What are some key terms I should be aware of if making a property investment?
Gross yield: A yield on investment property before any expenses. This is calculated as gross annual rent divided by purchase price. Cap rate: Similar to gross yield but includes all of your expenses (except loan costs). This is calculated as net annual rent income in Year 1 divided by purchase price. Cash yield: This is a measure of return on your initial investment after your first full year of ownership. This is calculated as net cash flow, after all expenses and loan payments, divided by initial investment amount. Annualized return: Estimate of the value the investment generates over the time period for which you own it (including cash flow and appreciation).
How is appreciation calculated?
Appreciation is a prediction of value based on current and anticipated market conditions and home conditions. These estimates may be influenced by many factors, some specific to the local market and some related to the broader economy.
Vacant or occupied—which is better?
They both have advantages. With an occupied property, there’s no interruption of the current lease, the property starts generating income right away. With a vacant property, you have the opportunity to renovate or add value to the property, start fresh with a new lease, and we can adjust the guaranteed rent based on the upgrade.