Are you looking to invest in property with a new home loan, but are flummoxed by the number of different strategies and methods of improving your portfolio? Check out these three typical kinds of investor, and see if you fall into one of these popular categories.
It’s about quality over quantity for Patient Percy. Because you’ll be using a buy-and-hold strategy, you won’t be seeing returns on this property for a number years. In fact, CoreLogic RP Data reports that the average length of time a property is held before being sold for gross profit is about 10 years. Plenty of time to improve your credit and make your next investment with more borrowing power.
However, considering the gains for these kinds of long-term property holds were in the hundreds of thousands, you might find that it’s well worth it, particularly if you are saving for retirement. This is particularly effective if you purchase more expensive properties in well-known high demand areas, such as city centres. The property cycle might dip and grow over the decade, but a Patient Percy can afford to wait for it to even out for a gross increase.
If you are in it for the long game, then following in Patient Percy’s footsteps might be the right strategy for you.
Who wants to wait around for years to see income from an investment? Depending on the environment of the market you are in, you might find yourself presented with low interest rates and high rental yields: If you get a 5 per cent annual return from a property that you are only paying a 2 per cent home loan interest rate on, then you are making money straight away. The property helps to pay itself off, and you are building equity in the asset at the same time.
If that sounds like you, you might be a Rental Rose. This investment strategy relies on high rental yields and low interest rates, and can result in an excellent supplement to your current income. However, as a landlord, you may find yourself having to sink some of that capital back into the home through maintenance or upgrades to attract new tenants.
Furthermore, if interest rates are too low, you might find that your tenants are instead choosing to purchase home themselves instead of moving into your rental accommodation! It’s a slow, but generally consistent, way of building wealth. If you want to supplement your income and don’t mind spending extra time for land lording, then you might be a member of the Rental Rose clan.
If you want something done right, you sometimes have to do it yourself. Construction Keith’s don’t want to muck about with all this waiting business, and want to try and avoid stamp duty as much as possible.
While Patient Percy is waiting his decade for a decent amount of profit and Rental Rose is trying to squeeze some extra rental income out of her properties, Construction Keith is either renovating, buying off-the-plan or buying land for new constructions. This can be a popular method of quite literally building capital growth, but there can be a few problems.
For example, CoreLogic and Cordell report that there are millions of dollars of abandoned or deferred projects every quarter. While Keith would get his deposit on an off-the-plan build back if this happened, he will have lost out on a lot of time while Percy and Rose have been building equity and earning income. If you find a place in dire need of extra housing supply, or just want a slightly cheaper buy-in and are happy to take on some additional risk, you might a Construction Keith.
But no investment strategy will be fully efficient without the right home loan! Make sure you chat with us to discover a wide range of available loans for your investment portfolio.