Potential Returns of Property Investment

There are two sources of investment income in real estate. One is from capital growth. Unless the property market is on a fast upward spiral, capital growth will take some years to realise. In fact, in a normal economic climate, ten years is not too much to wait for your property price to increase enough to sell for a profit. To achieve good capital growth, you need to buy at the right price and in a good location so there will be a quick sale when needed.

The other source of income is from renting your property out. Every investment should be compared with other forms of investment to see how well it would perform. To get a percentage figure from your rental income, divide your annual rent by the purchase price of the property and them multiply by 100 for the percentage. So if you bought a house for $400,000 and rented it out for $350 per week the income percentage would be 4.5%. Of course, if you managed to buy a cheaper property where rents were higher - such as in a mining area - you may get a better yield.

What you have to watch out for are the times when your rental property is vacant - and so not bringing in any income. You still have insurance and other bills to pay on the property even though there is no rent coming in, so this should be factored into your equation.

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