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Create a Property Investment Strategy

Post Date:03/02/2010 | Author: Capital Property Advisory Buyers Agents

When investing in property we assist clients with an 8 step strategy.


These steps are:

Step 1 –  Initial strategy

Step 2 –  Structure strategy (property trusts, syndicates, JV’s, SMSF’s)

Step 3 –  Finance strategy

Step 4 –  Buying strategy

Step 5 –  Add value ( renovation, property development)

Step 6 –  Property management

Step 7 –  Property portfolio review

Step 8 –  Sales Strategy ( should you wish to sell)


The level of success you achieve as a property investor is largely determined by the amount of planning and preparation you carry out before purchasing. The key to the type of planning that is required to reach high levels of success is the implementation of a calculated and action-oriented Property Investment Strategy that is tailored to meet your goals as a property investor.


If this ‘roadmap’, as we like to call it, is adhered by and executed properly, it will save you money not only at the time of purchasing your investment, but also throughout the life cycle of your asset.


Where to start

Seeing as our decisions – which are guided fundamentally by our mindset – have a large influence our success or failure as property investors, it is only wise that you start your Property Investment Strategy by shaping your investor psyche.


You should kick this process off by shrugging off any investment blunders from your past. Starting fresh will open up more opportunities. As a part of this, acknowledge that property investment is a viable way to achieve your financial goals. Then, confront the elements that make up your current mindset and attempt to remove the negative factors (such as believing that debt weighs you down). Remember to eliminate your emotions, and stay focused on buying property with a history of high capital growth and rental yields.


Educate yourself continually by reading, watching, listening and learning. This includes hanging out with the right crowd. Deliberately place yourself in the company of successful property investors and mentors to absorb their knowledge and learn from their mistakes.


Creating your Property Investment Strategy

Step 1 – Review your needs and goals

Conduct what we call an ‘initial analysis’ by reviewing your needs and goals as a new or existing investor. Think about what you’re trying to accomplish by investing in property. What results do you want to achieve within five, 10 and 20 years?


Step 2 – Timing

Realisticallyanalyse how long it will take you to reach the goals established in step one. Do this by calculating what we call your ‘status quo’. This is the net wealth you may reasonably hold by the end of your goal time frame (by simply holding onto your current assets). Deduct your ‘status quo’ from your net capital goal to identify how much extra capital you require to reach your goal portfolio size or income.


Don’t be overwhelmed by this figure. All goals are reachable with a sufficient amount time, leverage and the power of compounding growth. 


Step 3 – Research risk profiles

Evaluate qualitative factors such as your individual comfort level (bearing in mind aspects such as your age, excess equity and income positions, and years till retirement) against the risk of a range of different hypothetical purchases.


Step 4 – Research the right ownership structure

Become educated on the different ownership structures available to you as an investor, so that when it comes to purchasing, you know which structure will help better your situation now and into the future.


Despite common belief, finding an ownership structure solution beyond simply buying in your own name – which doesn’t work well for the majority of investors – is as easy as finding a good property investment accountant.


Step 5 – Research your finance product

Discuss your objectives, investment strategies and risk profile with a finance strategist to find an appropriate finance product and strategy for your purchase. A finance strategist is essentially a mortgage broker, but with the added skill of being able to identify and understand the financial requirements of investors. They should be experienced working with (and organising) finance for trust structures.


Step 6 – Plan your costs

Brainstorm and make a detailed list of all costs you may incur throughout the life of your investment property (including upfront and ongoing costs). Some great templates for this can be found on the websites of the big banks.


Also, weigh your income against your possible outgoing expenses to decide on an appropriate buffer (cash reserve) to cover any unexpected costs or changes to your financial position. Your buffer all depends on your comfort levels. This may be six months or five years worth of mortgage repayments for example.


Step 7 – Enjoy the process

Budget for the bad times and possible emergencies, but also for your own livelihood. We don’t want you resenting your investment portfolio!


Finally, your Property Investment Strategy should be something that you continually re-assess. So as time goes by be sure to re-shape it to meet your changing needs and goals.

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