An introduction to property investment strategies
When embarking on your property investment journey, a good place to begin is by asking the following questions: How much money am I willing to spend? What type of property am I looking to buy? Where would I like my investment property to be located? What are the risks/potential losses involved with having an investment property? What kind of return can I expect from my rental property?
Asking yourself these questions before even looking for an investment property will give you some indication of whether or not an investment property is the right choice for you and if it will be worth your time and hard-earned money.
Finding the right investment property for you
The next step in your investment property journey is to find an investment property that is best suited to your needs and wishes. Once you have set a budget, don’t forget to include the cost of any renovations you may have to carry out as well as agent costs and other fees.
Once you have your finances sorted, you should be able to narrow down your property search to a few areas that meet your investment objectives. Ideally, the investment properties you are looking at will have a high level of immediate cash flow and the potential for capital growth.
Some important factors to consider about the investment property include its proximity to public transport and amenities including shops, schools and public recreation facilities and employment opportunities. Being in proximity to yourself or a good agent who will be able to take care of the day-to-day running of the property is another important factor to consider when looking at location.
Choosing an investment strategy
One of the most popular investment strategies used by investors is the positive cash flow (rental) strategy. This investment strategy involves buying an investment property and using the rental income made on that property to cover the cost of the interest on your mortgage as well as other associated expenses.
Properties with a good potential for high cash flow are generally found in areas of high rental demand. However, when considering the positive cash flow investment strategy don’t forget to take into account the cost of rental repairs and maintenance. Also, consider that positive cash flow properties are often not properties with a great potential for capital growth.
Another relatively popular property investment strategy is the renovate and sell approach. This strategy involves buying a property, often a run-down for a cheaper price, renovating that property and then selling it for a greater price than you paid for it originally (renovation costs included). However, like any renovation, if you take the renovate and sell approach, you must be careful not to overcapitalise and potentially ruining your chance of a profit.
Luxury features such as tennis courts, pools, air conditioning or wine cellars, whilst attractive, are costly additions that add little or no value to the sale price of your house.
If you are lucky enough to own a large block of land with subdivision potential then subdividing your land and selling these parcels is a fairly straight forward and risk free property investment strategy. Before undergoing a subdivision, you will obviously have to comply with council regulations regarding minimum block size and practical elements such as access to properties and boundary fences. You will also have to decide whether or not you will sell the subdivided land as blocks of land or whether you will build on this land and sell these properties.
