Post about "Commercial"

Different Property Investment Strategies Provide Different Property Returns

Property investors all have different goals with their investing and many different influences affect their goals for investment property returns. Some investors buy a property and expect the rent payments to purchase it for them over the years, but other investors look at investing in a property in a prime location which will put them into a negative gearing situation, but they are concentrating more on the capital return they will get from owning a property in a prime position.

The market has constantly moving criteria and your view of the market at any one time also affects where you might buy a property and at what price.

Take the example of an investor buying a property and using the rent to pay off the property. This property will be getting some principal paid off with the mortgage repayments and in due course there will be an equity value in the property that the owner can use to purchase another property. This method of build a property portfolio is a slower way of doing it but it could well suit an investor whose personal circumstances, knowledge in the market place, financial commitments and so on require this slower strategy. At a later date their situation may well change and then their property investment business plan will probably change too.

In this second situation the investor buys a prime position property and there could be several reasons why they may do this. Here are some of those reasons that may cause the investor to purchase a more expensive property:

- they have the funds or equity available to use on a more expensive property

- they understand that prime position property prices rise quicker than average house prices do and the benefit of this could be that they will have more money quicker, to purchase again if the market is moving up

- they want to live in the property themselves in a few years time and want to buy at the lower price

- they want to use the negative cash flow as a tax deduction against a high personal income

- they could own some positively geared properties and can use the positive cash flow to subsidise a more valuable property

You can see how the two different investors would be looking for different investment property returns from the different style of investing they are doing and also that the two different price structures could require different purchasing strategies.

Over the years an investor’s view to property investing will most likely change due to the circumstances at the time and that is why property business plans are so important because tabs will be kept on your changing personal circumstances, on the changes with your property and adjustments can be made after due consideration if you so wish.

Some investors I know keep on buying in a certain price bracket and have accumulated 50+ properties at the lower end of the market, whereas others I know have started at that level and over time have increased the value of each property they have purchased and are now buying properties in the $900,000 to $1.2M mark. Each investor has their own property investment strategies and plans when building their property portfolio and so they should to get the best out of their property investing.