Some investors (if any) will release money for real estate investment unless it results in a profitable return rate. Placing capital in real property in the hope of producing returns is a characteristic of real estate investment and only smart for every individual investor to consider all returns have real estate investment.
In this article, we want to discuss the return of every investor that can be expected to accept from monetary and non-monetary sources related to income-producing property as an investment (not private residence ownership). The two sources are, although not necessarily moneyovers, it is returned to investors.
Monetary benefit sources include those who can be directly measured by the cost or return of the component. In other words, how much money (in dollars and cents) can be made by owing rented properties?
First, there is income. Fixed leasing income after operational costs, debt services, and taxes are cash flows that are your income. Naturally, there are factors that might affect the rental income you receive from time to time such as competition in the market, or market changes that dramatically change the market and cause a broad difference between the tenants who are now willing to pay at this time; Even so, if your cash survives and exceeds your cash, it is money in your pocket.
Second, there is appreciation. This produces what can be categorized as nominal or nominal in property value. The value of nominal increase means the property has increased in the term absolute dollar. The increase in real value occurs if the asset increases in value at a level that exceeds the size of the right inflation in the economic basket or the market used as the size of the purchasing power. Awards can be realized through sales, disposition of other assets, or by borrowing on increasing asset values.
Third, there is a financial leverage. This monetary refund is related through the use of loan funds. Positive leverage produces making money using loan funds (other people’s money) which costs less than the return they activate, resulting in enlarging the rate of return on investor equity and simultaneously allows investors to control investment which is far greater than what might happen. without loan resources.
Returns non monetary.
The source of non-monetary benefits is less clear but can be measured by personal investment objectives and opportunity costs related to special benefits.
First, there is pride in ownership. Direct ownership and control of investment in real estate allows one opportunity to control someone’s destiny through managing and making their own decisions about the investment. This may be lacking in the leashold agreement for commercial real estate.
Second, there is security. The knowledge that investment is under the control of investors provides security measures. Control land ownership and improvement in certain locations to ensure uninterrupted terms on the same address for business, for example, may be very important for business survival, growth and success. Or maybe it must be done with plantation buildings to ensure financial security during retirement.
Third, there is diversification. In this case, an investor can buy real estate as an investment for portfolio diversification to disseminate risk by having investment diversity among various types of investment.
Finally, it should be noted that most real estate investments involve the advantages of tax shelter arising from opportunities to delay taxes on revenue through depreciation and various tax credits.