6 Money Making Property Investing Strategies
This week, I want to talk about the money making property investment strategies that we employ as property investors. When you look at making money in the marketplace, there are two factors that you can use to make yourself money. What are all the factors?
Firstly the marketplace. These are things that happen out there in the world that force the values of properties up. Secondly interest rates, going up or down. Thirdly would be supply and demand. Fourthly population increases or decreases. Fively political climate and lastly . Government planning issues, all of these are factors that affect real estate.
So of these factors happening in the marketplace will help force property values up or sometimes reduce the property values. For example interest rates getting too high. As property investors, we want to make money without being left to the whim of the marketplace.
The real questions are any of these factors that are going to increase the value of a property over time, within our individual control?
Do we have any influence on them? Not particularly. Hardly at all to be quite frank.
Do you control interest rates? No.
Do you control where populations move for work or jobs, and do you control what happens in the political arena in Australia or around the world? No you don’t.
You don’t control supply and demand. You take advantage of those pressures, as an investor. A clever investor.
But today I’m going to talk about the strategies that we as individuals can use or employ to make money and create value in real estate.
There are always two forces in the market. There’s us, the investor, and then there’s the market. As I said before, the market can include interest rates, supply and demand, jobs, population and politics. These things affect property values, property prices and capital growth. While we don’t control or influence those factors, we can take advantage of them.
How, as property investors, can we control our own destiny? We can influence the way we make money as a property investor by the types of strategies or the types of investments we choose to do as property investors. I call this the “meat in the sandwich” – you always look for the best location your money can buy.
Buy the best property for the amount of money you can afford to invest. That’s always something that needs to be stated. But as property investors, what do we bring to the game? Where in all of this we can influence a property deal to make some money?
Here are the Six Strategies at Positive Real Estate we work with and teach our clients.
First strategy is to buy property at a discount. Well that’s pretty simple, you’d think. A lot of people don’t realise the power of buying property at a discount. It’s on the market for $350,000 and you buy it for $310,000. Doing this means you’ve made money instantly in equity that you can realise at a later time. Now those in the marketplace saying, “You know, what about Melbourne? I can’t get a discount”. Well we’re not talking about using discount as our only strategy. We’re talking about using a discount at the right time in the appropriate market. And that’s something that we’ve all got to remember. That different states and different marketplaces move at different times. And these strategies can be applied at different times.
Buy a property and do a renovation. I love renos. And we’re doing a lot of those at the moment, with our Positive Real Estate clients. Renovations are currently quite popular. You can add some value as a property investor, because you control the ‘add value’ process, if you stick to a budget and simple rules of capital expenditure on investment.
Discount and Renovation are the simple ways. for the next two they can get slightly more complicated.
Strata or Subdivide
We can strata, or we can subdivide. I call that paper value. Where we find something that’s big enough, or multiple properties and we carve them up. We can make some value instantly by doing something different to the property, influence it’s value, so we can make some money as a property investor.
The next two are slightly more advanced strategies and so can have more risk associated with them due to the time they take to come to fruition.
Off the plan or Developing
These are as I call them the after plan I put these down at the bottom because these are the ones that can take a little bit more time. They will sometimes take 12 months, 18 months, two years or even three years sometimes. These two types need a little bit more consideration.
Off-The-Plan is a great option and is pretty topical at the moment because New South Wales has cut stamp duty for brand new, off the plan properties, That means you can get a saving in New South Wales of around $22,000 for a property of $600,000 dollars. So anywhere else in Australia, it’s going to cost you $22,000 dollars more! In New South Wales, if you buy property for $600,000, you’re going to have a saving of $22,000. That’s pretty spectacular!
When you buy off the plan, you buy time. You put down a deposit today, you control the property for a period of time, we prefer between 12 and 18 months as an investment timeframe. During that time frame, you don’t have to pay the interest or insurance on the property, and if you choose the right timing of the marketplace, or a good market. Potentially your property can go up in value as well.
Developing well that is a whole course in itself as its an advanced strategy and not for everyone.
These are some of the strategies we teach at our property investment nights, in much more detail. Ao if you want to learn a bit more about how to buy a property at a discount, what sort of things to do with a renovation, stratas, subdividing, off the plan or developing, then come along and have a listen to a few of the guys who do the presentations at our property information nights, and explain these strategies in a bit more detail.
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