Rental yield is a properties yearly rental income divided by the purchase costs, and multiplied by 100. The total is expressed as a percentage, for example: If you receive $300 per week rent, which equates to $15,600 per year, and the total purchase price of the property was $350,000, the rental yield would be determined as follows: 15,600 / 350,000 x 100 = 4.45% rental yield. With interest rates at their current low levels many properties are leaning towards positive cash flow and achieving more in rent than what is spent on outgoings (interest payments, rates, repairs etc.).  As property prices rise in value over time your rental yields will also increase on your portfolio.

Capital growth is the improved value of a property minus all costs, including purchase price, purchase costs, selling costs and renovations or improvements. In Australia capital gains is taxed on this amount after the sale of an investment property, but not on your principle place of residence (ppor). Currently if you own an investment property for more than a year and then sell you are eligible for a 50% discount on CGT.  

Equity is the current value of a property minus what you owe to your lender. It can be used instead of a deposit as security to a lender to leverage you into another property purchase. Equity can also be used as security to borrow funds for just for renovations or to fund shortfalls in living expenses. Over the past few years leveraging property equity has enabled myself and many other property investors to live well off a property portfolio without the need to sell. Currently lenders are tightening their policies on low documentation borrowing and this strategy is not currently looked upon very favourably with lenders mortgage insurers during the current financial climate. But who is to say whether this strategy may once again be viable when the financial markets correct themselves.

 With housing affordability at its current levels people are finding that the old way of saving a deposit to enter the market will no longer work for them. By the time you have saved that large deposit, house prices can again move up and out of your reach. The longer that you are out of the market, the longer it will be til you get rich. Joint Ventures, commonly referred to as JV’s are a great way to enter the market sooner, and purchase better quality properties than you might otherwise have been able to afford. A JV involves two or more people teaming up to purchase a property usually with the purpose of using a value adding strategy like renovating or developing it and then on selling the said property for profit. The best JV’s involve members who can bring different skills or strengths to the table, such as a cash rich, time poor person partnering up with a time rich, highly skilled person. JV’s are also an excellent way for parents to help their kids enter the market by using the end profits to enable them to purchase their very own property down the track. A vital key to achieving a successful joint venture is attitude, focus on abundance not lack, as the name of the game is to make enough profit to happily share around. After all, would you rather have half of something or none of nothing?

Once the secret document wielded by big time developers, the option contract is suddenly the new black. Featured currently in high priced seminars across Australia that claim you can make millions in a couple of weeks. What is an option contract and how exactly can it make me millions? 

An option contract is a legal document drawn up to grant the holder control of a property for a predetermined amount of time. The person who controls the option has the right to on sell the contract to another party, namely a developer. The option holder also has the right not to exercise the option, for example they apply for a development application which is denied by council, the holder can cut his losses and walk away from the contract without any repercussions. At no time whilst the contract is valid can the owner of the property sell it to anyone else. Options work best with properties which are not listed publicly on the market, and when you approach a property owner directly. 

The people who make the big bucks from this strategy are able to identify properties that are zoned for development that the public are not aware of. By finding properties that can be developed the contract holder can often offer the owner an above “unimproved market price” for the option of the property, conduct a development application, and then on sell it to a developer for a tasty profit. The developer pays the owner the price negotiated in the option contract and the holder keeps the icing on top. 

Not bad for a little bit of research, negotiation and paperwork.