Property Investment Strategies

  1. Buy and Hold:

It is a well known fact that generally properties tend to show great growth potential in the long run than in a short span. Buy and Hold is the most common and popular strategy in terms of property investment. As the name suggests, in this strategy the property is bought and then held on for a longer duration to gain maximum value out of it. 

We have always been saying that the more you hold on to a property investment the more profitable it gets for you. Hence, Buying and holding a property is indeed a smart move. This strategy has definitely made many multi-millionaires in the country. But, be careful while choosing the property here, as a wrong one can spoil your investment experience for longer than you think. In this context you can play safe for your first few properties by investing in prime locations or those locations where the reports have shown more stability with a little risk element.

You may also keep an eye on the suburbs which can highly benefit from infrastructural developments, new projects etc. Also, during the period of holding the property you can add more value to it by renovations or repairs. 

As you are holding the property for long term the market may show highs and lows hence, the key point to remember here is not to sell off your property early out of FOMO.

  1. Positive Gearing or Cash Flow:

Positive Gearing means you are earning profits & your income is exceeding your total expenses, interests, other fees etc. Positive cash flow can be a very effective strategy as it provides instant and better earning potential. This also allows you to invest more and more frequently. What leads to positive cash flow? Simply investing in a property based in a prime or high demand location, adding new elements and making your property more alluring for the tenants or buyers, adding a Granny Flat, investing in multiple-family based homes, etc. 

Be careful in location selection here. If bought in the wrong location then the property may take forever to grow in value. 

Though it feels wonderful to earn immediate and positive returns, you must not forget that all kinds of incomes are taxed and a positive cash flow property is taxed a little higher. So, we recommend you speak with an expert accountant and get to know more about how much you can probably be taxed, this will provide you a clear picture. 

  1. Negative Gearing or Cash Flow:

As opposed to Positive gearing or cash flow, A Negative Cash Flow  is a condition where your cost of expenses exceed the rental income. This is a strategy popularly adopted by seasoned investors all across the country. It may sound a little daunting but it is true. 

Wondering why would someone follow this practice? Well! Negative gearing is majorly used as a tool to save taxes. As we know that property shows an increasing trend in terms of value over the period of time, seasoned investors use this fact as leverage. They simply analyze the market and from their previous experiences they can get a hunch as which area or property may be beneficial to invest in with Negative Gearing strategy and they know when to stop. Eventually they earn profit in this and use the rest of their saved thousands to invest in other properties. 

A lot of naive investors try to adopt this strategy and eventually end up in debt. If you are new to the market yet, we recommend not to go for this strategy. Though it can save you thousands but with no knowledge it can become more risky. 

  1. Subdivision: 

You might have heard of the “DIVIDE & RULE” concept. Subdivision works the same way. 

Subdivision means to buy a potentially big block and divide it in multiple blocks then construct different houses on the blocks or leverage it as is.  As lucrative it might sound, this strategy is not for every person. It accounts to more experienced and seasoned investors. This strategy also includes more costs to take care of. 

To subdivide any property one must abide by Council regulations and applicable law which can sometimes be difficult. Subdivision can add a lot more value to your investment portfolio but at the same time finding such a block with all the legalities is tough.

Going down this road demands excellent knowledge, mentorship and ample finance to cut past the competition.

  1. Short-term Leasing:

Short-term leasing is a strategy where you can put your property open to rent it out for shorter spans for instance vacations, stacations, holiday makers etc. A very popular example of this strategy can be Airbnb and student accommodations. 

Short-term leasing is gaining more and more popularity and growth gradually all across the world. It is also a fascinating strategy which can increase the income and can be one of the finest strategies to follow and earn maximum income.

Short-term leasing comes with a few extra costs and obligations such as furniture, wi-fi, cleaning and maintenance. The income highly depends on the location selection of the property hence, be smart in the choice.

  1. REITs & REIGs:

[ A ] REITs:-

REITs are life savers for those investors who do not wish to invest directly in the traditional Real Estate market. REITs stands for Real Estate Investment Trusts. REITs basically are the trusts which utilise money raised by investors to buy, administer, manage and operate income properties. 

REITs sort of work like stocks and Mutual funds models. REITs are super liquid therefore you need not to worry about the cashing out of property. These operate just like the stock market providing you liberty to buy and sell according to your pace. Investors receive returns in the form of dividends. 

Note that these REITs can be of two types :

  1. Equity REITs – Owns a property
  2. Mortgage REITs – Funds Real Estate and deals into Mortgage backed securities only.

Choose according to your purpose. REITs have to abide by the government rules and regulations strictly. Here you also don’t have access to the physical property itself. If you want to play a bit safer then REITs can prove a smart strategy to pull on.

[ B ] REIGs:-

REIGs basically work as a partnership among various individual investors who come together and invest into the Real Estate by pulling in money, knowledge and skills. Real Estate Investment Groups are ideal for the investors who want to invest in physical property hassle free. REIGs may use various strategies for investment and that can vary from group to group. These REIGs may or may not charge membership fees or require much of decision making or active participation. Therefore, choose wisely and accordingly. 

In REIGs normally the investor has liberty to invest in as many self contained units as he wants and the company or group will altogether manage the properties. Investing in REIGs can require you to keep an extra reservation of funds for investment. Yet, REIGs can actually be a wonderful strategy to learn more and more about the traditional physical Real Estate Investments as you can leverage the knowledge and experience of other group members as well.

  1. NDIS-SDA:

If you have never heard of these words then you must check out our articles on NDIS SDA. To tip you off with it let us explain in brief what NDIS SDA means exactly. 

NDIS SDA stands for Specialist Disability Accommodation. SDAs are federal government backed housing for NDIS participants who are either fully disabled or in extreme need of support in Australia. 

The investors of SDA housing are termed as SDA Providers. Yes, it is very good conduct and all but why should you be investing in SDA?

SDA providers can avail Gross Rental Income of around 9% to 16% on an average and it is gaining popularity. Government has a very high and wonderful vision and hence to encourage the scheme it is supporting the investors in all the possible ways. Apart from this one more strong reason to invest in NDIS SDA housing is that there is a huge shortage of proper accommodation for younger disabled Aussies or those in extreme need in Australia therefore making it highly in demand. Where DSR is high, returns are high too. 

Remember, not every good comes in easy and handy as such. Similarly SDA also has few Terms & Conditions that you must check out prior to investment. We are not getting much in depth here as we have covered it separately. 

If you are perplexed if it is actually good or its just all words then you may check out NDIS Property Investment Review.

  1. Smart Renovation and Flip House:

Smart Renovation is nothing but renovating your property to appreciate its valuation ultimately. Why use the word Smart Renovation? A lot of investors make few changes here and there in the property desiring appreciation in value but not every renovation leads to the desired output and results. Hence, you need to be smart here in choosing what exactly you want to put under renovation that can add to the value and meanwhile attract more and better tenants. Repairs and Renovations are also used as a leverage for Tax Deductions. 

Flip House shall be a renowned word to you. House flipping is an extremely popular strategy amongst the investors who have been into the race for years and have a good know-how of the industry. Flipping houses demands more knowledge, experience and skills to determine the value of the property, negotiate, market and renovate the property. 

Flip House strategy refers to purchasing an undervalued property either at an auction or otherwise and then to turn it into livable condition by smart renovation. In this strategy the investor will buy a property and work his magic on the property mostly within 6 to 7 months and then sell it off. You see, this is real work to do. It requires expertise to understand and invest in a profitable property, otherwise it can flip the tables for you in an unfavourable direction. All in all, if you have good knowledge or know someone who can do it for you and you aim at good returns in a relatively shorter span then Flipping houses can be a great choice for you. Don’t get mistaken to mix up the Flipping House concept with any Get-Rich-Quick type of ponzi schemes. Flipping a house is not easy, it takes more precision and if the execution takes time the more the investor will risk the loss of money.

  1. Diversified Portfolio:

Diversification can never ever bounce back at you. It is a very important and smart strategy to follow. If simply put, a diversified portfolio means to invest your money in different types of investment tools. 

Join The Discussion

Compare listings