Residual Income Investment Ideas – Investing In Real Estate
Among the most talked about residual income investment ideas is real estate investment. Indeed, investment in property and land has for centuries made lots of people truly wealthy. Investing in real estate is a tried and true passive income and wealth generation tool that is still being employed by individuals, companies, organisations and governments all over the world each and every day.
Why is property investment a passive income investment source?
Passive income is defined as income that you can receive on a regular basis but that requires little or no maintenance actions from you. Passive income businesses require little ongoing participation in the management of your investments or businesses, however you will enjoy a residual monthly income.
There are two main ways that are usually considered means of a passive income source by property investors. The first way is purchasing property and then renovating and remodelling and putting it back to the market. This is known as property flipping. In reality, this is a pseudo passive income investment through the fact that you’ll have to put in a lot of work and also money in the renovation process.
The second means by which purchasing property can act as a passive income source is to rent out the property. This is the most common definition of having a property investment as a passive income source because the ongoing management will require a small amount of your time for tenant and property management, however you may choose to outsource this to a property manager.
How much passive income can I earn from real estate investment?
Naturally the amount of passive income that you can earn from real estate investment (read rental property) is related to the amount of properties that you own. So if this is among the residual income investment ideas that you have decided to try then you must dedicate yourself to investing in a property purchase. The best way to get high profits is usually to invest in ready-to-rent properties.
It’s also a good idea to get a property that is managed by a property management company which will free you from handling any administrative tasks like paying for maintenance and repairs, confirming tenant documents or collecting rent. Selecting a property that is positively geared is ideal, which means that the rent collected is more than the amount paid for property management services, repairs and maintenance, insurance, tax and mortgages.
What is capital growth? What is rental yield?
Capital growth or capital appreciation is the positive increase in the value of a real estate property after a period of time. Capital growth is therefore the difference between the market value of an investment or property after a period of time and the original cost of purchase. The rate of capital growth for any investment property will depend on the type of property and its location. There are areas where real estate will steadily increase over a period of time and areas that experience a slow growth in the appreciation of assets.
Rental yield on the other hand is the total amount that an asset produces on a yearly basis based on the value of the property. There are two types of rental yield; gross yield which is calculated by subtracting all expenses form the annual rent then dividing by the value (purchase price) of the property and multiplying by 100. The other is the net yield which is the total amount of rent from the property on a yearly basis divided by the purchase price of the property, multiplied by 100.
How do I find properties with high capital growth and high rental yield?
Finding a property with high capital growth and high rental yield requires an in-depth knowledge of the property market. There are a number of property management companies and real estate agents (read buyers advocates) that can help you identify properties with high capital growth and high rental yields.
Where can I get more information on real estate investment in Australia
Other Residual Income Investment Ideas
If you are interested in learning about other residual income investment ideas that are available to you to start using today then have a look at this site www.passiveresidualincomefreedom.com