Property investing has been a powerful way to build wealth that Australian’s have been using for generations.
The great thing about property is that there are a number of different approaches you can use that all increase your wealth over time. The exact strategy that you use as an investor will be dependent on your own personal situation, but here are 4 powerful strategies you can use to add value to your property or build a portfolio.
The great thing about investing in property is that, as the owner, you have the ability to add value to your investment. Compare that to the share market and there isn’t much you can do to increase a company’s share price.
By doing a renovation, you are able to add value to the property and at the same time, increase the rental yield and overall appeal to potential buyers.
The trick to a renovation is to do your research before you start. You want to look at other properties in the same suburb that have similar characteristics. Ideally, you want to see a large difference in price between renovated and unrenovated homes in that suburb. That way, there’s room to make a profit after taking into consideration all the costs involved taking into consideration all the costs involved.
With interest rates at record low levels and mortgage rates incredibly affordable, the vast majority of properties in the current environment will be at least neutrally geared.
The idea of finding a positive cash flow property is that the income you receive from rent is more than the costs of owning the property. That includes mortgage and interest payments and all costs such as maintenance, repairs, and management fees.
A positively geared property puts money in your pocket each month and allows you to build a larger property portfolio than one that is negatively geared. However, just because a property has a high yield and is potentially a positive cash flow property, doesn’t mean it’s a good investment. You still need to buy a property that has the potential for capital growth over time.
Getting a Good Deal
When a vendor sells a property, they are doing it for their own reasons. Depending on how motivated that vendor is to sell, will tell you how much they are willing to negotiate. Generally speaking, a highly motivated seller, will be far more willing to accept a lower price in return for a quick settlement.
A motivated seller is often someone who needs to sell for personal or financial reasons and if you can identify these types of properties, you may be more likely to get yourself a great deal and also create instant equity in the process.
Arguably the key objective of most Australian property investors is to look for capital growth potential. Australian property has a long history of appreciating in value and that is expected to continue over the long term. However, the property market is not one big market, but rather thousands of smaller markets made up of tens of thousands of suburbs.
If you can identify areas where demand will outstrip supply, then you’ll likely see above-average capital growth as well. These types of areas are often located in highly sought-after owner-occupier areas that have great amenity, access to rivers and beaches and good school zones. Alternatively, they can be areas that are being rezoned and going through gentrification.
There’s no one right strategy for property investors, and a more powerful way to create wealth is to try and combine as many of the elements mentioned as you can into your next property purchase.