I want to invest in property? What is my strategy?

I want to invest in property:
So you want to try your hand at property investing? Do you know your strategy to invest in property?
Below we will cover off some of the common types of property investment strategies to give you an idea of which path you will want to take. The rest of this course will not go into too much detail on these strategies as it is designed to navigate you through the purchase process.
However if you want to know more or want to discuss which is best for you, please contact us here at InvestDoor: info@investdoor.com.au

Strategy 1: Buy and Hold
This is perhaps the most common investment strategy among industry investors and professionals.
Buy and hold refers to purchasing property with the objective of generating long term capital growth. Usually you purchase a property (using borrowed funds) that appreciates in value over time, with live-in tenants to help you pay off the mortgage.
As property values go up and rents increase, Buy and Hold investors often use their growing equity to purchase the next property in their portfolio. They may then sell some of their holdings in the future to decrease debt and emerge with assets generating revenue.
With good asset selection and the benefit of time, Buy and Hold can be a very effective and low-hassle strategy.

Strategy 2: Negative Gearing
Although not an investment strategy in itself. Negative gearing can be combined with other property investment strategies (e.g. Buy and Hold), to maximise the investment potential. The term refers to a property investment where the expenses for the property exceed any income that you receive for that property.
This leaves the investor with a loss, which under Australia’s current tax laws, can be claimed as a deduction against the investor’s taxable income.
This leaves the investor with a loss that can be claimed as a deduction against their taxable income, under the Australia's current tax laws.
Historically, especially in capital cities, property prices have risen more than enough to compensate the losses caused during the holding period for negatively geared properties. A word of warning for this approach, this depends strongly on rising prices beyond your losses. In order to maximize your yields, this approach should almost always be coupled with other approaches.

Strategy 4: Positive Gearing
The other side of the coin is Positive Gearing – where the property produces a higher income than expenses, before depreciation is considered.

These types of properties can be difficult to locate in an open market. They might be situated in remote towns where there is little development or population growth. Or, they might be a less common property type such as shared house, student accommodation, or short term holiday rentals.
Typically what we see is due to their location or type, they will usually have lower growth potential compared to other kinds of property.
However, the good news is that property that is not positively geared at the time of purchase, may become positively geared over time, as increases in rental income outstrip expenses.

Strategy 5: Flipping
The term "flipping" refers to the process of renovating a property, under the goal of manufacturing equity quickly, with the aim of selling a property for profit.
In recent years "flipping" has been made popular by reality TV such as "The Block" which makes the process look fun and easy, but in reality a lot of planning, time and hardwork goes into a successful flip. Factoring in the cost of time, labour, materials and stress it’s relatively challenging to make money over and above what you could make via other property investment strategies.
Keys to success when flipping are:
accurately predicting the renovation potential of a given property
only spending money on improvements that will add value
tightly controlling costs and avoiding budget blowouts
getting it done quickly – time is money!

Strategy 6: Renovating To Hold
Renovating to hold is about maximising the return that you get from your property.
By renovating successfully, you can not only increase the weekly rent moving forward, but also increase the value of the property by maximising its potential.
The best thing about renovating to hold is that you have time. You don't have to renovate straight away, you can buy and build up funds in preparation for the renovation.

Some other more exotic and less common strategies are:

Exotic Strategy 1: Property Trusts or A-REITs
The alternative to buying direct property, is to gain exposure to the property market via a Real Estate Investment Trust or A-REITs.
REITs allow the investor to gain exposure to diversified property asset types that may be difficult or expensive to buy outright (such as commercial office buildings in major cities).
Just be sure to do you due diligence and make sure you know where your money is going.

Exotic Strategy 2: Subdivision
Subdivision is the simplest form of property development. Essentially you buy a block of land, and then split it up into two or more sections. Understanding the right zoning is crucial when choosing the right block of land for this strategy.

Exotic Strategy 3: Passive Property Development, aka Armchair Development
Passive property development (also called “Armchair Development”), is where you supply money to a property developer, who then develops a property project, thus manufacturing equity.
Passive property developers provide the funds without the expertise or physical work. This strategy entails risks such as the development not going to plan or the developer going bankrupt prior to completion. Make sure you do your due diligence, investigate

Exotic Strategy 4: Active Property Development
Active property development is where you go out yourself and manufacture equity by adding value to land and buildings. You can either sell off the properties you build and/or hold on to stock, which you’ve now acquired on a “wholesale” basis.
If successful, property developments is one of the most lucrative ways to make money through property, but it is also one of the riskiest. This strategy requires substantial knowledge and expertise, there will be a substantial learning curve if you are looking to take this approach.

Which of these Property Strategies is right for you?

Have you reached the end of this article and still don't have a clear strategy or goal?
Without a clear goal or strategy in mind you will find it hard to identify properties to look for and will be more susceptible to making a financial mistake which may have ramifications to your lifestyle.
We highly recommend that you rethink purchasing a property until you understand the purpose and where the property will fit in with your life.
We have listed some key strategies that you should consider before purchasing a property.