Property Investment is growing in importance today in the global investment arena as more and more developing economies open up giving us the chance to make vast capital gains offshore. This article deals with why you should buy a house in a hot rental area so as to boost your ROI and continues from the previous article in our three part article series on how to maximise your ROI when purchasing investment property.
Most of us know in the mutual fund world, some funds consistently outperform the market and people then buy into these funds when they are low so as to outperform the market when there is a rebound. Property investment is no different except that our focus is not so much on the price of the property per se but on the rental proceeds. Have you ever noticed that some rental property geographical locations fetch more rental as compared to other areas? This article will highlight a three ways to identify such properties.
Firstly, the hill and the sea is the key to high rentals. In Hongkong the most expensive properties in terms both of rental and purchase price is found at the Peak. Needless to say we know that properties there are found at the top of a high vantage point overlooking the sea. Humans since the days of old have a great obsession of the sea, perhaps due to our fantasies about sea adventures fanned by movies and stories of great sea battles. This translates into higher profits when renting out the sea. For that matter, a sea facing unit on high ground will generally fetch higher rentals than one that is facing inland. Note that another reason why you want a property on high ground is that, in case there are new buildings near the sea, your sea view will not be obscured.
Secondly, finding a property in the path of development is another key to generating higher rental yields to boost your ROI. The reason is based in human geography. When a town expands in a certain direction, traffic and connectivity to that area increases and it becomes more desirable to live in and the rental proceeds will increase. Thus finding a property in an area that is in this path of development is important especially if you buy it before the city development takes place. Town development plans in your local city or county office will provide you with much needed insight into how your city or town will develop so pay a close eye to it.
Thirdly, an often overlooked trend is demographical change and migration patterns. Spend some time walking around and talking to individuals in the area. How old are the people in the area? What is the predominant ethnic group of people in the area? What do they do for a living and how much do they pay on the average for rental in the area? Your objective here is not to be racist or discriminatory but to find an area where the properties fetch rental returns higher than the national or state average.
Some places you will observe have a high level of immigrants, but the rental that you may collect may be higher than other areas. The reason is that you may be able to rent out to more people who are willing to be near their friends in a particular area as opposed to having to rent out the whole property. Note that you should always have someone trustworthy to look after the property so as to maintain some semblance of law and order.
In conclusion, we have highlighted three ways where you can maximise your rental ROI on your investment property and this concludes the third part of our property investment series.
By Joel Teo 2006 All Rights Reserved
Joel Teo is the author of this three part investment property series. You can find Part I of this investment property series at the investment property series article 1.
The Property Investment Resource provides more property investment articles at the property investment article directory.