Property Investing/ Property Advice: Series 2 of 7; Series 2: Tailored Plan: Part 4.
I believe you must engage a Buyers Agent with every property purchase, Using a Buyers Agents/Buyers Advocate and Property Advisor is key to more property investment success. These are extracts from my latest book “The Australia Property Investment Handbook 2018-2019”. In all good book stores now. Also Read Property Finance Made Simple and Property Investing Made Simple.
Many investors over the years have been drawn to negative gearing, yet it makes less sense why these people were. Of course they think they are saving a great deal of tax but let’s put this into perspective. According to the ATO, over 70% of investors that have a negatively geared property (a property not breaking even or not making positive cash flow) earn under 80k per annum. So their tax bracket is mid-range, not high, or the highest. So it is really foolish to spend a dollar just to save 32.5 cents and this is what all these people are doing that earn under 80k per annum.
There are three strategies for property investors;
Capital growth and cash flow strategies can be implemented in all three. The difference between the three of them is level of risk, time available to retirement, your tailored plan, comfort level, and many other influences.
- Buy and hold
This is perhaps the easiest of the three strategies. It is more suited to time poor investors that wish to be a little more conservative, or that lack the knowledge and expertise to risk undertaking one of the other two strategies. Buy and hold is what the majority of investors decide on.
Many still fail with this for innumerable reasons. Lack of knowledge and experience, poor research, not using an advisor, bad financial strategy, no plan, selling too early, buying at the wrong time in the wrong market, or buying the wrong property type in a good suburb.
- Flipping or holding by renovating
This requires a more hands-on approach or paying a premium to have someone renovate for you. The purchaser can manufacture more capital growth and cash flow independently of the market, so they’re not solely reliant on the market for the property’s performance. If too much emotion is involved and they over-capitalise, serious problems will arise. Having it vacant for an extended period while work is being carried out means being out of pocket for a period of time. Affordability could then be an issue, as it is more difficult to afford to have a property vacant for an extended period.
This includes construction of another dwelling or several dwellings on the block, and/or subdivision. This is the most risky, due to time and cost, but has potential for significantly more financial benefits from a cash flow and capital growth perspective. A feasibility study would be required to determine if the project will make enough money or will lose money. You will also need a good team around you. Refer to www.propertyinvestingmadesimple.com.au to get an idea of who would be needed in your team for this type of investment. Also stay tuned for my next book, ‘The 100k Property Plan’ where I go into significant detail on everything to do with small-scale developments.