There are different investment strategies that most people use.
Below is an overview of the two main types of investment strategies, they are:
Positive Cash Flow
The basis of the Positive Cash Flow strategy is to purchase a property that brings a high enough rental return to cover the costs of the mortgage interest, property management, owner’s corporation (if applicable), maintenance, insurance, council rates and any other costs associated with the property.
These properties are in areas where there is high rental demand and there is not a lot of buyer demand. Often these properties experience moderate capital growth. Positive cash flow can be great for first time investors and people who are having difficulty getting a mortgage due to tight cash flow. Also, it can be good for those people close to retirement and want to have increasing income as the mortgage gets lower.
Purchasing an investment property in a Capital Growth strategy means you have time to watch your investment grow in value. You do need to be patient. If you know that a suburb is just beginning a sharp upward trend, you may get good growth over 1 – 5 years. However most capital growth strategies are longer term.
Usually, the rental returns do not cover the mortgage interest payments and other costs, so it is important to have enough cash to cover the shortfall, however the benefit is that you are able to Negatively Gear the property against your income. The keys to this strategy are research and patience, knowing the suburbs that are about to have sustained growth and having the time to wait for the value of your property to increase.
Contact us at Wealth Connections Australia Wide if you want to discuss these strategies further, we can refer you to the right experts to help you.