14 property investment strategies

Depending on your circumstances, there are many ways to invest in or make a living from property.

Here are a few strategies to consider.

  1. Own a home

Many people don’t see their home as an investment strategy – after all, you need somewhere to live don’t you? You’re paying a mortgage and you’re not generating an income so how can it be an investment?

Over time, the property will generally increase in value, particularly if any renovations are made. Investors can use equity in the home to buy a second property. Some use it as a way to move up the property ladder by selling the property at a profit and then buying either a larger property or a property in a more desirable area.

  1. Buy & hold

Buy & hold is probably the most common investment strategy and it is reliant on property values increasing over time. It involves buying a property, holding onto it and selling on a few years down the line at a profit. Usually the property is rented out in this time.

  1. Generate an income – positive cash flow

As the name suggests, this strategy is ideal for investors who are looking for an additional income. The finances are set up so the incoming rent more than covers the outgoing expenses, giving the owner some cash to use elsewhere.

However, this income will have to be declared on the tax return and the investor may be hit up for tax contributions.

  1. Negative gearing – capital growth

When the rental income doesn’t cover the outgoing expenses, the property is negatively geared. On the face of it, the property is working at a loss. However, investors use this strategy if they are paying tax through a regular income, as they can offset this loss against the tax on their income.

In addition, they will hope to make a profit on any increase in the property value.

  1. Renovate or fix it to flip

This strategy works well for those who have spare capital and have a good eye for renovations. The investor buys a run-down property, does it up over a few months, and sells it at a profit.

In this case, you need to be sure the cost of the renovations isn’t more than the expected selling price.

  1. Renovate and hold

Similar to strategy no.5, this strategy involves buying a property and renovating it. But in this case, when the renovation is complete, the investor holds onto it and rents it out. Depending on the financial situation, the investor may choose for the property to be negatively or positively geared.

  1. Subdivide

As the name suggests, this strategy involves subdividing land into two or more plots. While homeowners with a large garden or land often use this strategy, the land doesn’t necessarily have to have an existing property on it.

Once the land is legally separated into plots, the investor sells the plot or plots of land.

Investors need to do their homework though and look into council requirements for subdivision as these differ between councils.

  1. Dual occupancy

There are several ways to create a duel occupancy, the most common being converting a large property, such as a 5-bedroomed, 2-bathroomed property into two smaller dwellings.

This can be a very lucrative strategy for investors who benefit from receiving two rental incomes, which are more than the income received from renting out the property as a whole.

Any changes to the property will be subject to council regulations and registration.

  1. Granny flats

Granny flats are a great way for investors to capitalise on their current property and earn an income. In Newcastle, they cost around $140K to build and can offer returns of $345 and more per week depending on the suburb.

Like every building project, rules and regulations will need to be adhered to and the total floor area is restricted to a maximum of 60 square metres. Plus, if you build a granny flat in NSW, you are not allowed to later subdivide the property.

  1. Duplex or additional dwellings

Once a property has been subdivided, investors may decide to build the second property, or properties themselves. Some investors choose to strata title the properties, while others prefer to have independent properties.

  1. Commercial real estate

Investing in commercial property isn’t one which immediately springs to mind however there are some great yields to be had and the ongoing costs maybe lower as the tenant often pays the maintenance and council rates.

Financial lenders for commercial properties do generally require a larger deposit and investors do need to do their homework on the area to be sure the property will maintain its commercial viability.

  1. House and land packages

With more land being released for property development and the government offering incentives to people who are building new properties, this strategy is rapidly increasing in popularity.

Investors do need to do their homework to be sure they qualify for any grants and fully research the area to be sure there will be a demand for houses there once the property is built.

  1. Off the plan

Buying a property, (be it a house, apartment or unit), off the plan means buying it before it has been built, often a year or two before it is built. This means the investor doesn’t have to pay for the entire property until it’s built, giving them more time to raise the finance for the entire property.

Many use this strategy for buying in an area that is going up in value, as it means by the time the property is built, the property is worth more than the investor paid for it.

But, sometimes the area doesn’t increase in value which may leave the investor in negative equity.

In recent years there has also been issues with developers going into liquidation before a project is finished.

  1. Tax savings

Investors in a high tax bracket often use property a means to making money through tax savings; the perceived loss on the property through negative gearing or depreciation, can be offset against the amount of tax paid on regular earnings.

When you’re looking at different strategies speak to a financial specialist who will be able to advice on what is best for your situation and highlight the risks involved.

Whichever property strategy you decide to use, remember it will be for the long term. Unless you’re using the ‘renovate and flip’ strategy, very few people buy a property one year and sell it the next.

As one of Newcastle’s longest established real estate offices, we know property. Whether it is from an investment or homeowner’s point of view, we’re always looking at innovative ways to help you get the best from your asset.

If you want to know more about investing in property, get in touch. Simply give us a ring on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or pop into our Cardiff office for a chat.