One of the ways of investing in property is to buy one that you can rent out. How do you estimate whether your investment will be profitable?
Start with knowing how much rent your property can bring in. If it already has a tenant, your figures will be more accurate, otherwise you may have to research nearby properties to get a clearer picture. Once you own a property you are taking on the liability of property taxes, insurance, property management and the likelihood of your property not having tenants for some periods of time. This will normally take away 40% of your rental income. If your property needs repairs before you let it out, you should add that to the cost of acquisition, and work out your ROI thereafter. For property buyers, you can visti SPFC.
The balance 60% can be profit if you have fully paid for the property and not taken out any mortgage on it. This then becomes your income, which you will have to declare as your personal income and pay tax to the government on this amount. What is then left behind is then your profit. If you have taken a mortgage to finance your property, the monthly instalments will also have to be deducted from your rental income to arrive at the figure of profit on your investment.
It is then up to you to judge whether the figure you have arrived at, justifies the investment you are going to make. Compare it with other sources of investment before you decide. You may also require to keep some money aside every month to cater for any repairs or maintenance of your property and this can further reduce your profit. City taxes may also rise in future, as can insurance and personal tax rates, and you need to be prepared to bear this additional expenditure.
Real estate can give you some tax shelter, and you need to be well informed about this before you plunge in to property investment. Take the help of your CA or other professionals to get a clearer idea of how you can find your way to take advantage of this, to safeguard your investment.
If you are a first time investor, take your time to study the market and be conservative in making your profit estimates. That way you will not be surprised with the final results. Use the experience you now have to make any future investments in rental property. For more tips and suggestions, you can check on www.sellpropertyfastcash.co.uk