Often, it is the strategy used that separates successful property investors from the ones forced to sell prematurely. A great property investment strategy is the key to many success stories, but you need to be careful as some strategies work while others can be quite treacherous.
Negatively Geared vs Positively Geared Property
Both positive or negative gearing property investments are strategies that work well, but they depend on your individual circumstances as to whether they will be a success for you. If you are not sure what negatively or positively geared property means, make sure to check out our blog on Understanding Negative & Positive Gearing.
There are many benefits available to property investors who hold a negatively geared property, but if you have a lower income this can be a bad investment strategy. If you have the income to cover a negatively geared property, great. But, if you require the extra income of a positively geared investment, then you need to ensure you can count on the rental income being greater than your property’s repayments plus expenses.
Buy and Hold, Develop or Renovate?
Of these three most common investment strategies, you need to have a clear understanding of what is best for you and the property you are investing in. Going into an investment with no strategy is going to destroy your chances of success.
You need to ask yourself some questions prior to any development or renovation property investment. Do you have any experience with construction projects? Do you have time to manage a development project? Do you have the equity or on-hand funds available to you for a construction project? If the answer isn’t ‘yes’ to all three of those questions, then you need to take another look at your potential purchase and either reassess your strategy or move on to a better investment more suited to you.
Buying and holding a property investment can be a good strategy, but if you have the expertise – if done correctly – spending on renovations could easily add considerable extra value to your property. Also, if you have the time to dedicate to a development, a falling apart home or empty block investment can be a very successful investment strategy. Buying and holding on to a home that needs renovating can be risky, because the years you hold that property only increase its need for renovations and the cost of doing so.
What is the ‘Best’ Strategy?
A successful property investment strategy truly depends on you and your circumstances. Your available time, funds, and your experience and skills will all greatly affect what strategy is the best for you. In the end, like any investment, it really all comes down to what you are willing to risk.