You’ve heard that property investing can be a great way to make money, but how exactly do you make it work? If you are looking to invest in property to grow your future finances, then have a look at these three ways that people are making money from property investments. Plus, learn how you can accelerate how fast you make that money.
1. Capital Growth
Probably the most common method in Australia of making money in property is through what is called capital growth. What this means is quite simply that you buy low and sell high.
The goal of capital growth is to have the property you’ve purchased increase in value over time. This can either be through work you do on it yourself, or most commonly through changes in the market. This method is particularly popular in Australia because most properties are negatively geared. Capital growth allows property investors to make money despite a rental income not covering all of the expenses. Think of it as paying a little each week in order to earn that big investment growth every month.
2. Positive Cash Flow
If you have a larger income than you pay in expenses, then you have what is called a positive cash flow. If all of your expenses (mortgage, insurance, council rates, etc.) are paid by your rental income and there’s still money left over then you have a positively geared property.
In Australia, a positively geared property investment is trickier to attain than some other countries. But, definitely not impossible. It’s a great strategy for those wanting a long-term investment in order to wait out the market.
3. Capital Growth OR Positive Cash Flow?
Many people gravitate towards capital growth as an investment strategy, simply because you can make large sums of money a lot faster. The possibility of growth in capital compared to the money you invested can be quite substantial if done right.
However, in order to achieve the type of wealth that grants you financial freedom, you will usually need to invest in more than one property.
4. Tax Benefits
The third method of making money through property investment is through tax benefits. The property has, on paper, losses associated with it, such as depreciation. You can claim the lowering in value of items located within the property as well as the building itself.
There are some cases in which the tax refund on the property means you actually haven’t lost out on any money. Or, though rarely, you can get a tax refund that is greater than the amount you have paid out each year. There are many major tax benefits available to you as a property investor. Make sure to seek an Accountant’s advice to find out what benefits are available to you through your property.
How to Accelerate Making Money in Property Investment
If your strategy is capital gains, then consider making some renovations. Cosmetic renovations are the most cost-effective way to add value quickly to your property. But, don’t forgo ideas such as extensions, structural renovations, second property developments, subdivisions or other such renovations. Adding value to your home can bring you huge rewards.
If your strategy is positive cash flow, then you need to look at ways to make the property more appealing to renters. Small cosmetic renovations can be a good method to increase the rental yield that your property is going to deliver. Alternatively, adding a granny flat, or altering a space to make it independent can be a great way to increase the number of renters living on the property and therefore your rental income.
Always do your research before buying a property and make sure you aren’t spending too much. Property is not without risks, but if done right the rewards can be life-changing.