How Do Reakl Estate Investors Earn Money.

by Matthews
(South Africa)

Hi Colm

I will invest in a residential property and buy four units of the property. How will I get the income.


This page is about real estate development and not investment, but I will give you a brief answer.

After you buy the 4 units you will rent them out to 4 tenants who will pay you rent for the right you give them to live in your property.

Before you buy the properties you should go to "several" real estate agents and find out what rent you could expect to get for each unit per week.

You shoudl not multiply that figure by 52 weeks to get the total income, as each unit will not be rented for a whole year.

I suggest a realistic figure is 48 weeks, as people sometimes rent for 6 months and then move out and it may take you 2 weeks to find a new tenant and if that happens twice a year you will not have income for 4 weeks; got it?

Remember that you will also have to pay for insurance of the 4 units in case of fire and you should also allow to spend some money on maintenance; say $200 a year for each unit. In addition you will have to pay Local Authority Rates.

Finally you will have to pay interest to the Bank if you have borrowed any money to buy the 4 units.

When you have deducted all those costs the amount left is yours.

Now remember the benefit of owning investment real estate is also with the increase in value of the real estate over the years you own it; this is called increasing your equity.

Lastly, you should speak to an accountant who understands you tax laws in relation to tax deductions for you in relation to these units, because if you earn a high salery or personal income most governments allow deductions for certain real estate investment costs anf this reduced the tax you pay in your income.

So in real estate investment, it is the "after tax" situation you must look at before buying a property.


Colm Dillon

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