Property Strategy Goal 3: Buying or building to keep as an investment and purchase another property in two to five years

In our last blog we talked about one of the goals you may have within your Property Strategy ‘Goal 2: Buying or building to sell in the next two to five years’ and we highlighted some important things to consider when buying a property that you want to resell in a short period of time.

But what if you don’t want to sell and you want to use this property as a stepping stone in building an investment portfolio? Again this strategy gives you some options in regards to the type of build, which may include a traditional family home, a townhouse, or a block of one or more units, but with an investment property it’s all about the Return on Investment (ROI).

One of the first things to consider when looking at purchasing a property to rent out in the future is any ongoing costs such as property management fees, strata payments and council rates. Will these costs take too much away from your ROI? Can you foresee any considerable increases?

Factor in any upkeep and repairs that may be required on the property. Keep in mind that you’ll be living in the property first so you can to do any repairs yourself before you rent the property out.

Building or buying a house and land package may be a good option here in order to minimise maintenance costs and maximise taxation minimisation strategies. Discuss these with your accountant.

Location is always key for an investment property, so do your research and go where the vacancy rates are consistently low, considering the proximity of the property to essential services like public transport and schools.

Often a large backyard is not a consideration for renters. If your home will become an investment property in the future then a large backyard only adds to maintenance costs and is unlikely to add to the rental return. But consider an outdoor living or alfresco area are they are very popular these days.

It’s also important to consider whether the property will be negatively or positively geared. Do you have the extra funds required to negatively gear your investment?

Living in a property, and then moving into another and renting your first buy can be a great way to start your investment portfolio and will be a stepping stone on the path to a bigger property strategy. So make sure you’ve considered how all of your decisions will impact on your ability to rent your home in a few years. Some sacrifices may need to be made in the short term in order to maximise your return and fulfil your property strategy. 

The importance of having a ‘Property Strategy’

Man using tablet pc on couch at homeAll too often we see people so excited about buying or building their first home, they forget about the big picture. Even if you only plan on owning the home you are living in (and are not considering owning an investment property) a Property Strategy is an important tool that you should develop.

A Property Strategy helps you to build an approach that outlines your current and future plans. It can include information on how long you envisage living in your current home and how you will create capacity in your property for an expanding family. Your strategy may also consider factors of your retirement or future travel plans.

If you are looking at building an investment portfolio a Property Strategy will assist you in planning what type of properties to purchase, provide best value for money, and minimise costs. It will also assist you in ascertaining when to rationalise and release capital which may then be reinvested in the portfolio.

Your Property Strategy should outline your goals for:

Buying property – identifying what properties meet your current and future needs so that the right purchase decisions are made at the right time

Investing in property – capturing the benefits of investment property

Releasing property – making informed choices about when and why to dispose of property

It should also include information about the makeup of your family and your lifestyle (now and your plans for the future). And it’s important to remember for something to be classified as a property it must have value, but this may not only be a dollar value. The property may be valuable for sentimental reasons or for the lifestyle it enables the family to have. All of these factors should be considered as part of your strategy.

So think about how your home and/or investment properties meet your current and future needs. Your strategy should include where you want to be, and how you want your property portfolio to look in the next one, three and five years. You can also have some longer term goals, but ideally your strategy should be reviewed and updated at least every five years.

In any situation a strategy will assist you with sourcing the right property at the right time, for the right price.

So whether you’re looking to have one property or ten, a Property Strategy will ensure you are forward looking, and continually assessing how property can meet your existing and future needs for building your wealth through property.

Look out for our next three blogs, which will give you some ideas on what to consider if your strategy includes any of these three goals:

Goal 1: Buying or building to live in the home for five years or more

Goal 2: Buying or building to sell in the next two to five years

Goal 3: Buying or building to keep as an investment and purchase another property in two to five years