Investing in Property is like any other investment, a very complex matter with many perspectives and aspects to consider. However, it seems, that unlike any other asset class, like shares or commodities, everyone has an opinion or experience that they are prepared to share (sometimes without being asked!) about investment in property.
The truth is that property is the oldest form of investing, dating back to the beginning of civilisation. Back then, man seemed obsessed about possessing land, at any cost. Today, we are more refined in many ways, but yet property is still a very lucrative asset to possess.
At Investment Property Partner, we are interested in land for one reason, wealth creation. It is not about having the most property, it is about working within your means and achieving your goals.
How do I buy my first property?
All good things start with the first steps, so too with investing in property. The key is to make your first investment a winner so that you can use the capital growth and positive cash flow to make further property investments – build a valuable property portfolio to suit your situation and goals.
So what do we look for in your first investment? Let’s start with you and to be specific:
- your sources of equity for the deposit, such as cash, line of credit etc.
- your borrowing capacity, in terms of serviceability. That is, your income and any current loans that you may have.
Once we understand these two key elements, then we can devise a strategy to get you into your first investment property.
Investment Property Partner works with you to select an investment property that compliments your current position and fits with your risk profile. That is, the amount of money that you are prepared to commit to the purchase and any ongoing contributions you are comfortable to invest into your property.
This is a relatively easy process. The aim of the investment is to create future wealth from your investment property. Our experienced Investment Property Specialists are available to assist you now, so please click here to arrange a complimentary Investment Property consultation where we can discuss real possibilities for you.
How does a regular investor become a property portfolio owner?
As with most asset portfolios, everything grows from the first successful investment. With residential property portfolios, the trick is to buy one property and use the increase in value of that property to buy your next property. And so it goes on.
Let’s consider that you buy an investment property for say, $500,000. In the first year, the probable net return (before interest) on that investment would be approximately $20,000. After paying interest and claiming tax deductions, the net cost of your investment might be approximately $4,000 in the first year. However, in the first year, your property might grow in value by, say $40,000. That is a net accumulation in wealth of $36,000. Not bad!
So how does this help you to buy a second or third property? Well, as the years go on, your property value should increase, year after year. And the net cost after interest and depreciation will reduce such that within a few years, the net cost could become a net gain. You can use this increase in property value and net cash-flow to provide the equity to buy your second property. And the cycle of portfolio building goes on and on, until you are a property portfolio owner. It is really that simple.
Of course, there is some detail in this strategy and it will only work if you make the right investment decisions and surround yourself with experienced experts that can guide you as you grow your property portfolio. We can show you how this strategy can fit with your current financial position so that you can build an asset base for your future.
If you are driven to become a property portfolio owner and have any questions, then please click here and one of our Investment Property Specialists will contact you to discuss your questions in detail.
When do I sell my investment property?
Most investors focus a lot of time and energy on the purchase of their investment property, without too much concern for the exit of their investment. This can be a fatal flaw in property investing as it is only when the investor exits or sells, that they crystallise the profit form their investment.
The timing of the sale of your investment property is usually reliant on two main elements.
The first of these elements is all about you! Where are you at in your wealth creation lifecycle? Do you want to ‘cash out’ so you can use the cash for you personal life, home, family, holiday etc. Do you want to ‘cash out’ because you are in retirement and need to convert you investment into liquid funds to support you in retirement? There are numerous reasons why an investor might want to sell their investment property.
The other equally important element to consider is the market cycle. That is, where in the property cycle is your investment property. Obviously, the closer to the top of the market, the better. This will help maximise your sale price and speed up the selling process.
Sometimes, these two elements do not coincide. So then, savvy investors consider the cost of selling at either the wrong time in their wealth creation lifecycle or at the wrong part of the property market cycle. We experience this often and have a number of strategies that have saved our investors a lot of money. If you are considering selling your investment property, then please click here to talk to one of our Investment Property Specialists about your scenario to see if one of our exit strategies suits you.