Despite what the property ‘experts’ out there would have you believe, there’s no one perfect investment strategy.
We often hear about whether to buy positively or negatively geared properties, buying in regional areas or investing in blue-chip locations or whether to buy land or apartments.
The reality is that property is a great investment because there is a place for all of these strategies.
For most property investors out there, finding the correct strategy is all about understanding your personal situation and then using the right type of strategy or strategies to get you to your long term goals.
While this might be obvious when people start looking to invest in property, they can often get drawn to a single strategy or an idea that just isn’t right for them.
For me personally, I’ve built my investment portfolio around buying high-quality properties in blue-chip locations. These are generally specific types of apartments, in very high demand areas in the likes of Sydney Eastern Suburbs & Newcastles inner ring.
We know that the types of people that want to buy into these areas have high incomes and are able to pay a premium for the lifestyle, amenity and opportunities that come from living in these types of suburbs.
It’s for that reason, we see properties in these blue-chip suburbs generate strong capital growth over long periods of times. A steady stream of buyers will always be present with high incomes, seeking out these properties to live in for all they have to offer.
The flip side of investing in these blue-chip locations is that they will invariably be negatively geared to some extent. You also require more capital as a deposit and there is also a higher income requirement form lenders, to be able to service the debt.
If you’re young, without kids and with plenty of disposable income, this is probably going to be a strategy that will do very well for you. You can service the debt while the capital growth kicks in and your property portfolio will quickly expand.
However, this might not be a great strategy for a couple with young children. They might not have the deposit or equity required to get into that type of property to begin with and they would likely prefer to be generating some form of cash flow as well.
While it’s clear that buying properties in blue-chip locations is a great property investment strategy, depending on where you’re at in life, it might not be the right fit.
At the same time, there is no one investment strategy that will do everything you need.
In fact, most investors move through a range of different investment strategies as both their portfolio and their incomes grow.
If you look to get capital growth early on in markets where prices are rising, that can be a great way to jump-start your property portfolio. After you’ve built an asset base, you can then look to add in more advanced strategies that will likely require more capital or equity. Or you have the option of adding in higher cash flow properties over time to produce income.
Ultimately, it still comes down to your own personal situation and what you are looking to achieve. There’s no magic bullet.
Start by working out what your goal is and then break down how you need to build a property portfolio to get you there. That’s when you can decide on the right investment strategy to start with and how that will need to change over time.
Understanding the way you build your portfolio correctly for your personal situation is far more important than finding a perfect strategy.