When most people think “Property Investment”, typically their thought process goes along the lines of buying a house, unit or apartment and renting it out to tenants who’ll hopefully look after the property and pay their rent on time. But “Property Investing” is actually an all-encompassing phrase. It covers a very broad and evolving list of investment strategies. Here are some of the best of them.
Home Ownership - While owning a home is a basic element of property investment, most home owners don’t go any further than this strategy. That’s alright if you plan on using other tactics to build your future but this one asset isn’t likely to secure your retirement and you’re going to need to add to your portfolio or find other ways to create wealth.
Buy and Hold - This is how you can start growing your portfolio. Buy a couple of properties and hold onto them for about two cycles of the property market, which is about 15 years, or longer. Then later on you can cash out most of your portfolio and use the after-tax profits to buy your retirement home and enjoy a nest egg you’ve put aside.
Buy, Renovate & Sell - This isn’t a strategy for those with little experience. The aim is to buy an unrenovated property, renovate it quickly and sell it for a much higher price. The failure rates of this strategy are pretty high and those who set out on their first flip property tend to not try a second. If you want long-term success with this you need to give up the day job and take on investing full time as well as becoming site manager, procurement officer and chief decision maker.
Renovate and Hold - This strategy mixes the last two together and works well for those who are happy with not having a fixed residential address for years on end. You can continue growing your portfolio but you acquire properties that mostly need work. So you move in and renovate while living there for a year or so. Instead of then selling on you rent the property out for a higher rental return.
Managed Funds and Super Funds - This is minimal risk and an extremely passive investment. But there’s a little work involved too. This strategy relies on trusting a financial institution to invest the money in property shares and portfolios and produce a decent financial growth for you. The gains aren’t highly lucrative but they are a lot less risky and can pay off over time.
Group Family Buying - This strategy is better used for creating better efficiencies for home ownership. Teaming up with family to pool money together and purchase a property is a very common way for people to get into the property market these days. Be careful with this strategy and make sure everyone’s goals are aligned and you have an exit strategy in place should one party want to sell before the other does.
Full time Property Development - This strategy requires the most hands on work and capital. It’s usually only reserved for those with good financial backing, construction experience or connections in the industry. It’s also possibly one of the most exciting aspects of Property Investing as you get to see your project go from an idea on paper to a completed building.
The best step towards defining your strategy is to define your objectives and outcomes in the greatest of detail.
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