Last Updated: 22nd January, 2018

Which Investment Strategy?

Published by Otto Dargan on December 9, 2013

What separates the investors who have a multi-million dollar investment portfolio from the ones who are forced to sell up to get themselves out of trouble?

More often than not the answer is the strategy the investor used. Over the years we have seen strategy make or break an investor’s success.

Be careful as some strategies work, some don’t and at their worst are downright dangerous.

Whether you buy and hold, develop, renovate, use options, wraps or any other strategy, make sure you do your research and choose a strategy which suits you.

Work out what you’re good at

We are all good at some things and not so good at others. Our brokers are great with mortgages but cannot fix a computer to save their lives!

The same applies to property investment. Some strategies will work for you and some won’t. But what is important is to choose one that plays to your strengths and long term goals.

Negatively geared or positively geared property?

If you are earning a good income, have good equity or a big deposit and not much time, then usually the way to go is buy and hold a good quality property in a good location.

Don’t over-complicate things! You have better ways to spend your time.

There are many benefits to owning a negatively geared property. But if you have a lower income which doesn’t really benefit from it, buying a negatively geared property can keep you stuck on property #1 for a long time.

A high rental yield from an investment property means you wont go broke while you wait for capital gains!

We’ve seen both strategies work well and investors win using both. It is just a matter of picking one that matches your situation.

Develop, renovate or buy and hold?

The three most common investment strategies are developing, renovating and buying and holding. The question though is, which of these strategies is best for me?

Do you have experience with any construction projects? Do you have a lot of equity in your portfolio or a large deposit? Do you have time to manage a development project to completion? If the answer is not yes to all these questions we wouldn’t recommend you take up a development project.

Developing properties is a highly specialised strategy and not doing it right could mean losing a lot of money rather than making it.

I don’t meet the above criteria, would it be best for me to just buy and hold then?

Not necessarily. If you are good with your hands and have an eye for design, cosmetic renovations may be best for you. If done correctly, spending $5,000 on renovations could easily add an extra $20,000 to the value of your property!

I don’t have an eye for design and am not good with my hands

You can offset your weaknesses by getting help! If you are not good with your hands, hire tradesman to do all the work. If you have no eye for design, get help from someone who understands what looks good.

So what is the “best” strategy?

All of them, they just may not be the best for everybody. At the end of the day it comes down to picking the right strategy for your situation.

Find what works for you and stick with it!

Have you made a gold mine from renovating? Then why move onto developments? Have you reaped the rewards from buying and holding? Then why start renovating?

Pulling off each strategy demands experience and expertise. Changing strategies means building up your skills and experience again from scratch. Are you willing to sacrifice your time, effort and hard earned money on a new strategy to possibly lose it all?

If not, stick to what you know and what has worked for you in the past! Too many times we have seen customers change strategies to something riskier and fail, even though they have had much success with their previous strategies.

To talk to a broker about your finance options call us on 1300 889 743 or enquire online.