Investing in Property can be as simple as getting finance, finding a property and purchasing it. But how do you know this is the right property? Will it bring you the right returns you are looking for (whether it be good yield or high growth)? Is this property going to get you closer to your end goal? Chances are this method of investing will leave you wondering what, who, where, when and why.
Don’t leave it to chance! Work out your strategy.
By now you should have worked through your SMART Goals and worked out why you want to invest in property and what you want to achieve with property. So the next step is Strategy. What strategies are there and more importantly, what is your strategy.
Below is a brief breakdown of the strategies you can use to get you to your investing goals. While just one of these strategies may work for you, chances are the more you invest and the more finance becomes a challenge, or the more you learn about investing or simply your circumstances change, it is likely you will use more than one strategy to get you where you need to go (and that’s ok).
5 Common Investment Strategies
1. Buy and Hold
This is one of the most common strategies and it’s simply buying a property and holding it, usually until the value goes up and you then have the chance to pull out the equity to buy again. Buy and hold properties may be negative geared at first and then progress to positively geared or you may add value to increase the revenue made.
2. Buy and Sell
Also known as flip. This strategy involves buying a property at below market value and then adding value to onsell. This is usually done within a short period of time to get instant equity.
3. Add Value
Adding value can arguably be the most common way to make quick money in property, simply because there is so many ways you can add value to a property. The following 3 strategies all fall under the ‘Add Value’ Category:
3.1. Renovation – This is by far the most obvious way to add value. Renovations can vary from a simple cosmetic reno for few thousand dollars through to a complete structural renovation which can be more indepth. Either way, Renovating is a tried and proven method to not only add value to the property increasing the equity, but it also increases rental yeilds.
3.2. Sub division – Whats the best way to get free land? Sub-divide of course! Well it’s not entirely free, you do have to pay sub-division costs. But once complete you have a spare block of land to do with as you wish. You could build on this land or on sell.
3. 3 Development – Development can be anything from building one house on a block to building a block of units. Development is not for the faint hearted (particulary larger developments), but done wisely could net you a tidy return.
Renovation, Sub Division and Development can (and do) go hand in hand. It is not uncommon to buy an older property, renovate the house and sub divide the lot. The new lot can then either be sold or developed on. These options can prove to be good little earners.
4. Off the Plan
This strategy is simply buying a property at plan stage, before it is built. This strategy is good for those who don’t have their finances ready.
Off the plan purchases can be bought for a small holding cost (say around $1000). Then the settlement occurs in the future once the property is built. This strategy is often used for units or apartments. The idea of this strategy is the property increased in the time it takes to complete the construction and therefore equity is created. This strategy can be considered a high risk strategy as there more potential for things to go wrong. The property may not increase in value on settlement, it may decrease. There may also be a risk that you may not be able to finance the settlement if you are not prepared and have not planned ahead.
Once you have settled on the property you can then refinance at the higher valued price and redraw your equity or you can on sell at settlement.
5. Vendor Finance
Vendor finance can get your foot in the property door if you are having trouble getting finance via the conventional means. Vendor finance is simply that. the vendor offers you conditions under which he will sell you the property via an agreed payment plan. Rent to own is a method that utilises vendor finance.
So there you have it, a quick breakdown outlining several Property Investing Strategies. You just have to find the right one to fit your own circumstances.
Until next time…
Chicks and Mortar
Women Investing in Property