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Investment Strategies

Investment Strategies

There is more to property investment and wealth creation than just buying and selling real estate. The secret to wealth creation and property is having clear goals and objectives and then implementing an appropriate investment property strategy in line with those objectives.

Although there are numerous investment strategies implemented in the market today, these strategies can be grouped into two broad categories:

  • Passive (or defensive) strategies and
  • Active (or offensive) strategies

Passive (defensive) strategies are where the investor puts in a standard amount of effort and therefore the investment has a standard risk profile and standard return. They also typically require a normal deposit (3-20 per cent) and normal finance (97-80 per cent), they receive natural capital growth (3-10 per cent) and a natural yield (2.5-8 per cent). These types of strategies include:

  • Cash Flow vs. Growth
  • Houses vs. Apartments
  • New vs. Old
  • High price vs. low price
  • Off-the-plan
  • Special purpose

Active (offensive) strategies involve the investor making a greater effort on a more “creative” type of opportunity, which therefore typically has a higher rick profile and return. These strategies usually involve a creative deposit (< 3 per cent) and a creative finance solution (>97 per cent). The rewards for this extra effort are instant capital growth (5-25 per cent) and higher yield (>8 per cent). These tyoer of strategies include:

  • Renovation
  • Development
  • Unconventional

Your choice of which strategy to implement depends on two factors:

  • The profit outcome you want to achieve (i.e. capital gains and/or positive cash flow returns)
  • The needs of the person who’ll be paying you money in exchange for the use of the property.