How To Choose A Good Investment Property Loan

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Real estate investment is generally viewed as a lucrative career opportunity. But purchasing investment property does require a significant financial backing. Nowadays, however, the funds required to embark on a real estate investment career are easily accessible to many people in the form of an investment property loan. Therefore, you may begin investing in real estate, even if you are on a shoe string budget.

Investment property loans can be broadly classified into two categories, namely residential and commercial. Residential loan is associated with those investment properties whose predominant use is residential, and that are purchased for future appreciation and rental income. On the other hand, commercial loan is acquired for the purchase of apartment buildings (with 5 or more units), warehouses, or stores.

An investment property loan can be obtained from several sources, including banks, financial institutions, credit unions, and private brokers. These lending institutions analyze a borrower’s credit score, income and assets, in order to determine if he/she is a viable candidate for an investment property loan.

A multitude of real estate investors in the US make use of an investment property loan to acquire real estate. Doing so offers them a twofold advantage – they can enjoy the benefits of capital growth and tax deductions. Though the escalations are not anywhere near the boom of the late 1980s, property value does appreciate on a gradual basis (capital growth). Another significant benefit is that offered by “negative gearing”.

Gearing, in essence, refers to borrowing in order to invest. A negatively geared investment property is one that is purchased using borrowed funds and where the income (after expense deduction) from that investment is less than the payable interest in the course of a year. This allows a significant tax benefit for investors, as they may deduct the expense of owning an investment property (especially the interest on the investment property loan) from their taxable income.

Investment property loans come in various shapes and sizes, as per the requirements of investors. They are offered as interim, short term or long term loans. Needless to say, you must ensure that you are well aware of the terms of the loan, such as the interest rate, the time period of the loan, and the payment schedule.

In a gist, newbie investors need not have plethoric amounts of money to set out on a career in real estate, since property investment loans offer a great opportunity for them to get their feet wet in real estate.

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Why You Should Buy Investment Property

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Tired of the ongoing flux in the stock market, more and more investors are moving over to real estate. Real estate is a relatively low-risk venture and provides greater certainty than other creative investment options. It is highly unlikely that the vacillating trend of the stock market will be mirrored in real estate. Therefore, if you decide to dive in real estate and buy investment property, it would serve as a profitable diversion as far as investing is concerned.

The real work begins once you have made the decision to buy investment property. Finding a profitable investment property is not a child’s play. It entails a comprehensive research, is a time-consuming task, and requires a lot of reliable contacts. Peruse further for a primer on how to begin with real estate investing.

Before you buy investment property, you must have a rough estimate of the time span for which you plan to own the property. This is because the longer you plan to own the property, the more you need to spend on the upkeep of the property. Small investors usually look for long-term ownership thereby enjoying the benefit of an ongoing rental income. On the other hand, the more experienced of investors quickly flip properties.

It helps to have a network of people who can find profitable investment properties for you. Joining a property owner’s association is also beneficial in making contacts. Almost half the battle is won if you have found a few lucrative investment properties.

To begin with, it is recommended that you leverage your initial few investments, as it’s reckless to put all your personal funds on the line at the outset. Loans can be acquired from banks, credit unions and private brokers, which often require a decent credit score. When you acquire a loan to buy investment property, you would normally have to pay higher interest and monthly payments, compared to when you purchase a property to live in.

Experts say that you should maintain a cash reserve for unforeseen repairs and a contingency plan for vacancy periods. It is also advised that you avert from entering into bidding wars or carrying out emotional purchases. You should rather look strictly at the numbers and discern if the investment is viable or not. If you overpay to acquire a property, it is unlikely that you will be able to recoup your investment.

Every real estate market is different, however, and what works in one locality may not work in another. The main thing is to ensure that the rental income covers the operating expense of the property. If you are aware of such basics, you can very well excel in real estate, no matter where you buy investment property.

Copyright © 2006 Joel Teo. All rights reserved.

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Residential Investment Property: Some Reasons For Its Rising Popularity

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Residential investment property has gained immense popularity over the past decade. Owing to the increase in demand for rental accommodation, and the resulting rise in rental income, more investors are likely to dive in the residential property business. However, not all residential properties are profitable investments, and some investors might lose money if they don’t choose with discretion.

When you set out to purchase a residential investment property, your key intent should be to leverage, in order to cut down on personal costs, and to acquire an income generating asset. Typically, you should invest in a property whose rental income will cover its entire mortgage and operating expenses. Such a property is said to be “self-funding”. Once the mortgage is repaid you have two options – you may continue to reap the benefits of a steady rental income, or you may sell the property at market value (provided the property has experienced appreciation) and invest elsewhere.

In general, there are two primary sources of income from any residential investment property: yield and capital gain.

Yield is the expected annual rental return, which is expressed as a percentage of the purchase price. For instance, if the purchase price of a property is $100,000 and its expected annual rental return is $8,000, yield is said to be 8%. The yield, in combination with the terms of the mortgage, determines the personal expense on the part of the investor, in order to acquire the property.

Capital gain is the appreciation in value of a property. Or in other words, the profit accrued from selling an asset. It is expressed as growth rate in percent on an annual basis. Capital gains are generally estimated from the movements in average property prices.

It is wise to analyze both the capital gain and yield potential when selecting a residential investment property. The typical problem faced by you as an investor would be that high yielding properties normally offer low capital gains, and vice versa. You should strike a balance between yield and capital gain, such that it best suits your investment goals. What constitutes the right balance depends on your expected capital gain and yield.

It is recommended that your expected returns from a residential investment property be based on a comprehensive analysis of current trends and market conditions. It isn’t advisable to rely on intuitions when scads of money are involved.

On the whole, a residential investment property is a viable investment option if the returns meet your expectations, and exceed those attainable from other possible sources of investment.

Copyright © 2006 Joel Teo. All rights reserved.

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Investment Property in Slovakia – an Emerging Property Hot Spot for Big Gains

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Investment property in Slovakia is becoming very popular with well informed property investors as it offers excellent returns coupled with low risk.

Not only is Slovakia investment property giving great returns this trend looks set to continue for many years to come.

Here we will look at why you should consider investing in property in Slovakia.

These include:

1. EU Membership

Membership of the EU which was granted in 2004 makes Slovakia more attractive for all forms of investments and ensures a level of political and economic stability that inspires confidence in foreign investors.

From the point of view of investing in Slovakian property it guarantees EU legal rights to all investors.

There are no restrictions on buying property in Slovakia for EU citizens when purchasing commercial and residential property.

This is not the case in many other recent members of the EU where overseas investors have to form a company in order to buy property as well as get permission from local authorities.

2. Location Location Location!

The Slovak Republic has borders with:

Austria, Czech Republic, Poland and Hungary – and the Ukraine.

This makes it a country at the heart of Europe and there are many locations where you can buy property for capital gains and the capital Bratislava is the most popular foreign investment property location in Slovakia.

Bratislava benefits from its superb and is close to the following:

30 miles from Vienna, 2 hours from Budapest and 3 hours from Prague.

Prices in Bratislava are lower than in Prague or Budapest and offer excellent potential for capital gains which will be driven by the following factors:

With the lowest wages in the EU, foreign companies have moved to Bratislava to take advantage of cheap labor costs.

This has given rise to a shortage of housing and estimated 40,000-50,000 new dwellings will be needed annually to house the labor influx.

Property for sale in Bratislava remains highly affordable and in Petrazalka – close to the station and the rail link to Vienna – apartments can cost as little as £30,000.

Many investors are also looking at the lucrative buy to let market and are targeting the university city of Trnava.

With rental values rising by around 18% per year, it’s an affordable and lucrative place to invest.

3. GDP

GDP growth rate in excess of 8% achieved in 2006 and a similar level of growth forecast for 2007.

Slovakia’s Government between 2002-2006 carried out reforms to the taxation, labour and social systems which has made the country much more attractive for foreign investors.

The World Bank nominated Slovakia as the world’s top reformer in improving its investment climate during 2004.

The current Government is building on the base of the previous administration and has committed to Slovakia joining the Euro in 2009.

These reforms are helping the Slovak Republic attract major investments in industry and commerce.

For example, due to recent investment in the auto industry, Slovakia is now becoming the highest producer of cars per capita in the World.

Another industry that is be promoted and developed in Slovakia is tourism.

Slovakia is relatively undeveloped in comparison with neighboring countries such as Hungary and the Czech Republic and the country in addition to the charm of Bratislava.

Buy investment property in Slovakia should not be restricted to just buying in Bratislava.

Move out of the cities and you are in beautiful countryside and national park areas and property prices become even cheaper.

Rural properties around the mountainous regions of the country make excellent affordable second homes.
Popular destinations are:

The ski resorts of Ruzomberok in the central Velka Fatra range, Jasna in the Low Tatras and Zilina and Poprad in the High Tatras.

Investment property in Slovakia – The future

The future looks bright for Slovakia and the advantages of:

Geographical location, rising GDP, innovative reforms, growth in tourism and property to suit all budgets and you have market that looks set to provide investors with solid gains for years to come.

If you are looking at buying overseas property, then consider buying Slovakian investment property and you may be glad you did.

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Investment Property – How to Define It?

Author: admin / Category: buy property, conveyancer, estate agency, estate agent, Estate Agents for properties, for sale, for sale, free information, home buyers, house, house sales, how to sell your home, land, listing, mls, mortgage bond, properties for sale, property for sale, property sales, property wanted, Real estate, realtor, rentals, rentalsEstate Agents for properties, renting property, sell property, selling property

With the increase of buy to let properties and the hype in the property investing market, often an investment property is confused with a simple property trade deal or speculation.

Often any property purchased is viewed as an asset and therefore called an investment property. That is true in the wide sense of a discussion. However, a property for investment is not any property purchased just because it is viewed as an asset.

Purchasing a property that is not a primary dwelling or holiday home, can be generalized in 3 main categories:

1. Resale – For the purpose of selling for profit (often called a “flip”)

2. Fix / Renovate – For the purpose of renovating and reselling for profit (often called a property trade).

3. Letting – For the purpose of letting to a tenant and generating income for the long term (often called buy to let property).

Those are the major categories. However, not all of them are investment properties.

In the first case, when one buys a property to resell, it would be considered a speculation or a trade. In terms of income, on a short term deal of reselling a property, even the tax man will ask for income tax instead of capital gains tax (CGT). Therefore, it is not an investment property, it is simply a trade and the property is “stock” just like apples and pears that are sold at the market.

In the second case, when one finds a property that needs renovations, fixes the property and then resells the property, it is also a trade. The holding period is short term and the tax man again will ask for income tax not CGT. Therefore, this category is also not an investment property but rather a trade. The renovations Option varies significantly in strategy from the speculation, as in this case the “stock” which is the property was bought at low value, increased in value by the renovations and sold for its new value. In a speculation the speculator only waits for a period of time for the market to move up in price, and resells without doing anything to the property to increase the value.

In the third case, when one buys a property to let the property to tenants for the long term and earns income from it – it is an investment property.

This is where the confusion occurs.

The speculator often does rent out the property to tenants, to reduce the Mortgage Bond payments, (often called shortfalls). The letting out of a property for the short term to resell later for profit confuses the term investment property with speculating and trading.

Just because the property is let to a tenant for a period of time, this does not make the property an investment property. The long term holding of the property will determine if the property was bought for investment or only for speculating and stock trading.

The last resource of clarification is SARS. Every sale of property has to attract some tax, either CGT (capital gains tax) or income tax. SARS guidelines make this issue very clear.

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Use an Investment Property Calculator to Evaluate Properties

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If you are getting serious about rental property investment, you will need to be able to determine if a property is likely or not to be profitable for you. The last thing you want to do is invest in a piece of property and find out that you are loosing money each month because your expenses on the property are more than your income from renting it! One of the best ways you can begin to evaluate your potential investment property is through the use of an investment property calculator. You can easily find investment calculators of all kinds on the Internet.

An investment calculator can assist you by showing you many of the probable outcomes you can expect of your investment. Investment property calculators use very complex mathematical equations to give you fair financial analysis of your potential investments. They look at all of your routine mortgage and upkeep costs, and they also can give you an idea of your income and tax considerations for the property, as well.

By simply looking on the Internet, with a good search engine such as Google, you can very effortlessly find a multitude of free investment property calculators which you can easily use to evaluate rental property. Into the property investment calculator, you will input all of your monthly rental income, the monthly loan repayment costs associated with any financing you have on the property, and the operating expenses which are necessary to maintain the property in question each month.

From all of the data you have entered the calculator will then give you rough estimates of your monthly cash flow you can expect from the investment, your annual building tax deduction which you can legally take, and any changes which might occur in the amount of taxes you will be paying on the property.

Mortgage investment calculators are complex enough to take both positive and negative values into consideration such as income, taxes, and payments. The calculator is a great way to determine if your potential investment property will earn you money, or conversely cost you money. It can also be helpful in determining the rent which you will want to charge your tenants for rental of the property.

Most mortgage calculators do have some limitations which you need to be aware of, however. Most of them assume that your expenses are the same each month over any given year. While it’s a nice basis, we all know that you can have a very costly repair and your numbers will no longer be anywhere near close to accurate. But, in this scenario you can run the calculator again and re-evaluate the numbers it gives you.

Many mortgage calculators also do not take into consideration many of the important tax issues you will be faced with. They do not see any rebates you might receive, or any tax deductions which you may be eligible to claim which would reduce your overall tax obligation

While investment property calculators can be very valuable tools for you to use, you will want to understand that they do have some limitations and as always you will want to consult with professional tax accountants when necessary.

Article Source: http://www.articlesbase.com/investing-articles/use-an-investment-property-calculator-to-evaluate-properties-197913.html

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