How To Build Your Real Estate Investment Strategy
by Mony Shah Real Estate 22 August 2023
Getting started in real estate investing is a great way to set yourself up for success. If you’re ready to improve your finances and secure your future, the right property investment strategies can make all the difference. Real estate investing for beginners may seem daunting at first, but with the right information, you’ll be able to spot opportunities that support your financial goals.
Deciding where and how to invest your money takes serious research and practice. While investment property courses can learn more, today we’re going to look at some of the basic principles and help you select the best strategy for your situation.
Choosing Your Investment Strategy
Australia’s strong property market means investors are spoiled for choice. It is evolving with time. Now, the stakeholders are using software for commercial real estate investment management. It is indeed a great development. There are plenty of ways to make money in the market, but successful investors employ four main methods:
1. Short-Term Capital Gains
Popularised by reality TV shows as “flipping” houses, this style of investing involves buying a property, spending money on improvements, and then selling it shortly thereafter.
This type of investment allows you to make tens of thousands of dollars worth of profit in just a few short months. However, this relies on your ability to secure the right properties, and it often requires you to get your hands dirty with renovation work.
2. Long-Term Capital Gains
The most popular investment strategy, buy and hold allows you to access short-term income as well as long-term capital gains.
With this investment strategy, you purchase a property and rent it out to tenants. The tenants pay rent, which is used to offset the cost of the mortgage repayment and as an additional source of income. The longer you hold onto the property, the more it increases in value, and you can eventually sell it for a large profit.
3. Property Subdivision
Australia’s capital cities are always growing, and they’re getting denser. This is opening up new opportunities for subdividing large blocks in inner-city areas.
Subdividing a block of land allows you to split the plot into two or more individual titles. Each title can be sold on its own. That means it’s possible to buy a vacant block of land, split it down the middle, and immediately increase its value. For instance, if you bought a large piece of land for $500,000 and subdivided it into two blocks each worth $350,000, you would have made a profit of $200,000.
4. Property Development
For those with a larger budget, it’s possible to turn an existing property into a bigger development. By building townhouses, units, or apartments, you can dramatically increase the value of your land.
This style of investing comes with major costs and risks. While it has the potential to deliver the highest returns, it’s an advanced strategy that should be left to the pros.
How to Buy Your Second Investment Property
Buying one investment property is a challenge. You need to save a deposit, obtain finance, hunt for the right house, and perform thorough research to ensure it provides the returns you need.
The good news is that it’s a very attainable goal! The bad news is that most investors struggle to make it beyond the first one or two properties. The more properties you own, the harder you need to work to buy the next, right? Well, that depends on how you spend your money.
When an investment property increases in value, it is said to be building “equity.” Equity reflects the actual value of the property, which may exceed the value of your mortgage. When that happens, you can use the additional equity as a downpayment on your next investment, reducing the amount you need to save. As long as you are buying the right investments with strong capital growth potential, it’s easy to grow your portfolio and add new properties!
Where to Turn for Help
One of the biggest mistakes made by budding property investors is trying to do too much of the work alone. When getting started in property investing, we recommend building relationships with people like:
- Your bank, lender, or broker – most local bank branches can set up a meeting with a loan advisor who will provide advice on how to secure favorable mortgage terms
- A financial advisor or accountant
- Investment coaches and support groups
- Other investors who have had success in your area
- Real estate agents who work in the areas where you are interested in purchasing
Always be mindful of who benefits from your investment. You don’t need to shy away from the advice given by banks, lenders, and brokers, but be mindful of what they’re selling. When taking advice, do your own research and compare advice from competitors before making a decision. That ensures you get the best properties possible!
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