Putting Up A Rental Business Easy Guide

Rental Business

Having a property investment is one of the great decisions you will ever make because in terms of cashflow it is one of the highest-earning investments and over time the value of the property increases.

Things to consider if having a property investment is worthy:
-Return on investment
-Cash flow
-Property insurance
-Return in the long term process

Return on Investment (ROI)

ROI measures the gain or loss generated on an investment relative to the amount of money invested.  It usually takes 8 years to measure the ROI from the start you put up the property but it will be better if it will not take that long. In addition, it means that you need to get back the money you invested in putting up a rental property.

Cash Flow

The goal of putting up a rental business is to have a positive cash flow. It will be better if within the first year of your rental business you are earning more than the money you invested, that completely means that success is on the way.

In addition, if the cash flow is good within the first year it means that the investor is not using their own money.
If you get a loan to use for a rental property, the monthly income should be higher than the monthly amortization loan. In this case, you will have a positive cash flow.

Property Insurance

All the assets that earn in the property investment should be covered under property insurance to mitigate any losses when unexpected things happened including calamities.

Long Term Return Process

If the property investment gets successful it means that you will have a regular and positive cash flow, and as long as the property is alive it means you will benefit.

Advantage And Disadvantage Of Putting Up A Property Investment

Advantage:
  • You will earn in having tenants who will rent out your investment property.
  • Property increases in value over time
  • Benefit from capital growth if you buy at a good price
  • The interest on an investment home loans is tax-deductible
  • Property investment is less volatile compared to shares
  • Property investment is a physical investment that you can see and touch, unlike shares

Disadvantage:

  • Sometimes rental income is not enough for mortgage repayment, so you may have to invest some of your income for repayments and expenses
  • You became a slave to the property market
  • Rising of interest rate will affect your return and put the pinch on your disposable income
  • If the property market goes down, so too does your investment. 
  • You can not easily sell off a section of your investment unlike shares
  • Without tenants, you have to be prepared to cover the entire costs and expenses

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