21 Common Property Investment Strategies In Australia (Ep236)
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21 Common Property Investment Strategies In Australia (Ep236)

21 Common Property Investment Strategies In
Australia Hi guys, Ryan here from on property your daily
dose of property education and inspiration. In today’s episode I’m going to be covering
21 common property investment strategies in Australia. There are a lot of different ways
people invest in property in Australia. No way is necessarily better than the other,
depending on your circumstances and your risk factors; you may prefer an investment strategy
over the other. There are many investment strategies that could also work out for you,
so what I wanted to do in this video was to cover 21 common strategies that investors
use to purchase properties and to make money through property in Australia.
I’m not going to cover them in a high level of details but I will go through enough detail
so that you could understand what these strategies are like whether they may be suited for you.
The first strategy is Home Ownership: now this is by far the most common investment
strategy in Australia. Basically what you do is you purchase your own home in order
to live in it but over time what happens is you might do renovations at home, you might
improved at home value or the market would just go up in value over time and therefore
your home will increase in value. So you’re not generating any revenue from your but rather
as a matter of owning the home it goes up in value and you make money over time.
This is how a lot of people step up the property ladder, they don’t start with their dream
home but they start with probably on the lower end of the market and then they slowly move
up as their property increased in value. Strategy number 2 is to Buy and Hold: these
also refer to as purchasing or investing for the long term. This is when you purchase a
property and you hold it and rent it out. You then hope that the property is going to
go up in value overtime as a result of the market going up and you also intend to make
money through rental income, which we’ll cover in another strategy.
Strategy number 3 is Positive cash Flow: and this is where you purchase a property sole
for its income generating purposes. The property may go up in value as well but that’s more
a side effect to the main purpose of the property which is to generate you a passive income.
Passive income property or Positive cash flow property works because the rental income coming
in from the property is greater than the expense going out. So this means that each month or
each week or each year, you have money left over that you can then use to pay down the
mortgage, to reinvest or to use to watch your life style.
Strategy number 4 is Negative gearing or a capital growth strategy: This is purchasing
a property where the income is not as large as the expense but you hope to make out that
difference in growth on the property. Let’s say you have a property and its bringing rent
in but the expense is two thousand dollars per year greater than the income that you’re
bringing in. well that means you have to dish out two thousand dollars out of your pocket
every single year in order to keep that property flow. Now if you’re investing using negative
gearing your hoping that, that property is going up in value more than two thousand dollars
per year so that you are making a profit. Strategy number 5 is to renovate and Flip
the property: When people say they are going to renovate property this is generally what
they mean. You purchase a property that is run down or in need of some work, you go in
and you renovate the property quickly, maybe in three months or six months or nine months
and then you turn the property over, you sell it and you bank that profit. So when you watch
shows like Property Ladder with Sara Bayne this is the strategy that those investors
are using they’re buying the property, renovating it and then selling it to access that using
it quickly as possible so that they can move on to the next property.
Strategy number 6 is to renovate to rent: So this is slightly different to the renovate
to flip. Rather than purchasing a property renovating it and sell it you’re actually
purchasing a property and renovating it in order to increase rental income with that
property probably turning it into a positive cash flow property and then rent that property
out. It’s highly like that if your investing using this strategy, the property you originally
purchased wouldn’t be positive cash flow if you just started renting it out straight away
or wouldn’t be that great of a return. But once you’ve renovate it and the rent goes
up as a result of that you can now command more rent , you getting more income coming
in and you getting a better return on investment. Strategy number 7 is sub division: Now this
is where you take a passel way might have a property on it already or might not and
you go through the council requirements and you split that land in two to create two individual
passels of land from one original plot of land. Now what this means is you can then
sell off the two individually you could keep one and then sell off the other or it could
just means that you keep both of them because that you have two separate blocks you have
got an increase in value. Strategy number 8 is Jewel Occupancy: Now
this is where you keep one block of land but you create two individual incomes out of it.
This can be done in a multitude of ways it can be done through renting out a granny flat,
it can be done through converting a single house into two units, so maybe someone lives
upstairs and someone live downstairs or someone lives at the front and someone at the back
or there are many other ways that you can do with Jewel Occupancy. This is a great way
to increase the rental hued of a property in a lot of cases and can be a very profitable
strategy. However you do need to go through the council’s registrations to ensure that
everything is above and then you can get insurance on that property for that use.
Strategy number 9 is to have a duplex or second dwelling: So this is like building two units
on one block of land you may stratletile that, you may split it down the middle and sub divide
it or you may simple have two houses on the one block of land very similar to the Jewel
occupancy however in most circumstances when people say Jewel Occupancy they mean converting
existing house into two incomes streams where as the duplex is designed from the ground
up to be two separate properties. Strategy number 10 is development and so this
is a higher end sort of sub-division or Jewel Occupancy where you building town houses or
you building block of units or you’re building a high-rise or something like that. Basically
this is full scale renovations, full scale development where you need to do a lot of
building and a lot of work needs to go into that but obviously it can be extremely profitable
to take one block of land or a couple blocks of land and add loads of properties on there.
You can then turn them around and sell them you can keep some and rent them out it’s up
to you what you do with that and what your strategy is.
Strategy number 11 is property syndicates or property shares: This is where you purchase
into a property syndicate or you purchase into a property fund and they go out then
invest for you and you get a portion of the revenue of the profit that is generated from
these property shares. This is kind of a way to step back and invest and especially if
you don’t have the full deposit to go purchase a property this could be also a new strategy
for you. I would go and research this in more detail this is none area of expertise for
me so definitely research it in a more detail before I would jump into this.
Strategy number 12 is partnership: I recently interviewed Ben from promptonproperty.com
and he has a bunch of properties that he has purchased in partnerships with other people.
Partnerships can be a great way to minimize the amount of deposit that you need or they
can help you afford a property where maybe you couldn’t get the service ability otherwise.
You do need to be careful with partnerships because the full liability of the loan will
rest with you if your partner decides to go off and disappear and this can also make servicing
future lines more difficult, because even though you only owns half the property in
terms of banks and there serviceability they will count out full mortgage towards your
service ability. So it can ender you from getting loans in
the future but if you have no other option to get into the property market by yourself
then partnerships are maybe something that you would want to do.
Strategy number 13 is Commercial Real Estate. Commercial Real Estate differs from residential
real estate in the way things work and the way lending works, generally you do need a
larger deposit about 30% or 35% deposit in order to purchase commercial real estate.
There are some lenders who will give you an 80% loan however you do need to speak to a
mortgage broker about that and can advise on who those are and whether or not you should
do them. You should really speak to a mortgage broker if you’re going to invest in commercial
property. Commercial property can be great because the renewals can often be higher than
the residential properties in the area and as well allow the expenses that you would
generally pay when you’re investing in residential properties.
The tenant of the commercial property will actually pay. So things like maintenance can
be paid by the tenant, things like [In audible, 09:22] insurances can all be paid by the tenant
that is in there. Obviously speak to an advisor about this you want to have the right insurance
on your property regardless and so just be careful there. Strategy number 14 is house and land package:
so this is where you purchase a block of land and you go about building a house on that
land this is very popular at the moment because a lot of the state governments are actually
offering grants or concessions to people who are building new property. So there is a motivation
for first home buyers to go out there and to build a property rather purchase an existing
one because [Inaudible, 09:58] and you can potentially get a grant for that meaning you
don’t need to save as big of a deposit or meaning your loan doesn’t need to be has big.
Packages can’t be very preferable, however you do need to be careful I have an article
which I’ll link in the description below that goes through and packages and the issues and
problems that they may have. Basically you do need to be aware that there
are a lot of properties out there that are and packages that are over price for an area
so always research the area first and you also need to be careful that if there is a
lot of land being release in that area, well then supplying demand could be affected because
there’s always new properties coming up why would anyone buy your existing property. So
that can make it harder to resale can make it harder for it to go up in value, so just
be careful there. Strategy number 15 is Land: just purchasing
land by its self and, you know, land is a limited resource here in Australia. They’re
not making any more land only in countries like to buy where they make their own islands
is their more lands coming about. So a lot of people would purchase blocks of land and
hold them and then maybe sell them down the track as they go up in value or maybe sub-divide
them and sell them later down the track. You see the guys with massive portfolios things
like stockland they are in so much lands all over the country, they hold on to that land
and then when it comes time to, they sub-dive that land and they sell it off in hassle know
packages and things like that. Strategy number 16 is Rezoning: this is where
you purchase a property in a certain zoning area and you change the zoning to increase
the value. This might be an example of purchasing property that is zone for Rural an turning
it into commercial or turning it into standard residential properties and so you can then
you can build more properties on that one area or you can build more valuable properties
than was previously possible. Again I don’t know a lot about this so I would speak to
an advisor or potentially get a mentor for rezoning it’s not something I know how to
do but I do know that there are people out there successfully making money by rezoning
land that they’re purchasing. Strategy number 16 is off the plan purchases:
so this is maybe a block of units or something like that you purchase it off the plan so
you know what it’s going to be you know how it’s going to be built you have the plans
there but it’s going to be a year or maybe two years until that property is complete
and you actually purchase it. Now when you’re purchasing off the plan what would generally
happen is you would pay your deposit upfront and then when it comes time to actually acquire
that property when it’s completed you would then obtain the rest of the financing and
purchase that property. Off the plan can be effective if you buy the right property in
the right area that’s going up in value. However you do need to be careful because
often developers will put growth projections into their property so they know the property
won’t be released for two years (they would predict, you know, what would the property
be worth in two years time?) and so if the market doesn’t go up there are occasions where
you have put down a deposit for an off the plan property and its actually not worth what
you paid for it and so that can make it hard to get financing which means you could lose
your deposit or just means that when you purchase the property you’ve got negative equity, you
can’t then sell the property because you’ll have to take a lost and it can be a poor investment.
So just be careful with off the plan but buying right off the plan properly you can be an
awesome investment and I’ve seen a lot of people make money with that.
Strategy number 18 is owner finance: This is where you purchase a property and then
you then go and re-sell it, but rather than go and obtain from the person that is buying
the property from you, you actually extend a loan to them. So you act like a bank in
giving that person a loan and then they pay you back overtime. So owner financing generally
can be profitable for two reasons. First your appealing to people who can get a standard
bank loan so you can charge more for your property than what its currently worth on
the market. Secondly you can charge a high interest rate
than what the banks are charging again because you’re marketing and selling to people who
can’t access a standard loan. So this means that you can sell your property for a higher
price, you can get a higher interest rate and make a profit out of that and passive
income overtime. Strategy number 19 a distress sales: So this
is where you make money not when you sell the property but you make money when you buy
the property. When a property is distress or the seller is distress more often than
not, you can get a property for under market value in order to give them the terms that
they need and therefore you have instant equity in that property. A lot of investors like
Nathan Birch from binvested.com.au talks about using this strategy buying distress properties
that are under market value so then you have instant equity that you can access and then
go and repeat the process. Strategy number 20 is flipping property: So
this is similar to people who would purchase renovating flip rather than renovate you simple
purchase a property and then sell it for a higher price. This sound crazy like it can’t
be done but actually through good marketing this can be done. You could purchase maybe
a distress property and go ahead and flip it or you could purchase a property that as
just being on the market for too long or just hasn’t being shown in the right light you
can purchase that property market it in a different way and then get a higher price
for that property. This you do need to be very smart to do this
because you’ve got agent fees when you sell the property, and you get stamp duty when
you buy the property so you will need to sell that property for a decent margin in order
to actually make any profit. And lastly you made it all the way through
to the end. Strategy number 21 common property investment
strategy in Australia is investing for tax purposes: Now this sounds crazy for those
of us who don’t pay a lot of tax but there are people out there who invest in property
purely for the tax saving purposes. A lot of cases this is going to be new properties
that have a lot of depreciation associated with them because depreciation counts as a
UN paper lost you in a lot of cases can offset that against the income that you’re earning.
Now if you’re in a higher tax bracket earning over that 180 000 dollars a year I think it
is and your paying almost half of your income in tax by taking a lost on your property that’s
an Un paper lost through depreciation and getting that back well you could make a profit
out of that even if the property never goes up in value even if the property is nutual
geared so it doesn’t make a passive income because your making money on tax and that’s
money that would have disappeared otherwise you could invest and actually that’s how you
generate a profit. I’m not going to go into that in details I
can’t advise on that I’m not a taxation advisor. If you want to do anything with tax always
go and see your professional tax accountant because you don’t want to be breaking the
law you want to be doing the right things. It’s too easy to make money legally so no
point trying to make money illegally so just make sure you see your tax accountant if that’s
how you’re going to invest. So there you have 21 different investment
strategies that people use when purchasing property in Australia. As anyone stock out
to you is the one that you think is more suited to you or one that you are very interested
in? Well I suggest you go out there and you learn more about that strategy and become
a master in that strategy. Go away and invest and I wish you the best.
Until next time stay positive.

10 thoughts on “21 Common Property Investment Strategies In Australia (Ep236)

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