Planning investment success: Understanding property income types
Taking out an investment home loan and securing property in a growing real estate hotspot is a great way to accumulate wealth and create your own nest egg for retirement.
However, one of the first things to consider when selecting an investment property has to do with your long term goals, and the type of income you hope to earn from your real estate. There are two main income types from investment properties – capital gains and rental yields.
Capital Gains
If you're interested in a long term, slow burning investment, capital gain is the type of income you should concern yourself with. This is based on the increasing value of your home, and the differences between what you purchase the property for and what you sell it for.
Understandably, it can take an extended period of time to see decent returns on these investments. Furthermore, the rate of growth will also depend on a number of external factors that need to be considered prior to purchase.
For example, the location of the property, the state of the economy, projected demographic or market value changes are all things to think about when choosing an investment property.
Rental Yields
On the flip side, renting out your property and securing a rental income is the second type of investment profit you can make.
These returns are far more frequent than capital gains, and are good for anyone interested in securing a regular income from their real estate.
Rental income tends to be for a shorter term than capital gains, and many investors will have a mixture of both long and short term investments in order to facilitate their capital growth.