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September 28, 2022
Real Estate

Know About the 5 Property Investment Strategies

  • September 7, 2022
  • 4 min read
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Know About the 5 Property Investment Strategies

If you’re a first-time investor in real estate, it might be challenging to determine which property investing tactics are right for you. But you should give yourself some credit! Investing in real estate is a huge step toward completing the assignment, which you have already done to some extent. 

The following few stages toward a prosperous investment future shouldn’t be too difficult if you can do the first one. While there is no “one size fits all” approach to investing in real estate, the following guidelines should help narrow down your options.

1. Equity:

Most people tap into their home’s equity when making their first property investment strategy. The combined equity from their primary residence and rental property can then be used to finance their next real estate purchase. As time goes on, this dramatically simplifies building a real estate portfolio. 

You need to know the ins and outs of equity for this method to succeed. Don’t put too much pressure on yourself. Using all of your equity is hazardous, especially if doing so leaves you exposed financially (i.e., without a “cushion” for unexpected expenses).

2. Depreciation:

You may rest easy knowing that your renters and tax savings will cover most of your investment property’s cost thanks to the plethora of tax benefits (including depreciation) available to landlords. Get a depreciation schedule drawn up by a skilled quantity surveyor to maximize your possible tax deductions (and savings). Your accountant should not be involved in this.

3. A cash flow surplus and a negative gearing ratio:

Since the annual expenses of maintaining the property exceed the yearly income, negative gearing occurs. On the contrary, a positive cash flow means that you make money off the property each year (i.e., total expenditure (including all costs) is less than total income.  

A familiarity with negative gearing is also crucial. The most common option is to enter the real estate market; however, monthly “top-ups” to the investment are required. Each property investment strategy will eventually generate positive cash flow, eliminating the need for further capital injections.

4. Look at real estate as an investment:

When investing in real estate, it’s crucial to correct the fundamentals. The bright side is that you can rarely go wrong if you try to learn as much as possible. Always look for a place to buy in a desirable area, ideally one with easy access to public transportation, reputable schools, and convenient shopping and dining. It will be easier to discover reliable tenants with this method. 

Don’t limit your search area to the neighbourhood where you already reside (or where you imagine you might want to live). You can shop everywhere in Australia, so don’t feel confined to your immediate area. It’s also wise to spread your investments across. It’s human nature to want to keep buying from the same shop after making a purchase there once. However, doing so increases your exposure.

5. A house or an apartment:

This one question, for which there is no simple answer, might quickly fill a whole article. Both could be profitable for you, but you should only invest in properties that fit your price range, cash flow, and preferences in the area. There is potential for a single-fronted Melbourne terrace to be a week-long nightmare for renters (after tax). 

Things like this are beyond the means of the typical investor and can lead to serious financial difficulties. Don’t go into debt because of a purchase. This will keep you secure and, one hopes, allow you to expand your real estate holdings.

Conclusion:

The widespread of the COVID-19 epidemic has caused many potential investors to delay their investments out of concern for lower rents, increased vacancies, and lower prices. These are reasonable worries, but remember that the best possibilities occasionally present themselves when nobody is watching. 

Those who can still afford a home and secure a loan could benefit significantly from the current market conditions, which feature low-interest rates, decreased competition from other buyers, and more excellent room for negotiation with sellers historically.