Know How To Count These Three Before Investing On Property Service –
Are you interested in investing in property service? If you are new at property service or investing in anything at all, then don’t jump onto the gun right away. At least, know how to count these three things before investing:
• Opportunity Cost
Opportunity cost is the opportunity lost depending on your choice, like when you choose a table while playing online poker in . This cost usually needs to be considered when you have two or more options and don’t have any resources (aka money) to pick them all.
For example, when you only have two dollars and want to buy some instant ramen or mac n’ cheese, you got to choose one of them since the money you have is limited. When you choose instant ramen, then you lost the ‘opportunity’ to get mac n’ cheese and vice versa. That lost opportunity is what we call ‘opportunity cost’ that happens in all fields.
Following that explanation, then calculating opportunity costs can simply be done by adding up the costs of what you don’t choose – as simple as that. This counting is useful for those who simply want to look at the advantages of what eyes can see alone and gain or earn as much as possible like how you want it.
• Capital Gain
Now, what if you want to sell the property? If that’s the case, then you can count on the Capital Gain. To put it simply, Capital Gain is the profit you can get from selling the property. The gain itself is calculated by subtracting the selling cost to the price you originally bought it. Again, it is a simple calculation. However, unlike Opportunity Cost, Capital Gain is only useful for those who wanted to sell the property.
• Yield
What if you have no intention to sell the property? Then, calculate the Yield. Yield itself is the profit you can gain from renting your property. The Yield percentage itself depends on the condition of the area surrounding the property. Overall, a good property in a strategic area without any political nor economical conflicts should be able to gain a 5% Yield per year. That said, we can’t get the perfect property all the time – depending on the development of the area, the property may be unwanted even though it was fine last year. Our purpose here is to fit the Yield to the surrounding conditions of the area to gain profit without losing tenants.
Investing is not something everyone can do right away. However, as long as you know the risks and benefits by counting the opportunity cost, capital gain, and yield. After you know at least those three, then you can consider whether you should invest on the property or not. Good luck!