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Real Estate Investing: How To Make An 80% Return on Your Property

80% Return on Your Property

80% Return on Your Property image: becomingminimalist.com

In the recent years many real estate investorsare having a tough time answering…Do I focus on creating a bigger income, or do I go full force for capital appreciation?

Today more than ever the real estate investing field has been turned on its head. Back 10yrs or more ago buying a property that lost money every month was common and profitable.

When all capital values were increasing by 10%-15% every year, why worry just focusing on increasing income. But this, for the most part, was a young person’s view of how to invest in real estate.

In reality, when you were looking at retirement back then. You would pull out all your capital sum which you wanted to use to create income. This is where income from rentals became very important.

But with rental yields only giving us max 5% gross, it barely kept up with inflation. So what are you to do?

Wells here is how you can see 80% returns in your real estate, over a short period of time:

Today, the demand for rentals is sky high. Way higher than property values, I think you would agree?

This goes hand in hand with the ability to acquire these properties under market value. Locking in your equity gain from the day you buy it, so later on when you are looking at retirement you can sell it and make a profit without a price rise.

Great huh?

Now, a somewhat less certain piece of the puzzle is the potential for growth in the coming years. As we see it now, things are very uncertain…

You can have small pockets of area’s that grow 5% to 8%, while others just sit at the same value. This is something you can not control right now, and in my opinion is a waste of time trying to
figure it out.

Here is a quick illustrative example of what is possible if you buy and hold a property for five years:

Here is what we should assume:

– Assume 5% capital growth
– Assume you will collect 5% net income
– Assume you paid 80,000 for a 100,000 home
– And that you are going to get it 20% below market value

In just 5yrs here is how it would look like:

Income: 20K
Equity Growth: 20K
Capital Growth: 27.6K

For a total return of slightly over 80%.

Now, obviously there are going to be many other factors that determine your ultimate return. But you need to start somewhere. A simple illustration like this one, will get your wheels turning. Allowing you to put a solid plan on paper for income or capital appreciation.

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