Following these property investment strategies will help you improve returns while reducing risk as you manage your property portfolio.
The aim as a property investor should be to adopt strategies that allow you to build a high-performing property portfolio – rather than just making a one-off purchase. Keeping these proven, best-practice strategies in mind will put you on the path to financial success.
1. Educate yourself
Understanding the basics of property investment is a must if you are serious about making sustainable profits from property. Attending a one-on-one workshop that is tailored to your level of experience can teach you most of what you need to learn – and then with the help of an experienced property advisor you can pursue smart, safe strategies. The beauty of a good property adviser is that they can also help introduce you to trusted financial planners, mortgage brokers, lawyers and accountants, and integrate all their collective advice.
2. Insist on better property valuations
You can often get a 10 per cent better valuation on your property (or more) if you use experienced property investment advisors rather than banks. Valuations are not an exact science, but banks are typically conservative with their valuations, whereas a savvy advisor can work with experienced valuers to legitimately get an appraisal that reflects a property’s true potential. Consider the fact that a 10 per cent variation on a $1 million property equates to a difference of $100,000 and dramatically affects the amount of available equity for additional property purchases.
3. Avoid the risks of cross-collateralisation
Most banks like to cross-collateralise; this means they use more than one property as security for a loan. This practice ties you to one lender and their valuer, and if one property rises in value but another goes down, it can have a major impact on the amount of money you can borrow. This may cut the availability of equity, so secure your properties separately.
4. Take advantage of high-quality research
Good research is at the heart of successful property investment. Reputable property advisors should be able to show you research from independent, highly capable sources such as BIS Oxford Economics. This type of research can identify the best cities, regions or suburbs in which to invest – and which ones to avoid!
5. Stop procrastinating
You may never have the perfect market opportunity for investing, so at some stage you will need to trust your strategy and enter the market. Remember that a $500,000 property grows by almost $1,000 a week on average, so every week you delay can cost you a significant amount of money. Take action and implement your strategy!
6. And finally … adopt smart risk-management strategies
Having extra funds for income protection and financial buffers is an essential property risk-management strategy. These reserve funds are valuable during downtimes in the property cycle, if unexpected expenses arise, or in a worst-case scenario if you lose your employment income (which could force you to prematurely sell properties before they have time to grow in value). A good property investment advisor can help you weigh up the myriad risks against the possible cost of lost opportunity.