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Beginner’s guide to property investment strategies

11 Jan 2017 local real estate 0 Comment

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There are a number of ways you can make money in property. Unfortunately, there are equally as many ways to lose your cash. The key is to understand the different investment strategies before you dive in.

Choosing the right property strategy can be overwhelming, especially if you’re just starting out and talking to different experts.

For example, financial planners may suggest you buy new property to maximise depreciation. Developers may suggest off-the-plan properties, while your accountant may advise you to look at older properties.

The reality is, there isn’t just one way to get rich through property. But in general, there are three ways you can achieve financial freedom through property investing. These are:

Capital growth strategy

A capital growth strategy, in a nutshell, is buying a property with the expectation that it will increase in value over a period of time.

It’s a strategy where you focus on getting maximum capital growth and making that as your priority.

“The capital growth strategy involves minimum effort after purchase,” explains Jeremy Sheppard, creator of DSRdata.com.au.

“The time-consuming part is the research. You want to find those markets that are ready to experience high growth right now and hopefully well into the future too.”

Your timeframe for holding any particular property can also impact what you are going to buy, so it’s important to be clear about your strategy first before looking for a deal.

A short to medium timeframe, for example, is one where your property grows in value over a 1-5 year period and then trading it back to the market or selling it to realise a cash profit.

For this strategy to work, you want to focus on an area where you can see a short-term major boost or buy in an area which is on the verge of an upturn to ride the impending growth.

A long-term buy and hold strategy means you are buying into an area where you can see the ongoing desirability of the area, where there will be continual demand and multiple reasons why the market has the potential to keep growing.

Pros

Cons

Who suits this strategy?

Cash flow strategy

As the name suggests, a cash-flow property investment strategy is where the priority is cash-flow.

This means there’s less focus on capital growth and other strategies such as renovation or development, although they’re also considered.

A cash-flow strategy can help those trying to supplement their income.

Typically, a cash-flow strategy is where the investment property earns more rental income than the cost of mortgage, property management, rates and other maintenance costs.

This strategy is generally favoured by many beginner investors, particularly those that are earning lower to average income.

Pros

Cons

Who suits a cash-flow strategy?

Renovation

Renovation is a strategy where you actively seek out properties that you can improve to boost value or rent.

The key is picking the worst eyesore with the least cost to spruce up. The more you spend, the more likely you’ll “over-capitalise”.

Pros

Cons

Who suits this strategy?

For full article click here

Credit Nila Sweeney

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