Property
So you love property! Well, there are many investors who share your passion. How many property books have been written, how many property seminars have been hosted all aimed at educating investors in how to make a positive cash-flow to release them from their jobs?
There are many wealth creating strategies taught by property educators and the strategies appropriate to your investment portfolio will depend on many things.
As we mentioned in creating your Wealth Plan, if investing through property is truly your passion it will come easily to you and you will merely have to educate yourself in the strategies your are unfamiliar with.
Active strategies may suit your portfolio if your desire for financial freedom has a short term objective i.e. say five years. A more passive and slower approach may suit a longer term strategy where you are a younger investor with more time and longer objectives.
These strategies may also be dependant on how much you have to invest and how much time you have to invest. Certainly as in investor you should examine your risk profile to ensure the strategies you employ will allow you to sleep at night.
Active Strategies
Renovations
You may be a new investor but very handy and wish to use a “manufactured growth” strategy in which you acquire a rundown property and perform a cosmetic renovation which brings up the value. Once the renovation is complete you have other decisions; sell the property and become a “flipper”, refinance to access the new equity and use it to reinvest in the next project. Be careful of the structure you use in either of these strategies.
Subdivisions
What if in the previous example you are getting more confident and as well as renovating the existing house on the property, the land component is large enough that the council will allow a subdivision to take place as well, so part of the land is carved off. Questions to ask, who will take title of the new block of land, will it be sold, will gst apply to the sale? What if the renovate house is sold instead. Make sure you get tax advice from a reputable tax expert.
Just a note here, although this can be an example of an active strategy it isn’t always a quick strategy. It will depend on the council and the town plan for the area in which you are investing.
Small Developments
Let’s imagine in the previous example that instead of selling the subdivided land the house is demolished rather than renovated and a small lot of townhouses is built instead. Again although it is an active strategy investors should perform their feasibility studies carefully as it is not always a quick turn around and many investors get caught with stock that does not sell in soft property markets.
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