There are numerous elements that contribute to achieving high capital growth when investing in property.
To begin with, when choosing where to invest, you should choose an area with ongoing population growth. This will ensure demand for rental real estate in that area, and therefore put future pressure on both price growth and rental growth.
To ensure further demand for your rental property, it is best to ensure that you don’t invest in something at either the top or the bottom end of the market. Essentially, your best choice is to select a middle-range rental property that will be affordable to most people, more specifically, the middle-classes.
Australian property investor Hans Jakobi adheres to this philosophy. Top end properties are too susceptible to recessions. During the good times, high end properties can do very well, but boom times don’t last forever, and high end properties are the first to tumble at the start of a recession.
Conversely, low-end properties can under perform the market in terms of capital growth because the localities in which they are situated tend to be less desirable. Not to mention that the type of tenant you are likely to attract with a low-end property could prove to be a more high maintenance type of tenant, with a higher likelihood to default on their rent and a higher chance of taking less good care of your rental home compared to a middle class renter.
The following linked article on selecting high performing investment property covers many other elements that form the recipe of successful investment home selection. There are also a number of Property investment training courses in the Success University curriculum from renowed experts such as Loral Langemeier, Claude Diamond, Robert Allen, and William Bronchick. You can obtain a 14 Trial access to Success University for only $2 to check them out.
It is also a prerequisite to analyse the numbers pertaining to your prospective real estate investments just as you would do with stocks. You need to compare price-earnings ratios; internal rate of return; compounding interest; gross versus net yields, and before and after tax cashflow.
There are numerous software programs out there that can perform this type of analysis. One of the leading programs is called the POSH property owner system. It allows you to number crunch and contrast multiple prospective purchases against one another with a comprehensive Inspection Check List which you can print out and take with you when viewing prospective properties.
In conclusion, it is not only important but also definitely worthwhile to take the time to become educated about property investing before diving in to your first, or next, investment. It is worthwhile to understand the elements that will contribute to a high level of capital growth, and then to locate and analyse several properties that meet these criteria to be certain that you are stacking all of the chips in your favor.