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INVESTMENT PROPERTY

It’s important to know that buying an investment property is different to buying your own home.

When it comes to your own home, you need to think about your lifestyle and aspirations, not to mention your heart, and emotions.

Investment property is simply about what will make you the most money while minimising your risk, and the decision-making process is a numbers game.

In fact, the property is just part of the equation; how you structure your lending, and the different entities you use, can save you thousands of dollars.

You may even be able to use the equity in your existing home to help with your purchase.

Keen to get investing? We can help guide you through the numbers, and advise you on what to look for in a property.

When it comes to your own home, you need to think about your lifestyle and aspirations, not to mention your heart, and emotions.

Investment property is simply about what will make you the most money while minimising your risk, and the decision-making process is a numbers game.

In fact, the property is just part of the equation; how you structure your lending, and the different entities you use, can save you thousands of dollars.

You may even be able to use the equity in your existing home to help with your purchase.

Keen to get investing? We can help guide you through the numbers, and advise you on what to look for in a property.

BUy and Hold

This is the most traditional property investment strategy. Suited to investors looking for long term capital growth and income streams. When considering this strategy its important to consider (among other things):

Yield vs other income producing assets
Yield vs location
Healthy homes requirements
Compliant use of a property
Location to amenities
Tax legislation and efficiencies
Asset protection
Income protection
Tenants rights and landlords obligations
Maintenance requirements
Your ability to get lending approval and the repayment costs
Professional services costs

Buy, add value and Hold

This strategy involves identifying a property that has potential to add value quickly and provide long term growth and income. For example, you may be able to add a bedroom and increase rent and the value, build or relocate a new dwelling to increase rent and the value, subdivide and build a new dwelling to increase the rent and the value. When targeting this strategy its important to consider the points above and (among other things):

Likely council approval
The cost of the development
The cost vs the likely value added and increased income
The yield on completion

Buy, add value and sell, other wise known as flipping

This strategy is high risk and not for the faint hearted. It involves identifying a property that may be selling at a discount. Alternatively, there may be opportunity to add value as mentioned above. This strategy involves a lot of planning. When targeting the strategy its important to consider:

Your funding strategy. This is likely to sit outside mainstream banks and its important to consider your long term lending that may sit along side this funding and how that may be impacted. You don’t want to impact your personal property goals.
The strength of your balance sheet to carry you through a market that may slow.
The skills and experience you have to execute this strategy to make it profitable
The council consents that might be required
Back up strategies should the market change

Just like investing in any asset, property values move up and down. The more risk you take the more reward there is for you. However, many other assets are liquid (can be sold easily). Property, particularly in a depressed market, can be very illiquid. Understanding the implications of this when combined with leverage is key before you embark on your property investment journey.