Property Investing Basics

Posted by Lauren Thompson on December 21, 2008

The three basic rules of investing in property are to maximise your yield, maximise your capital gains and reduce your risk. If he does certain renovations to his property, then he may be able to rent for an even higher price, so maximising his yield again. But a serious real estate investor does not want to wait for that cycle to come and go before he buys and sells. Even when property is in the boom cycle, there can be bargains to buy.

This is because there are always people who need to sell quickly for any number of reasons – and there are always deceased estates that often sell at reasonable prices. To do all three takes at least some knowledge of where the real estate property cycle is. Real estate goes through a cycle that usually takes around 7 years. When interest rates are high, the real estate market tends to become depressed because it is harder to afford housing.

When interest rates start to fall, housing is more affordable and more people want to buy rather than spend all their money on rent. If an investor can buy at a low price and sell high, then his capital gains will be enhanced. If he does the opposite, then he will lose money. But if he buys at a high price and rent is also high, then he can rent out his property for several years while he waits for the price to go up again. In this way he will be able to maximise his yield.

If he does certain renovations to his property, then he may be able to rent for an even higher price, so maximising his yield again. But a serious real estate investor does not want to wait for that cycle to come and go before he buys and sells.

Even when property is in the boom cycle, there can be bargains to buy. This is because there are always people who need to sell quickly for any number of reasons – and there are always deceased estates that often sell at reasonable prices.