subject: How To Start And Develop A Rental Property Portfolio For Yourself [print this page] If you have decided to develop a rental investment portfolio you have more than likely already been looking at the real estate market to see what it offers. Purchasing a property for investment does require a different buying strategy than it does when you purchase a property for the family to live in.
To cut a long story short, the beginning and end of it is that a property investment portfolio should make money for the property investor.
There are a number of ways for a property investor to make money in the real estate market and this needs to be one of the first criteria addressed when looking to invest because each end result will need a different buying strategy at the outset.
This is a list of the most common ways investors make money in the property housing market:
1. Buy and rent the property out until capital gains can be made from the property 2. Buy and rent the property out with a positive cash flow from day one and also make money on capital gains 3. Buy, renovate and rent the house at a higher than expected rental return 4. Buy, renovate and sell at a profit
Positive and Negative gearing
Investment properties that are rented have an income and they also have expenses. When the expenses of a rental property are more than the income of the property the property is said to be 'negatively geared' or 'negative cash flow'. If monies earned from the property is higher than the expenses of the property and the property is running in profit, then the property is considered to be 'positively geared' or in 'positive cash flow'.
Profits from a positively geared property are tax deductable.
Buying and renovating
If this is your goal then consideration needs to be given to the type of property that you purchase and also how you are going to fund renovations. If an investment property is bought with the intention of renting it out, then consideration needs to be given to the fact that when it is being renovated and not rented, this will 'cost' in the sense that it will not be bringing in income during the renovation period so the mortgage repayments for this period also need to be funded.
Properties for this type of investing need to be carefully assessed so that they are not overcapitalized and that there are no surprises in costs when the renovation takes place. Costing these jobs right is very important to the success of the project.
With these different scenarios available when developing a rental property portfolio you can see how you need to have a clear picture at the very beginning as to how you will build your investment portfolio. Investors have different ideas on building wealth and eash has their own strategies for achieving. It is often in the earlier days of property investing that investors develop their strategies for success.
Copyright (c) 2010 Kaye Dennan
by: Kaye Dennan
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