The Basics Of Property Investing For Brokers

The Basics Of Property Investing For Brokers

Having expertise in property investment can set you apart as a leader in your market.

You’ll be able to attract better referral partners that can drive a steady stream of clients to your business.

But many brokers struggle with understanding the fundamentals of property investment. And this limits their ability to explain the risks and opportunities with their clients.

Here are some of the basics that you should have a clear understanding of.


Capital Growth

The general trend line of property values rises in an upward direction.

There will always be dips here and there, but if you look at property investment as a long-term strategy, know that it rises over time. And this can be seen throughout history.

It’s also important to note that land and buildings are different. Land generally appreciates while buildings often depreciate as they get older.


The Power of Leverage

Leverage is what allows the majority of properties to be purchased.

When it comes to investing, the Loan-To-Value (LTV) ratio can determine what you can do with your investment capital.

For instance, if your client has $200,000 in capital to invest, they can use that as a down payment on one property with an 80% loan-to-value ratio. Or, that same amount of money could potentially be enough to buy three properties with a higher loan-to-value amount.

?

Cash Flow and Rental Yield

Cash flow or rental yield refers to the rental returns a property generates as a percentage of the property’s value.

Here’s how you calculate gross rental yield:

  1. Add the annual rent generated
  2. Divide the annual rent by the value of the property
  3. Multiply by 100

Example:

$26,000 in annual rent, divided by the property value ($500,000), multiplied by 100 = 5.2% yield.

Meanwhile, the net rental yield factors in any expenses required on the property, such as maintenance or repairs, compared to the gross rental yield. You’ll take these expenses out of your total annual rent and then recalculate using the same formula.

Properties can have a positive or negative cash flow depending on income generated vs. their expenses.

It pays to become proficient with the fundamentals of property investing. You’ll be able to attract more investor referrals to your business because they see you as an expert in the field.

Gaining more and better referral partners is a long-term strategy for succeeding as a top-tier broker.?


Cheers,

Ross Le Quesne

Mortgage Broker Coach, Mentor and Founder of?The?Billion Dollar Broker

________________________________________________________________

P.S.?Whenever you’re ready... here are 4 ways I can help you grow and scale your mortgage business:

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2.?Join the Billion Dollar Broker community and connect with other like-minded brokers.

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James M. Brett

Mortgage Brokerage Principal | Trusted Referral Partnerships | Awarded Mortgage Broker & Sales Leader | Tea Lover | Dad | Volunteer | Mentor | Sober 14 Yrs

2 年

This is scratching the surface - a great topic to dig into!

Zale Tabakman

Making Older Buildings Green leasing them to Indoor Vertical Farms, Creating a $B+ business and 60%+ IRR

2 年

Hello Ross, My name is Zale Tabakman and I am the president? at Local Grown Salads. I would love to have the opportunity to share my knowledge and experience in the field of indoor vertical farming on your podcast. As I am sure you are aware, it is gaining traction as the way to have local, fresh, healthy food I am well-versed in the technology, finance, and marketing of equipment and the production. If you want we can also dive into Indoor Vertical Farming in Opportunity Zones. I would be happy to share my thoughts on the latest trends, challenges and opportunities in the industry. I am available for an interview at your convenience and would be happy to provide additional information about my background and qualifications upon request. Thank you for considering my request. I look forward to hearing from you. Sincerely, Zale Tabakman?

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