Are you confused about what property investment strategy you should use? After all, there are a lot of options out there. You need to pick the right one. The one that will suit your risk profile, your time and your skills. If you get it wrong it could cost you. What works for me may not work for you. It took a business mentor to open my eyes to the two main ways that people use property as an investment vehicle and I thought I’d share that with you.
Actively Making Money from Property Investment
I have learnt over the years that there are different ways to look at property investment and a number of different ways to make money through property. For example, I’ve seen people successfully make an income through:
- Renovating or building;
- By teaching others how to successfully invest in property or how to renovate;
- Through trading in real estate;
- Via land / property development or
- By helping others to find their ideal property as a buyer’s agent.
Passively Making Money from Property Investment
These are all great active ways you can create an income source. But what about us lazy investors? We don’t want to be constantly looking for the best deal, negotiating the lowest price and dealing with builders and tradies, (believe me it’s a struggle trying to fit a renovation and new build between work demands and personal life). If you’re like me, perhaps you want to look at using property to store your savings, and gradually build wealth passively.
Let’s face it, for many of us in Australia in our early 50’s there will be little or no pension of value once we reach retirement age. If you are fortunate, you may have a reasonable Superannuation pension however, not all of us have had the opportunity to develop our Super balance to any reasonable level. This could be due to time out raising kids or, if you are like me, running a business, where thinking about Super was not on the radar for many years. Thankfully, we did think about retirement income back in the late 90’s and, not being savvy around the Share Market, invested in a couple of little, brick boxes.
The benefit of investing in little, brick boxes (LBB) – my name for our three bedroom / one bathroom, brick rental houses – is that there are few maintenance issues and they appear to be popular with renters. We also focus on properties with small lots and basic gardens, as renters generally do not want to spend their weekends mowing and gardening.
Yes, we have tried a few different property investment options such as renovating for profit, building new and, more recently, subdivision. On reflection though, we have found that our best returns on both time and money have come from buying the LBB in popular rental areas. We identify properties that are selling under market price. These are usually a little sad and neglected, they’ve had little or no renovation since they were built in the 80’s or 90’s. We carry out a quick cosmetic renovation e.g. paint, new carpet and blinds, update the tapware and cupboard handles and tidy up the garden (in the past we did this ourselves, now I just pay someone else). This allows us to attract a good rental return and tenant. After that, we can forget about it for a good few years and get on with earning money to pay down the loan.
Ok, so it may not be totally passive, but much less work than say renovating or trading.
So how about you, what do you prefer? Are you a passive or active investor?