Now that you have researched why you should be investing in property, it is important to understand what type of property you should buy that suits your plan. Setting a budget, finding the best returns, protecting yourself from risk and getting pre-approval for finance are all important steps before you are able to go ahead and put an offer on a property.

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Deciding On A Strategy

When we meet a new client, we discuss the many investment strategies they can use to set up a successful process. Here are a few successful options we have used:

Buy and Hold

This is perhaps the most popular investment strategy among industry advisers and professionals. Buy and hold refers to acquiring property with the goal of generating long term capital growth. Usually you buy a property (using borrowed funds) that appreciates in value over time, with live-in tenants to help you pay off the mortgage.

As property values go up and rents increase, Buy and Hold investors often parlay their equity into purchasing the next property in their portfolio.  Then in future, they may sell some of their stock to reduce debt and emerge with income generating assets.

With good asset selection and the benefit of time, Buy and Hold can be a very effective and low-hassle strategy.

Negative Gearing

Negative gearing refers to a property investment where the annual expenses exceed the rental income. This leaves the investor with a loss, which under Australia’s tax laws, can be claimed as a deduction. Historically, particularly in capital cities, property prices have grown more than enough to offset the small loss incurred by a period of negative gearing.

Positive Gearing

The flip side of the coin is Positive Gearing – where the property puts cash in the investor’s pocket after depreciation and tax deductions are taken into account.

Positively geared properties are usually hard to find (and if a newly purchased property is genuinely positively geared, there will usually be a downside, such as poor capital growth prospects).

However, properties may become positively geared over time, as increases in rental income outstrip expenses. New properties have the greatest potential to deliver positive cash flow because they offer the largest depreciation benefits.

Positive Cash Flow

A close cousin of Positive Gearing is Positive Cash Flow. Positive Cash Flow properties are properties that put cash in the investor’s pocket each week.