The Importance Of Strategy
Fundamental to creating a successful property investment portfolio is a clear and focused strategy. A successful investment strategy should consider an individual’s needs and expectations for both the short and long term. It’s easy to get entrenched in analysing market-specific factors, but the fact is that any strategy must have a purpose, be time specific and know what the end goal is.
A well-planned strategy should factor in your goals, aspirations, and risk tolerance to determine a roadmap that gives you the best possible chance of achieving your intended end goal. Adhering to the strategy and not reacting emotionally is the key to success – always remain disciplined. Any investment is a risk - making rash, reactionary decisions are generally why most strategies fail, regardless if they are property related or not.
Every investor is unique. Some regard driving capital growth highly - focusing on rental yields or securing regular cash flow. Others may look to expand their knowledge base of investing in the short term to act as a springboard for future opportunities.
Ultimately an investor will at some point make a decision on what they consider being the most important to them.
If we were to isolate strategies, investors usually consider the following;
- Funding Retirement - A carefully designed strategy to minimise reliance on available superannuation funds - the right combination of capital growth generation and annual yields to achieve an early retirement.
- Income Generation - There are multiple strategies available for building a sensible portfolio geared towards delivering cash flow. In this case, the investor highly regards short-term outcomes. This strategy is focused on working on ways to minimize interest repayments, property management, and maintenance fees to ensure a monthly return that covers personal living expenses.
- Lifestyle – Believe it or not, a lifestyle strategy is an established strategy that can deliver money in the investors pocket and provide capital growth simultaneously. Either borrowing against capital growth or selling down assets to fund lifestyle improvements is generally employed. May even consider active property strategies such as renovation and developments which can generate both cash flow and one-off income events for lifestyle purposes.
- Net worth - Investors nearing retirement are naturally looking to be in the best shape possible before doing so and will have a keen eye on improving overall net worth. Capital growth strategies and portfolio building will be of particular interest here as investors seek to improve their asset base in order to take longer-term advantage of compound growth.
You may be wondering which bracket you currently fall into, or you may have gone through them all at one point or another! What’s crucial is to know simply what you are trying to achieve and being clear about how you are going to get there. Doing so provides a clear strategy that assists in making wise choices when making property purchases.
Assistance is always warranted and more often than not required. If we look at any other endeavour - we always seek assurances and confirmations from colleagues, friends and family – property investment is no different. Talk with experts, friends, and family about your strategy and goals – doing so will assist in making the right decisions at every stage of your investment path and ensure you remain grounded.