When it comes to property investment, there is no precise road map to success. There are many strategies that can assist you in entering the property investment roundabout. But which one is right for you? A property investment strategy should not be a one size fits all strategy. You need to seek advice on the best property investment plan or strategy for you.
As a property investor,it is important that you keep an eye on the changing trends in your region. The property market can fluctuate so keeping your finger on the pulse is essential to get the best return on your investment.
There are multiple ways to be a successful real estate investor. Below are the top 5 best property investment strategies for Australian investors.
- Buy your own home
In Australia, purchasing your own home is the great Australian dream. This is often overlooked as an “investment”. Owning your own home offers many benefits including being free of Capital Gains tax. The emotional and lifestyle benefits can be immeasurable and as a long-term strategy, it can be quite lucrative.
- Buy and hold real estate
As the name implies, buy and hold means buying real estate, renting it out to tenants, and holding onto the property for the long term. The rent will help pay the mortgage while the property value appreciates.
Buy and hold is a long-term property investment strategy.It relies on regular rental payments and good property management. Using a reputable agent is critical.
It is common for buy and hold investors to purchase multiple properties using the capital growth and equity from the first property to purchase the second and so on.
Research, selecting the right property in the right location, good management and time can ensure that buy and hold is an effective property management strategy.
- Positive cash flow
A positive cash flow is when a property earns money for the investor after depreciation has been calculated. The right property, especially a new build, can be eligible for significant tax deductions based on a depreciation schedule. It is recommended that you seek the advice of a financial advisor to discuss if this is the right option for you.
- Positive gearing
A property that earns more than its expenses before depreciation is calculated is said to be positively geared. That is, the rent paid for the property covers all costs, mortgage, rates, insurance, interest, maintenance and repairs, and an income. It can be difficult to locate such a property and the potential for growth can be minimum.
It could mean purchasing a lower priced property in a regional area that has fewer opportunities to increase in value.
But a property can become positively geared over a longer period as the rental market increases demand and rent rises. This, in turn, will cover the expenses of the property and create an income.
- Negative gearing
The opposite to the above is negative gearing. A negative gearing strategy is popular as it can reduce your taxable income due to the losses from the investment, which then reduces your payable income tax. The money that you save can be put towards the investment.
In a recent article, Elizabeth Tilley from News.com.au stated:“Almost seven out of 10 rental properties in Queensland are negatively geared, with landlords in the red claiming billions of dollars in expenses in their tax returns.”
So, which of the above property investment strategies is the best? Like we said earlier, there is no one size fits all strategy. You may find the perfect investment strategy for you and stick to it, or you could use a mix of each of the above strategies.
Seek independent advice from investment property advisers to ensure your leap onto the investment roundabout is a success.