Property investor profiles – what type are you?
In Australia, it’s possible for just about anyone with a deposit to invest in property, whether you are a low-income earner on a tight budget, or a well-off with loads of disposable income. Interest rates are very low at the moment and home prices are more affordable than they’ve been for a while. So, if you’ve been thinking about property investment, it may be a good time to get started.
Rentvestors are often motivated by a desire to maintain their current lifestyle, while still wanting to get on the property ladder. The solution? To rent where they want to live and invest in more affordable suburbs elsewhere.
This type of investment strategy can help you to grow a deposit to enable you to buy a home where you’d prefer to live later, but talk to a professional financial planner to ensure it will work for you. Capital growth is an important factor in Rentvesting, so it’s also important to research your property investment carefully and locate an up-and-coming suburb where this is more likely to happen quickly.
‘Mum and Dad’ investors
This is a common way of describing a conservative type of investor. ‘Mum and Dad’ property investors will typically have paid down their family home loan and be ready to access the equity to build more wealth for the future. They’ll often be growing their portfolio slowly and want to have only one or two investment properties in addition to the family home.
Each investor’s strategy depends on their goals and how comfortable they are with risk. If you are a conservative investor, you may opt for ‘set and forget properties’ that are easy to maintain and likely to deliver moderate long-term capital growth. This approach helps to protect your capital while making “extra” money.
Short-term investors (property flippers)
Buying, renovating and selling quickly is the name of the game for flippers. The idea is to buy a property in need of some TLC, but no major structural work. This takes careful research and it pays to have a team of builders and property inspectors to help you make the right property purchasing choices.
Property flippers manufacture capital growth by renovating. For this type of strategy to work, you need to be willing to invest considerable time and energy into the project and have a very firm grasp of both your budget and building costs.
It’s important to note that when property prices are falling, flipping can be a very risky business. If you fail to get your budget right, it could be very easy to end up with a property that’s worth less than you spent on buying it and renovating it.
Investors who do it as a business (long-term)
This type of property investor takes a professional approach and work as though they are operating a business. They often have a significant, diversified portfolio that includes both residential and commercial properties, and plan to continually purchase more properties.
Sophisticated investors are up to speed with things like value movements in the property market and maximising their tax advantages. They usually seek professional advice from a qualified accountant to support and inform their activities and decisions.
Investors who do it as a business buy, when home values fall rather than allow market variations to keep them up at night. They are usually careful to set up financial buffers to protect themselves throughout the peaks and troughs of a property cycle.
Get a professional broker on your team
No matter what approach you take to property investing, the right finance solution is critical to your success and can potentially make a big difference to the profit you make. We’re here to ensure your mortgage and loan structure is suitable for your investment strategy, personal financial circumstances, needs and goals. Feel free get in touch to find out more.
Your full financial situation will need to be reviewed prior to application for any loan product. Finance is subject to lender’s terms and conditions and their fees, charges and eligibility criteria will apply. This article is general in nature and does not constitute legal, tax or financial advice. You should always seek professional advice in relation to your individual circumstances and suitable investment strategies.
Sources: CoreLogic June 2019 Housing Update.