Property investment requires a proactive approach for long-term gains, Insynergy explains.
Contrary to popular belief, property investment is far from a set-and-forget strategy, it demands ongoing attention and strategic planning. While the initial effort involves saving, planning, research, and acquiring a valuable asset, the key to transforming a good investment into a great one lies in effective management and continuous refinement.
Building the right team
Self-education is crucial, but professional guidance is invaluable. Surround yourself with trusted advisors, including a qualified property wealth planner, finance broker, accountant, lawyer, financial planner and buyer’s agent.
This team will not only save you time and money in the short-term, but could potentially make a difference of tens, if not hundreds of thousands of dollars in returns over the lifetime of your property investment journey by ensuring you make well-informed decisions from the outset.
Careful portfolio management: annual reviews
Similar to annual check-ups with medical professionals, you should conduct annual reviews for each property in your portfolio. Consider factors such as:
- Rental returns: how has the rental market performed in the last year? Has the average weekly rental amount in the market grown? If so, by how much? Being educated about rental price growth allows you to confidently increase rental rates.
- Lease type consideration: do you have long-term tenants or are you leasing short-term? While long-term leasing has its advantages, short-term corporate letting can yield significantly higher gross and net rental yields.
- Market conditions analysis: how is the overall property market performing? Is it still in its growth phase or is it nearing the top and entering into a plateau phase?
- Equity growth assessment: what is the property’s value in today’s market? Does the property have lazy equity that can safely be deployed into another growth asset?
- Costs and outgoings review: analyse the expenses such as insurances, utilities, management fees associated with owning and maintaining your investment property.
Use property cycles to your advantage
During recent years there have been some huge booms in property markets across the country. Some people think it is pure luck choosing a property or a market right before it booms. However, it’s been proven repeatedly through research into macroeconomic factors including population growth, jobs creation, large infrastructure projects and capital expenditure that you can predict which markets will boom and confidently ride the wave.
This information helps you to make strategic purchasing and selling decisions and helps in identifying when to sell properties at their peak in order to reinvest in high-growth markets.
Real-life case study: Adelaide, SA
With the help and professional guidance and expertise of a property wealth planning team, an investor acquired an off-the-plan townhouse in a strategic lifestyle location in Adelaide, with strong annualised house price growth of 14.8 per cent and an 8.3 per cent increase in average weekly rental returns.
- Property Type: townhouse with two bedrooms, two bathrooms and one car space.
- Initial Investment: $475,000
- Current Valuation: $630,000
- Rental Yield: 9.5 per cent
In three years, the property appreciated by $155,000, providing a substantial return on investment. Additionally, the property’s ideal location and type allowed for corporate letting, achieving an impressive rental yield of 9.5 per cent, giving the investor an immediate increase to their weekly cash flow. This surplus can be used to bolster their financial buffer, make mortgage payments, or serve as capital towards another high-yield property in a high-growth, high-yield market.
Adopting a proactive and informed approach to property investment, along with a well-structured team and strategic reviews, can turn your investment journey into a lucrative and successful venture.
Richard Sheppard is the CEO and founder of inSynergy Property Wealth Advisory. inSynergy provides a broad range of professional services designed to assist with all aspects of property investment. Phone 1300 425 595 or visit insynergy.net.au