The biggest challenge of property investment isn’t deciding to invest; it’s finding a property that ticks all the boxes.
There are a range of factors to consider when trying to identify your perfect nest egg, and the conflicting information out there can get overwhelming.
But most experts agree that there are a handful of property investment strategies that can work for you over time and give you the best chance of success.
Let’s look at five of these strategies.
1. Buy on location, not just property
Your new property may be modern and spacious, but if it’s out in the sticks, it’s unlikely to be a smart investment—unless you know that area is set for growth.
Before you purchase a property, it’s imperative to research your chosen location to ensure that it’s ideal. This will help attract steady tenants and achieve strong capital growth over time.
Buying in an area that is set to undergo positive transformation is can be a smart move, though sometimes these things are hard to predict.
However according to a recent investor survey, nearly 60% of investors believed purchasing in the right suburb and street was a key factor when choosing a property. If you manage to buy in a location that is currently popular or on the up, you could be in a good position.
2. Identify renovation opportunities
Popular TV shows like ‘Fixer Upper’ might make renovation investing seem like fun, but it can actually be a difficult strategy.
Buying a property to renovate can be an expensive, lengthy endeavour that can ultimately end in a loss—not to mention the time and effort it requires.
But strategic renovation in general is an important part of the investment process. If you’ve got a rental property, making minor upgrades could add hundreds to your monthly rental income.
Alternatively, if you’re living in a property you own, finally organising that bathroom renovation of your dreams could boost the value of your home and its equity. This could pay off if you intend to rent it out or sell later.
If you’re interested in buying a property solely to renovate, it helps to have a clear goal. Are you trying to convert a farmhouse into a B&B? Is that expensive paint job worth it right now? Or should the focus be on adding a new extension?
Stick to functional renovations that offer tenants real value, as these are likely to have the biggest impact on your returns.
3. Invest in the long term
Here’s a phrase you might hear from any successful investor: buy and hold. This strategy encourages investors to perceive their properties as long-term investments, not short-term profit makers.
This strategy is one of the most likely to guarantee an investor success. The property market may dip and dive over time, but if you can withstand these fluctuations you’re likely to come out on top with a high-value property.
This strategy relies on finding tenants, so you have a rental income that can help with the mortgage. You’ll also need to budget for any necessary repairs or renovations. But with a great rental property, reliable tenants, and good property management, this can be relatively smooth sailing.
The aim of a buy and hold strategy is long-term capital gain. Investors normally use the profits made from the equity in their first purchase to buy the next property in their portfolio.
It can be tempting to ‘flip’ instead, which refers to the act of buying a property and trying immediately to sell it for profit. But this is a risky strategy, and rarely achieved with any success by those who aren’t experts.
Long-term investments can be more stable and offer greater growth potential.
4. Work toward owning your own home
Otherwise known as ‘the Australian Dream’, owning a home has been set in the hearts and minds of Australians for decades.
But people don’t always think of home ownership as an investment. After all, a mortgage drains your bank account and can take decades to pay off.
However, owning your home has one big advantage: it’s free of capital gains tax. If you live in your home throughout your life, it’s likely to rise in value significantly over this period.
If you eventually choose to downsize, you could free up bundles of retirement cash when you sell.
Also, the word ‘investment’ doesn’t necessarily always mean financial. Owning your own home has emotional and lifestyle benefits that many Australians take comfort in, especially in their later years.
5. Do your own thing
With all the news stories about ‘the next big property crash’, it can be hard to listen to your intuition and do your own thing when investing.
But following what everyone else is doing isn’t always the best strategy. You might find yourself swayed by headlines that are little more than clickbait, or become overly confident based on what you’ve seen others do.
The fact is, nobody truly knows what the property market is going to do; not even the fat cat investors!
Focus on your own investment goals. What is it that you need? What can you manage?
If you don’t love a property or you’re not feeling good about a decision, don’t go ahead. There may be a box that hasn’t been ticked somewhere, and it may come back to bite you.
Comparing your portfolio to others’ and soliciting the advice of too many different sources can lead to confusion, and maybe even limit your potential.
So listen to your gut, and make large-scale financial decisions responsibly. It’s your investment so, you’re in charge!