The Best Property Investment Strategies
Buying an investment property is a popular choice among first-time investors. Owning a property investment in Australia has a plethora of perks such as tax benefits, stability, and flexibility. However, there’s more to property investment in Australia than simply buying properties. To make the most out of your investment, you need to know your stuff.
In this article, we provide important tips to help you make smart property investment decisions.
What’s the secret to a successful property investment?
It's all about having a good investment property strategy. This strategy is used to help investors achieve their goals by following a set plan or course of action. You can’t just invest in property blindly hoping for a return on your investment.
An investment property strategy guides your property purchase. It’s there to help you make the most out of your investment.
Different property investment strategies in Australia
Investment strategies are not a one-size-fits-all plan. Here are some of the most popular investment strategies for real estate:
Rental yield investment
Renting out an investment property is a common investment strategy. Its main draws are the steady passive income, tax incentives, and quick turn of profit. Take advantage of this investment strategy by finding an affordable property in a suburb where the rental yield is high.
The main downside of the rental property strategy is the amount of work you must put into it. With this plan, you’re essentially becoming a landlord as you manage your rental property. You have to think about rental income tax, zoning restrictions, and tenancy issues.
This is a relatively low-risk strategy that doesn’t require a lot of hands-on work. Like what it says on the tin, this strategy involves buying a property and holding it until its value increases. This relies on the property growing in value over time.
To make the most out of this plan, you have to find a suburb with the most growth potential. Identify drivers of growth and see if there are plans for infrastructure development, education facilities, and other neighbourhood amenities in certain suburbs. You can research local real estate trends by looking at suburb reports and property reports.
For the buy-and-hold to be effective, you need to figure out the perfect time to sell. The downside to this is that it requires a lot of time for the investment to pan out.
This may be the most well-known investment property strategy thanks to home improvement shows. When you ‘flip a home', you are buying a low-value property then renovating it to increase its value and re-selling it for a profit. This method requires a lot of time, effort, knowledge, and funds.
Flipping properties is a good strategy if you want a quick profit. Unlike buy-and-hold, this method increases the value of the property quickly and you can re-sell as soon as the renovations are done. The hard part is finding the right property and suburb.
Negative gearing happens when the cost of owning a rental property outweighs its yearly generated income. This creates a loss which can be deducted from your taxable income. The taxable loss could be offset against other income sources like your wage which could provide tax savings.
As an investment strategy, negative gearing works by buying a low rental yield property in a high capital growth location. The negative gearing could help manage cash flow issues while holding the property investment.
This is one of the more complicated investment strategies. It’d be best to consult with a finance specialist or an accountant before moving forward. This strategy is better suited for investors who can cover the shortfall of owning this kind of investment property.
Positive gearing pertains to the positive cash flow on your investment property. With this investment strategy, investors buy properties of which the overall return covers interest fees and expenses, and provides additional cash flow. This may involve the purchase of multiple rental properties for additional rental income.If you’re looking to build your investment portfolio, this strategy may be beneficial.
This investment property strategy could make it easier to buy more properties in the future. However, because you’re looking at rental yields for properties, you may suffer capital gains losses on certain investments.
Similar to negative gearing, there are a lot of technicalities involved in this strategy. It’s a good idea to speak with an accountant or other finance professionals when going this route.
Tips for finding the right investment property strategy
Figuring out which investment strategy to use can be difficult. Here’s what you can do to help you find the perfect one for you:
List down your goals and know your limits: What’s your purpose for buying an investment property? How much time and effort do you want to spend on your investment property? Clarify what you want to achieve with your investment before looking for potential investment properties.
Do your research: If you’re a novice at property investments, it’s best to do some cursory research. You don’t want to jump into real estate investing blind. Get your bearings and learn about the ins and outs first. Doing so will help you understand the process better and make informed decisions.
Find the right investment property loan: Start looking at investment property loans to see how much you can afford. Look at different types of investment property loans too. Your investment strategy relies heavily on your budget so it’s important to figure that out right away.
Apply for a low-rate property investment loan!
About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.