Why Invest In Property – The Long-Term Strategy

Impulse may tell us that get-rich-quick schemes are viable, pyramid schemes are fast ways to earn good cash and that return on investment is an overnight venture. This is rarely true. When done properly, investment of any nature takes years to bear fruit and investment real estate is no different. Even property flipping has significant risk attached at the best of times, and can strike investors with unexpected costs, complicated renovations and diminished returns.

Successful investment is often about timing. Fluctuations in any market can make any time better to invest than another, and global crises like the 2008 GFC and 2020 coronavirus pandemic have strong economic impacts that can either destroy an investor’s portfolio or leave them miles in front.

Professional property investors generally maintain a diverse portfolio. With diverse experience comes the wisdom investors need to respond to market dynamics and manage each property for the highest return on investment. Small-scale, long-term property investment is certainly appealing for individuals seeking a secure investment with low risk attached, and by providing insight into what to look out for, we keep you informed about how to navigate such opportunities.

Where to Invest

As a whole, the Australian property market has been in a strong position for the last decade. Sydney house prices, for example, have risen by 43.1% since May, 2012, and Reserve Bank interest rates have never been lower. However, the recent real estate bubble isn’t common to every city in Australia, which begs the question – where to invest?

It’s worth keeping in mind that your choice of location will have a large impact on the deposit needed to close a property. While capital gains might be higher in one location, the overall cost of housing means that more capital is needed to begin investing, making investment difficult for smaller investors. Longer-term investors may consider proactively investing cheaply in a less-premium location, and letting the capital gains take place over the life cycle of the property.

Sales Timing

Property transactions are filled with stresses and short-term pressures. Long-term investors are much more secure in their ability to navigate successful timing of a property sale than short-term investors who are forced to react to market fluctuations to maximise their return on investment. It’s wise to keep an eye on varying interest rates as well as property prices before making or selling an investment. That way you know when the market is waxing and can take full advantage of that.

Cash Flow

Not all investment properties will be tenanted all year round. Research your area well and look for ongoing development and planned infrastructure. These things will beget long-term tenancy. Avoid areas with one industry or company for employment because they tend to attract short-term residents. A cash-flow-positive investment property facilitates easy debt servicing when untenanted and provides additional income for retirement – good incentives for long-term investors.

Contact Pillar Financial today for a free confidential discussion. We are licensed practitioners and operate five days per week 9-5pm.