Property Investment Tips » M A Williams

Rent Increase: Are Regular Rent Increases Always Necessary?

M A Williams — Mon, 25 Apr 2011 09:33:45 +0000

It’s property investment 101. If you are renting out a property, particularly a residential rental property, then you have to increase rent. This may be annually, but most likely every 18 months to two years. Why? Well, there are a number of reasons this is considered to be a standard operating procedure in property investment. Firstly, small rent increases regularly are more likely to be absorbed by your tenants than a large increase when it is possibly too late. Secondly, you need to be keeping up with inflation and with the rental market. Your personal property investment rules probably involve getting the most out of your investment to support your overall investment plan. Why subsidise your tenants’ rent at the expense of your investment goals?

But is it always so black and white? Sometimes we get so caught up with the investment rules and numbers we forget the big picture. For example, what if a 5% rent increase takes a property’s rent over a key …

Banking Terms and Definitions

M A Williams — Thu, 06 May 2010 07:18:46 +0000

When you are making an important decision, such as buying an investment property, there is nothing worse than feeling overwhelmed or out of your depth. One thing that can cause things to start whizzing over your head is the use of jargon and industry-specific language. Unfortunately, the banking industry loves these terms, and the world of property purchasing and investment is full of them! A good property investment tip is to brush up on some of these banking terms and definitions before entering in any discussion where you need to be fully understanding what you are getting into.

Here’s a few banking terms and definitions to get you started:

Lending Priority:

The priority relates to the right a mortgager has over what is retrieved through the sale of the property. To avoid hassle later, a lender will often set out a higher priority than they have lent in case the customer wants to borrow extra in the future.

Consent to Second Charge Mortgage versus Deed …

Property Valuation Methods

M A Williams — Sat, 17 Apr 2010 23:45:24 +0000

As the economic environment brings about change, so property valuation must change to meet these new conditions. For property investors the value of a property affects everything from the purchase, property income, and importantly the investor’s ability to leverage for further investment. Before looking at any property valuation, an extremely important property investment tip is to understand what approach or property valuation method was used to determine it. From there you can cast a more critical eye over this vital element of property investment.

Property Investment Tips will look at the three most common methods of valuation and compare them as to how they relate to property valuation in 2010. There are three basic valuation approaches used to value property, with each using different means of finding the property’s place in the market. The methods include ‘the market date approach’, ‘the cost approach’ and ‘the income or investment approach’. The market data approach looks at the value of property sales …

10 Reasons to Buy your First Investment Property

M A Williams — Sun, 11 Oct 2009 02:48:33 +0000

One. 2009 is a good time to buy for a cashed buyer – It’s 2009 and there is a global recession, there is no shortage of foreclosures, or mortgagee sales. Get hunting for bargains. As fewer people can afford to buy, as times are hard, there are more people looking to rent, which drives up rent.

Two. You can share the risk, and cost – You can make fairly small investments if you share with others, however your return will still be equal to your percentage of ownership, and the overall gain in value of the property.

Three. You are in control – The performance of any investment is not guaranteed, however, a bricks and mortar investment may provide you greater control than other assets.

Four. Capital growth – Investing your money in the bank will not make you any capital growth. It may hold it’s value and be safe, however when you take inflation into consideration, you stand to gain very little. However, with …

Ten Key Reasons to Sell your Residential Rental Properties by Auction:

M A Williams — Fri, 09 Oct 2009 21:10:06 +0000

Property Investment requires selling of houses almost as much as it requires buying of houses. One of the key property investment tips to consider is whether to sell the property by auction. Here are the ten key reasons why property investors need to consider using an auction instead of a negotiated sale to sell their investment property.

1) Transparency

If the residential rental properties are owned by a group of investors, then transparency is a must. The person managing the sale needs to show his fellow investors that the sale was genuine. Too many scandals involving backhanders and under the table dealings have emerged during the recession aftermath to take any risks with your credibility.

An auction is more transparent than an open sale because it is visible, and the formula is simple – the highest bidder wins the sale. This is not that case in an open sale, where the winner may just be the person who entered negotiations first, and this is too vulnerable to …

The Different Types of Property Investment

M A Williams — Fri, 09 Oct 2009 20:47:31 +0000

Property investors make money from investment property in an an extremely varied array of ways. Here is a broad outline of the main types of property investment.

Residential Rental Property Investment

a) Owner Occupancy:
This is the most common type of property investment, possibly the most common type of investment period. Owner Occupancy is where the owner lives in the house he or she owns. It is common for a house buyer to borrow 70 – 90% of the house’s value and take out a mortgage for 20 to 30 years. Returns come in the form of capital gains over the period of ownership.

Some residential property investors disregard this as an effective form of property investment compared to rental property because it does not have same the tax benefits that can make rental property investment so appealing.

b) Rental Property Investment:
Rental property investment involves renting out a dwelling for people to live. This could be by renting out a house, condominium, apartment, or flat. …

Property Investment Leverage

M A Williams — Fri, 09 Oct 2009 01:48:50 +0000

The key concept in property investment is leverage. If you have experience in the industry you may already understand this concept, but for the benefit of those who are new, I will explain it. Leverage is your ability to increase your returns by using other peoples’ money to increase the overall value of your investment. With property investment it’s usually the bank’s money.

It makes more sense if you look at some numbers

Say you have $30,000 to invest. This would need to be a lump sum to invest in the first two options, however for option 3 it could be equity from your main residential property which you live in. Lets look at the best way to invest this money?

Option 1) Place your money into a term investment or savings account with your bank

We would be looking at about 3-4% return. After you consider tax on profit, and inflation you are going make very little progress at all. Although, your money will …

Property investment – How much risk are you willing to take?

M A Williams — Thu, 08 Oct 2009 22:25:04 +0000

Property is like any form of investment, where the greater the risk you take the more potential you have to make greater profit. Ultimately how much risk you take my depend on where the money you invest has come from, and to what degree of trouble you would be in if you were to lose it!

What time scale are you working on?

The time scale you are working on will affect the level of risk you may need to take to see a positive return. Where there are many safe investments that will make a nice return over a period of 5 to 10 years, there are very few that are risk free for a period shorter than 12 months. It is my opinion that property investment should be seen as a long term strategy for profit.

Spreading Risk

One way to reduce the risk involved in an investment is to spread that risk across several different projects. If you are lacking in capital, …

Investment Property Checklist

M A Williams — Thu, 08 Oct 2009 22:24:14 +0000

As part of any smart property investment, a good idea is to develop your own Investment Property Checklist. There is a lot to consider when investing in a new property, and it goes without saying that it is likely that you will be dealing in large amounts of money. So why not do yourself a favor, and build your own Investment Property Checklist. I have put together some thoughts below, however, it is important to make a list that suits your goals, and plans. What is key for me, may not be a consideration for you.

1) Do the sums, and if they don’t work out walk away. Always buy within your means.

2) Check the property, and inspect for defects, if there is anything that concerns you, pay for a building report. It is better to waste a few hundred now, than to throw away your investment on a leaking building. At the very least you can use any problems with the property to …

New Zealand Investment Property

M A Williams — Thu, 08 Oct 2009 22:21:13 +0000

New Zealand is a lovely place, it has a fresh green image, and despite it’s relatively remote location it still does very well on a global tourism market. However, what are the benefits of investing in New Zealand property, and if I am a foreigner, is it worth my time.

Positives

New Zealand does not have a capital gains tax, so when you sell your investment, you get to keep all of the profit.

New Zealand has a deprecation value of 4 percent per annum. This is a much higher rate when compared with Australia for example, which has a deprecation value of 2.5 percent. This means investors can claim a larger amount of a properties depreciation earlier on in the investment, which makes an investment more profitable earlier on.

Negatives

You will likely find it very hard to get finance from New Zealand banks as an international investor, so you will need to source money from else where.

As with any foreign investment property, …