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The Five Winning Property Investment Strategies

By Chris Porter | November 27, 2017

Every successful property investment starts with a strategy which will guide the whole investment plan and even determine if the investment is right or not. The right strategy will save you time and money, and you won’t direct your money into underperforming investments. Any expert will tell you that their best investment strategy started with determining the type of investment, the right person to help, the ownership structure, ROI formula, and investment goals.

investment property under contract

Here is a detailed look at these considerations:

  1. Which property should you invest in?

The property chosen determines your returns on investment or profits earned from the particular property.

You have to select the geographical area, the potential property in the area and you have to carry out a basic rental income return on investment analysis.

It is easier to meet your investment criteria once you decide the area to invest in and the market to target. The analysis also includes determining the purchase price of the property, management, and maintenance, foreseen rental income and the cost of your mortgage repayments!

Avoid purchases based on discounts. Discounts are great, but not all the time! Most discounted properties require expensive maintenance works. It gets worse when you find terrible tenants. So, to be safe, think of the huge attractive discounts as time bombs waiting to explode, but this time, the explosion fleeces you. Don’t forget to consider the potential to add value to the investment and the effects of the refurbishment on the value of the property.

  1. Get the right professionals

Who will guide you in making the best high-yield investment? Unless you work in the property investments sector, you have to get out and get help. And in most cases, you may have to get a second and a third opinion.

As you grow your investment portfolio, you will realize that having an experiences property investment team is crucial. Make sure you trust those experts and include permanent players like an accountant, lawyer, and home insurance specialist. On the reserve bench, have property managers, registered valuers, and real estate agents.

  1. The ownership structure

While this depends on your goals and circumstances, you have to consider flexibility, taxation, simplicity, growth of your investment portfolio, exit strategy and the ability to introduce other people.

  1. Rental income and investment yields

There are cases where a property generates regular income but no capital growth. This means that you can’t use your rental income as your rental yield or return on investment. Experts assert that you have to measure the returns from your rental income to returns from returns other classes of assets could offer you. This calculation helps you determine if property investment is the right idea. Ensure that the property selected has a potentially high capital growth.

The main factors that affect the rental yield include tax benefits and other deductions. Yield decreases when the property becomes expensive unless you increase the rent charge proportionally. Use the vacancy rates to determine the rental yield of property.

To get the best return, you have to look for property in a location with potential for improvement. The property should offer a high yield, and property you can renovate without running a big loss.

  1. Investment goals

Are you investing in the property to build wealth, generate income, or to save for retirement? Will the timeframe set help you meet your investment goals?

Final thoughts

Beware of your tenants' profile, leverage your investment, and set a definite exit strategy.

"Chris Porteous has significant experience in the financial markets with stints at Goldman Sachs, UBS Securities and DBRS. At DBRS, Chris extensively covered the Mortgage Backed Securities market, Covered Bonds and regulatory changes involved in the real estate markets. Chris currently runs a personal Real Estate Investment Trust with over 15 properties located in South Florida."
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  • One comment on “The Five Winning Property Investment Strategies”

    1. Good points but I don't know if avoiding discounts is practical. It's difficult to purchase a property at full market value and have sufficient rental yields. The key is to understand the numbers and to model your profit and losses accordingly. If you know your numbers, you will know if it is a good rental property investment.

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