Navigating the World of Investment Property Asset Allocation
The asset allocation of an investment property portfolio — or any portfolio for that matter — depends on many factors, including your risk tolerance and investing goals. However, some experts recommend allocating a significant portion of your portfolio to investment property as an alternative asset class that can provide both recurring rental income and long-term capital appreciation.
To maximize your return on investment, consider a mix of commercial and residential properties. Each type of property has its own unique benefits, but both can be lucrative investments depending on your needs and the location of the property. Read more https://www.happygoluckyhomebuyer.com/sell-your-house-fast-in-lapel-in/
Aside from the potential to yield a steady stream of rent and generate future capital gains, real estate also offers tax advantages, such as deductions for mortgage interest and operating expenses. This makes it a smart option for investors seeking a stable and dependable source of income.
When choosing a property for investment, look for an area with solid population growth and rising demand for housing. This can boost property prices and ensure the suburb will continue to thrive in the long-term. A high-demand area is also likely to have a robust job market and a good quality of life, which will attract tenants and lead to longer vacancy periods.
Once you’ve found a desirable location, evaluate the property itself by looking at its current and potential rental income. You should also study the surrounding area for future development that could impact its value. For instance, an area with new highway construction may disrupt traffic flow and cause noise pollution that can drive down property values.
Lastly, you should evaluate the purchase price of the property against its current and future rental yield. Ideally, the annual gross rental yield should be greater than the risk free rate (currently about 3.1%). If it’s not, you should negotiate harder or move on.
In addition to evaluating the potential for rental revenue and capital gains, you should always weigh up the cost of buying an investment property against its ongoing management fees and running costs. In general, you should aim to pay no more than 12% of the property’s total purchase price in management fees and running costs.
Finally, you should also consider the purchase type. For example, if you’re looking for rental income, avoid co-ops, which often have restrictions on renting out the property. Condos are typically better for investment purposes as they’re easier to rent out.
Navigating the world of investment property asset allocation requires a deep understanding of both general and property markets, strategic planning, and ongoing management. It’s also vital to have a team of investment experts on hand to support you. At Long Angle, our HNWI advisors can help you build a profitable property portfolio that’s aligned with your financial goals.