- What do you want?
There are two significant categories of property strategies: growth producing a strategy and income generating strategy.
You can use either of the strategies depending on what you are after and what you want to gain from your property investments. There is only, but a thin line between growth properties and income properties, mainly because purchasing a property can earn you both an extraordinary growth and an enormous income.
There are many strategies that property investors can use. The most important thing is to understand how each plan works, their advantages and disadvantages, the one that is ideal for you and the one that supports your goals and the direction you are moving to.
You should note that there are no specific rules to this; there is no right or wrong way to make property investments. It all boils down to your present, where you see yourself tomorrow and the time, effort, and risk you are willing to take before you achieve your aim.
Property is one of the best rewarding investment strategies. Even when you seem to make a wrong investment decision, if you still hang on for a while, you will hardly lose your money. Ensure that any decision you are making as regards property investments fit into your portfolio, and it will not expose you to high risk.
- Getting yourself informed
“Knowledge,” they say, “is power.” You won’t be exposed to many risks when you educate yourself. If you know much about a topic irrespective of the field, industry, or sector, you have low chances of facing threats in that area. When you get yourself informed about things that have to do with real estate and its management, you are less likely to be faced with risks such as a property not being zoned for immediate use, being stuck with GST bills or even a bad lease.
With more knowledge, you have more confidence at your disposal. It confers on you, not just the ability to ask more questions but also to ask the appropriate questions. In that way, you get the required answers that would help you make wise decisions.
- Analysis of portfolio
Nothing much seems to be said about this aspect of investing yet, and it is an important one. It doesn’t matter the sort of deal you come across, if it isn’t suitable for your portfolio, then it is not the right one for you. This doesn’t mean it is not the right one for another person either.
As you gain more knowledge and become more proficient in property investment, you get to a certain level where you have developed your investment intuitions to the point that you can take investment decisions taking into consideration what best suits your personality, your timeframe, your goals, your financial level and then the personal commitment you have towards possessing wealth.
- Getting started and knowing your starting point
Most Australians address the issue of money management before they even start investing. The most crucial money management skills people need to learn are record keeping, budgeting, and also keeping account of the inflow and outflow of your money.
You should take note of your assets and liabilities and know your financial capability. What do you gain on a monthly, bi-weekly, and weekly basis? What exactly does your income look like? You should know all that. This still boils down to record keeping. With record keeping, you would be able to give a more accurate assessment of your financial status.
- The concept of ‘good debt’ and ‘bad debt.’
Good debts are usually tax deductible as they are acquired to buy assets that generate more income than the asset itself costs. It is the debt between you and the structures you purchased; you are both the banker and the borrower. This is the right way of protecting your assets as your structure will get paid before any other potential litigant or a creditor that is not secured.
Bad debt, just like its name sounds is the sort of debt that leaves your poor. With this sort of debt, you get to pay huge interests e.g., the store card debt and the credit card debt. It would help if you had these debts eliminated as soon as you can.
- What is the purchasing power of your money?
To attain success, you have to ask yourself the appropriate questions. The question, “how much can your money buy?” is an excellent place to start. It would be best if you always had in mind that in property investments, your starting capital should be able to cover your deposits (from 5% to 30%, ideally 20%) and the property cost (that includes the price of forming the structure, legal fees, stamp duty). It should also cover the cost of whatever it is you want to do on that property to achieve your desired purpose for purchasing it in the first place e.g., loss of extending and renovating it.
If you understand this, you are one step ahead of being a successful investor as this will go a long way to determine how much you can afford to pay for a property and also where you need to search for the property within this price range.
- How far are you willing to go to get the right deal?
Price should be the first factor you should consider when investing. The next element in line to that is how far you are willing to go to get exactly what fits your price range. If you do not have the right answer to this, then, it is high time you have a rethink on your strategy, motivation, and determination. Sometimes you might have to drive a long distance to get a deal. Some are willing to do everything necessary to start up their property investment. A family purchased a $79,000 property after six hours drive. With this investment, they were able to buy their PPR and are now into multi-million dollar deals. How far are you willing to go?
- What is your timeline for sale?
When choosing the strategy to use for your property investment, time is a factor that should not be overlooked. You should know that some plans would require more labor and input from you. Hence, if you do not have much time at your disposal, you need to go for a strategy that won’t take much of your time or require much input from you.
- Make investments that would help strengthen your weakness
As an investor, you should already know your weak points so that the next property deal you would be striking would be one that reinforces your investment weaknesses.
Lets’ take, for instance, you have equity that has low serviceability, you would need a deal that focuses more on cash flow. This is to help increase your income and thus, serviceability from the angle of the bank. This implies that banks will favour you more when you come seeking for a loan for your next property.
In the other hand, if your investment is already on high cash flow like a business but low on equity then your next deal should be geared at one that gains ownership or value so that when you want to take a loan from the bank for your next sale. You will have enough security to cover up for it.
- Do a review of where you started when you purchase/sell a property
Your financial status changes with each property you buy or sell. This means that each time you have a new starting point hence, the need for you to make a new assessment of what next your portfolio needs, your original price point, your new timeframe and every other detail we pointed out above. This is an ongoing project for you, and you need to make adjustments continuously; it makes it more fun.