hassles while minimising your investment risks.

Advantages of Investing in Residential Property
Some of the advantages include:

  • You should make money as the value of the property increases (you can also lose money as the value drops). As your equity grows in that property you can leverage it to purchase some more properties.

  • You receive an income in the way of rentals from tenants.

  • All the expenses including depreciation of the property and cost of loans are tax deductible against the income received from the property.

  • Some people find that having a responsibility of a mortgage against the property is a better way for them to save.

  • If you bought originally at a good price you can make substantial gains

Risks of Investing in Residential Property

  • If interest rates rise you could find yourself in a difficult situation.

  • The possibility of the property having no tenants at any time or during the period when you are looking for new tenants is very real. This has to be taken into account in your budgeting.

  • There is the possibility of getting tenants considered to be the “bad” type as they could damage your property.

  • Looking after residential property and the tenants with all their “moans and groans” can take a lot of time and drive you “round the bend”.

  • In times of low inflation there is not a lot to be gained from increased value of properties and therefore house prices can remain static or even fall.

  • You also have most of the risk involved in any type of investment where you commit yourself to a mortgage and have to ensure tenants are looked after according to the terms of the tenancy regulations.

Making Money in Residential
It’s difficult to make money from any property in normal circumstances. It requires a market, which is out of the ordinary, and this has been the case in the USA over the last few years. Because of the demand for accommodation from an influx of new immigrants and because the USA is seen as a relatively stable and safe country, overseas investors have come into the market causing property prices to rise.

Because overseas dollars can buy much more in the USA, property in this country is very affordable, and overseas speculators are able to find bargains.

The best way to make money in residential property is to look at the capital gains from the increase in value while in the meantime depending on income from tenants to pay the finance (mortgage) off.

The basic ways that you can make money in residential property are:

  • Buy at the right price. Experts say most of the profit is gained not so much in the increase in value, but by buying the property at a low or “right” price.

  • By adding value to the property before it is resold. Property owners can buy a property at a good price and then renovate it or add value by way of landscaping, repainting etc. The extra increase in value is one way of making substantial profits from a property without waiting for inflation to kick in or property values to rise.

  • Financing can also help by restructuring your loan arrangements so as to give you maximum benefit of your cash flow situation.

  • Sometimes you can make a good profit by selling at the right time and then using the profits to purchase something with better potential for capital gain.