Property investment can be a great way to make money. But how exactly do you make money
from property investment? Today we're going to look at the three ways that people make
money from property investment and ways that you can accelerate how fast you make that
money.
Hi, I am Ryan from onproperty.com.au your daily dose of property education and inspiration.
There are so many different ways that you can invest in property. But almost every single
one of these ways relies on just three ways of making money. I'm going to look at these
three ways and now I'm going to explain a little bit more about ways to accelerate how
fast you make money in property.
The first way people make money in property and probably the most common way especially
in this trial is through what's called capital growth. Capital growth is explained really
easily if you just simply say buy low sell high. The whole goal of capital growth is
to purchase a property and to have it increase in value over time either through doing work
on it yourself or most likely through the market just going up and then selling it or
borrowing against that growth in order to access that money. Capital growth is really
popular in Australia because most properties are negatively geared where they actually
cost more money than they bring in in rental income. So capital growth is the kind of silver
bullet to counteract negative gearing where can make a great deal of money even though
the rental income doesn't cover all the expenses and you are actually paying to earn that investment
every single month.
Method number two for making money is through positive cash flow. And that is explained
by saying more income than you pay in expenses. Positive cash flow works when the rental income
coming into the property pays for all your expenses like your mortgage, your insurance,
your counsel rates, your manager fees. All of that and there's still money left over
at the end of the day which is your return on investment. Positive cash flow properties
are much harder to find in Australia than they are in other countries like the US. But
there are still heaps of them around and anyone who says that positive cash flow properties
don't exist anymore is frankly bonkers. Yes that's right I said bonkers. I had no idea
why I did but I said bonkers. What a funny word. I know that positive cash flow properties
exist because part of what I do is I actually find the next positive cash flow properties
inside my membership website. I also teach people how to find that using the same techniques
I use. If you are interested in learning about that or seeing those properties head over
to www.onproperty.com.au/plus and watch the video over there.
When it comes to capital growth versus cash flow a lot of people lean towards capital
growth because you can make large sums of money a lot quicker because you have leverage
to purchase the property on borrowed money as that property goes up in value. The growth
in capital growth compared to the money you invested can be quite significant. You are
usually going to need more than one investment property in order to achieve financial freedom.
If you want to try and look how many you would need then head over to www.onproperty.com.au/76
to check out my episode that I did over there about how many properties you need to be financially
free. When it comes to capital gains versus positive cash flow that's a complete different
discussion that really I need to do another episode about.
The third way to make money through property investment is through tax benefits. Because
property has on paper losses associated with it like depreciation where you can claim the
lowering in value of items within the property or even the construction of the building itself.
In some cases property may actually give you a tax refund without actually losing any money.
Or you can get a tax refund greater than the amount of money than you have actually paid
out each and every year. On paper the refund is not greater than what you paid out but
because the lowering in value which isn't a year-on-year tax expense you can actually
get some major tax benefits through property. That's way more detailed than I can go into
and I'm not a certified accountant so don't take any of this as taxation advice. Always
see an accountant before you do anything in regards to tax.
So there you have your three different ways of making money. You�ve got capital gains.
You have got positive cash flow. And you've got tax benefits.
Now what are some ways that people tend to accelerate the growth of their properties?
Let's look at capital gains first. Accelerating the growth of the value of your property can
be done in a myriad of ways. There are cosmetic renovations. There are larger structure renovations
like doing extensions. There are developments like adding a second property. There are subdivisions
you can build townhouses. There are so many different things that you can do to add value
to your existing property. And if you're an active investor and you are actually going
out there and adding value, there can be huge rewards for you. If you just purchased a property
in Sedona well then you need to wait for the market to go up in order to get value from
that property. When it comes to positive cash flow you can add value mainly through cosmetic
renovations to make the property more appealing to increase the rental yield that's going
to deliver. But you can also increase value through things like development because things
like adding a granny flat or adding a new dwelling onto your existing property means
that the rental yield that you get based on the construction cost could bring the entire
rental yield of your property up. So renovations and adding other dwellings or splitting dwellings
from just one income stream into multiple income streams. It is how people tend to accelerate
their cash flow and passive income. And when it comes to tax depreciation I am actually
not going to go into detail about how to accelerate that and get more tax depreciation. If you
go and speak to a quantity surveyor, they can do a report for you and show you what
you can legally depreciate and you take that to your tax accountant and they will lodge
that with the ATA so it's not something that I can really advise on.
If you want to see a course I did a ten part series on depreciation head over to www.onproperty.com.au/depreciation
and you can check that out and learn more about that. So I think some of the keys to
making good money from property are to look for areas that you can add value in the way
that you want to make money. So if you want to make money through capital growth and through
increase in value look for ways that you can buy a property that needs improvement that
would generate that for you. If you want improvements in passive income then look for properties
where you can create improvements that generate you more passive income. Manage your properties
well because I'm a firm believer that the investor plays a vital role as to whether
or not a property investment is either a good investment or a bad investment. Always do
your research before buying and make sure they don't pay too much for a property and
always be prepared for anything that might come your way. Property is not without risk
and it does have its issues with it. If you want to check out our episode about the problems
of investing in property well head over to www.onproperty.com.au/170 and I outlined all
the problems there are when it comes to investing in property. So you can say whether this investment
vehicle is great for you or if it�s not really your cup of tea. If you liked this
episode then you might want to check out on property plus which is my premium membership
website where I have advanced training about how to find positive cash flow properties
and how to research in an area. And I also have tools to help you analyze properties.
And I go out there and find positive cash flow properties and I list them inside that
membership area as well. If you want to check that out head over to www.onproperty.com.au/plus
and watch the video over there. You can see the pricing and everything. It is currently
just $20 a month or $200 per year but is limited to 100 members so if you do want to get in
I suggest that you get in quickly.
So until tomorrow remember that your long-term success is only achieved one day at a time.