The Benefits of Property Investment

Buying an investment property is a very popular investment option. One of the main advantages is that you have control over most parts of your investment. You have the power to decide:

If the purchase price, rental and potential for capital growth are acceptable.

How much cash you're going to put into your property investment, if any.

How you'll structure your mortgage(s).

How you're going to improve the value of your investment property to achieve the rental return you want.

If you'll manage your investment property or properties yourself, or pay a property manager to do it for you.

How you're going to maintain the property and whether you'll repair it yourself (if you can) or get someone else to do it.

This doesn't mean you have to do everything yourself, but it does mean you have to take an interest in what's going on. Residential property investment is not a passive way to make money.

More specific benefits of property investment include:

The security of bricks and mortar

When you buy an investment property you're buying a physical asset. Many people are more comfortable with this than other less intangible investment types such as unit trusts or shares.

Rental income

You can put the income from renting your investment property towards the repayments on the mortgage you’ve taken out to buy the property.

(If your financing costs and other investment property-related expenses are greater than your rental income, you may find yourself in a "negative gearing". While this has risks, it can also have advantages).

How to calculate your rental income return

Calculating the returns from rental income can help you compare different investment properties. 

Two common measures are:

Gross rental yield

This is the rental income received relative to the value of your investment property. To calculate Gross rental yield, divide the annual income from the property by the purchase price and multiply by 100 to get the percentage rate of return (yield).

Rental return on investment

This is the rental income received relative to your equity or investment in the property. It's important to factor in the costs associated with the borrowing required to buy the investment property, along with the other expenses incurred from maintaining and managing it.

To calculate rental return on investment:

Work out the rental income per year and subtract total expenses associated with the rental property for the year (include mortgage repayments, insurance, rates, maintenance etc). This is also known as the ‘net operating income’.

Divide this by the total amount invested (your equity or investment in the property). Remember to include the cost of any improvements you’ve made.

Multiply by 100 to calculate the percentage rental return on investment.

Potential capital gains

Capital gains are the second form of income from your property investment (along with rental income).

You achieve capital gains when the value of your investment property increases.

Returns from capital gains depend on movements in the housing market and may take longer to achieve than rental income returns. Keep in mind that while property values tend to increase over time, they can go down as well as up. One strategy for achieving capital gain is to look for investment properties that you may be able to purchase for below their market value, or in areas where you think house prices will increase.

Combining rental income and capital gains

As an investor, you may aim to buy investment properties that can provide both types of investment return. Different investment properties will provide different levels of capital gain and rental income. It’s up to you to decide on your investment goals and the most suitable properties to achieve them.

Investing for Iloilo Business Park Boutique Hotel and Commercial District

Iloilo Business Park’s Boutique Hotels and Commercial District, a 9.2 hectare prime property composed of 60 prime commercial lots located in 10 blocks. It is envisioned to become the next Central Business District (CBD) in the Visayas. More than 80 percent of the commercial lots are already sold to bank institutions, local entrepreneurs and companies. This posh commercial area will become the center of business ventures and future buildings. In the coming years, IBP’s Boutique Hotel and Commercial District will be the busiest and bustling area of the township due to massive investments coming in. The country’s biggest commercial companies are looking ahead to put up their own showrooms, regional headquarters and offices here. Presently, the two most prominent bank and financial institutions that successfully acquired lots in the Boutique Hotel and Commercial District are Union Bank and Metrobank. 

Invest in upscale commercial district where guaranteed return of investment is assured and will surely elevate your concept of investing for a property with high-income return.