In the realm of investment, property remains a consistently viable option due to its ability to generate steady long-term income. This makes it particularly enticing for those close to or in their retirement years. However, successful property investment isn’t merely about purchasing a piece of property and waiting for its value to increase. It’s a strategic process that, when executed thoughtfully, can yield a substantial return on investment. In this article, we explore five key strategies that have proven effective in leveraging property investments to build wealth and provide a continuous cash flow.
Capitalising on Value Appreciation
The appreciation of your investment property’s value over time is a great profit source. However, this trend isn’t always consistent and can significantly vary based on location. That’s why conducting comprehensive research into any potential areas for purchase is vital. This research will assist you in maximising your return by identifying the key indicators or drivers for sustained growth. Many prospective investors feel more comfortable purchasing a local investment property, taking comfort in their ability to casually “drive-by” and check on their investment. However, many overlook the fact that the return or appreciation from a local property could be notably less than that of a property located interstate. It pays to find the best location matching your strategy and that may well be not in your neighbouring suburbs.
Leveraging Inflation
Inflation acts as a propellant for rising rental prices. Furthermore, population growth generates housing demand, which, if supply can’t match, results in higher rental prices.
Value Enhancement through Wholsale Pricing
Being part of a buying group, most likely through a property strategist, is a great way to generate value enhancement by simply paying less. Wholesale is better than retail – and that not only in pricing, usually also in better fitout, quality and conditions.
Consistent Cash Flow from Rent
Similar to a dividend-paying stock, a carefully chosen and well-managed rental property should offer a steady income stream via rental payments. Undertaking precise research before purchase will help you understand which areas promise higher rental returns, lower tenancy vacancies, and are situated in a growth area. This increases your chances of earning higher than average, consistent rental income.
Using Mortgage Payments to Your Advantage
Initially and for cashflow purposes it is advantageous to use interest only mortgages. Later on it may pay to change to a principal and interest payment. As you gradually pay off your mortgage, the subsequent increase in equity can also be utilised for further investments. While sometimes accessed by selling the property, an investor can also opt for equity release loans under appropriate terms to use those funds for expanding their property portfolio. Using the equity out of an existing property keeps the portfolio intact, in fact the portfolio is increasing through the equity release and another purchase.
To sum up, the stability and potential for long-term growth make property investment an appealing option, particularly for individuals nearing or in retirement. The strategies outlined, such as capitalising on value appreciation, leveraging inflation, enhancing value through wholesale buying, generating consistent cash flow from rent, and using mortgage payments to your advantage, serve as a roadmap to maximise your return on investment. Remember, thorough research, strategic planning, and a keen understanding of the market dynamics are integral to successful property investment. With the right approach and the right team of advisors surrounding you your property portfolio can act as a reliable wealth generator, providing you with a steady stream of income and capital growth, for years to come.
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Property Friends is a specialist Property Investment Strategist that provides solutions for people aspiring to financial independence, choices in retirement, or leaving a legacy. www.propertyfriends.com.au (03) 9758 5331
