An Investment Strategy: A roadmap to create your property Investment success

Smart and holistic strategies for sustainable investment are what we all need when entering the property market. That’s why it’s important to have a roadmap, with balanced risk mitigation, to guide your investment choices and keep your investment on track.

A good property investment strategy contains three essential elements:

1. An acquisition phase
2. A holding phase
3. An exit phase

The Acquisition Phase
When choosing a property, it’s important to consider the historical capital growth profile of the property, the investment and developments in the area, population growth, supply and demand, economic prosperity and current employment drivers.

Immediately following your property acquisition, you have the opportunity to gear your portfolio a little more assertively during this phase. However, what you want to avoid is ending up with an under-performing asset.

Statistically, properties growing at 5% double in 14 years, those at 7.2% double in 10 years and those at 10% double in 7.5 years.  Buying “around the corner” in your beloved inner urban suburb may end up costing you dearly.

A Holding Phase
This is the phase where you can reduce your risk so you can ride out the ebbs and flows of market and regulatory changes. Neutrally gearing your property during this phase will reduce risk and result in above average returns if you have factored in the sustainable rental and capital growth drivers identified in the acquisition phase.

To avoid being forced to sell when the cycle is not ideal, consider:

• accumulating contingency funds in a mortgage offset account to reduce interest and support flexibility in cash flow; and
• structuring a mixture of negatively and positively geared properties in your portfolio to generate overall neutral cash flow.

An Exit Phase
To realise a return on your investment, you will ultimately sell part or all of your portfolio depending on your particular goals and circumstances.

At this stage, the earlier risks associated with investing in property without a strategy or expert advice become apparent, and in some cases, it may be too late.

Without knowing which investments will have broad appeal at your exit phase, there may be reduced demand for your property and it may not realise as much capital gain as you anticipated.

Note: Houses, townhouses or apartments suitable for families attract the broadest appeal as owner occupiers comprise 70% of the market.  Families tend to pay more for a property if they can see themselves settling into the property and area long term.

Get in touch with us for a complimentary consultation to review your current property investment portfolio or to discuss how we can help you navigate the three phases of property investment.