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Ways To Make MONEY in Proerty Investing
When considering your options for investing in property, you should take into account not only your personal behaviors and interests but also the type of business model that you want to get involved in. Here are some key questions: How much initial capital do you have to invest? How much ongoing capital do you have access to? Are you looking for an increase in long term wealth or is immediate cash flow your priority How much time are you willing to invest initially? How much time are you willing to invest on an ongoing basis? What level of complexity are you comfortable with you? As a summary, map out where you want to be and then ensure that your chosen option has a business model that fits into this. Property is a well proven arena for generating wealth (but not always cash flow!). Most successful people would hold a property portfolio On the upside: " the impact of compounded growth, " the ability to use significant leverage " the fact that tenants pay you rent " The tax benefits available (varies country to country) " Bricks & Mortar reduce risk of substantial losses On the downside: " Can involve some capital to get going " If you go for the buy & sell model, liquidity can be a problem " You need to be smart to generate significant cash flows in a short space of time " Reasonable degree of management time Below are a number of different strategies you can employ BUY AND HOLD The most popular as it avoids the transaction and tax implications of buying and selling properties. Return is generated either by positive cash flow properties or by refinancing to access capital growth. There are different strategies that focus more towards positive cashflow properties and others that focus on higher growth but typically negatively geared property. To clarify POSITIVE CASHFLOW PROPERTIES " Generate +ve returns from the word go " Sometimes at the expense of capital growth NEGATIVE CASHFLOW PROPERTIES " Generate ve returns from the word go " Capital growth is often better (but not necessarily!) " Tax benefits available (but you have to be earning an income to access this) Either way, investors will always look for good investment opportunities and ways to find an angle especially in the early days of a purchase. A number of strategies are outlined below: BUYING BELOW MARKET VALUE This can be achieved by finding motivated buyers, or another option is to control property by buying off the plan or purchasing land and constructing the house. Both give time which in an upward market will effectively you are buying below market value PROPERTY DEVELOPMENT Objective is to enable you to acquire property at significantly lower than market value through the use of time and also by taking more of the margin. Of course there are risks and cashflow considerations. There are more opportunities to JV with developers to access some of the benefits of property developers without all the risk. This arena is normally occupied by more seasoned property investors. ADDING VALUE This can achieved by renovations (bathroom and kitchens are always good), or looking for opportunities such as turning a large bedroom into 2 rooms. It is essential here to be market facing and not to let emotion to take over. Be warned that the stereotype:budget for twice the cost and twice the time has come about for a reason INCREASING RENTAL RETURNS Using backpackers or students for example and packing them into is an option. Subdividing large rooms is another example NEW FINANCIAL PRODUCTS In Australia, there are new cash loans, which capitalize interest payments into the capital to increase yields in the short term of owning a property. STRATA TITLING, SUBDIVIDING This is where you create more from the existing land/property. Strata Titling is a transfer of titles from a common title to individual titles. It is used in flats & Duplexes. Paper process with a few physical requirements along the way. Typically can add 10% to a property. Subdividing is where you put say a second property on the same land or even getting approval for this to be done can add value to it. This is starting to get in to property development territory. FLIPPING /OPTIONS Often used with off the plan scenarios, where you effectively control (but not own) the property in the construction phase, and then sell it before the settlement date. Only works in a rising market. Options can also be used in a similar vein WRAPPING Acting as an intermediary, where you assist vendors and buyers and create a deal which benefits all parties. A way of controlling and moving significant property with minimal capital outlay. Often used with motivated buyers and vendors who are unable to finance. Vendor financing, options to buy come under this category.
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