Three Keys to Maximizing Returns from Residential Real Estate Investments
Why is residential real estate such a good investment right now?
Three key elements continue to make residential real estate the ideal investment vehicle.
1. Interest rates are still at historic lows
2. Supply and demand factors favor investors
3. Residential is the preferred security of banks
We can see that these three components have obvious merit, but choosing the best investment property is a process that involves knowing your budget to buy and your budget to own a property. Also knowing what you want to get out of an investment and when is important in the selection process. The goal is to find the right property that will allow you to achieve your personal goals in the fastest and most profitable way possible.
Residential investment properties come in several different types, for example, multi-unit, double occupancy, single unit, student housing, serviced apartments, high rise, low rise, luxury, executive, affordable, inner suburb, outer suburb. The choice of property is often dictated by price and personal circumstances. Knowing the budget that suits you is the key to correctly selecting the right property.
Once you have selected your budget and type of property, you should consider ownership because you can significantly improve your bottom line by properly establishing the structure in which you acquire the property. For example, factors such as stamp duty, GST in the case of development, superannuation i.e. self-managed funds using remittance mandate agreements, tax deductions for depreciation, a negative gearing and a property tax, create a need to ensure the correct entity is established at the point of acquisition.
Assuming that the timing is correct based on the above three components, we then set our targets for our investment strategy.
If, for example, we have concluded that we want a long-term investment strategy, defined and maintained for, say, ten years, then more options open up. For example, a new subdivision that had an interesting future prospect or attraction may be considered.
Whereas if your goal was to make money and sell in a year or two, this might not be your investment vehicle of choice. Decisions regarding risk, leverage, personal time involvement and time to realize return are the factors to consider when selecting the right real estate investment strategy.
The message of this article, therefore, is to suggest that while the time may be right, your returns can be dramatically improved, simply by selecting the right vehicle for your personal investment goals and the right entity and structure to place it in.
If you’re busy building a career, profession or business, talk to a real estate investment consultant. This will potentially open up ideas you hadn’t thought of, and if it doesn’t, chances are you’re talking to the wrong consultant for you.
The key is to select a consultant who specializes in a location you understand or want to invest in. Also the sector of the market you feel comfortable with or want to participate in. A good quality real estate investment consultant will not just insure their fees. are covered in their property negotiations, but you’ll also be assured of getting the right property that fits your personal purpose and appropriate structures that maximize your returns on investment. Hiring a real estate investment consultant also removes any potential emotion from the equation that can seep in, especially with residential real estate investments.
Seeking quality advice makes sense, learning from others saves you time and you gain quality knowledge for your next investment.
Enjoy the process.