To contemplate your future and what your goals may be is something most of us think about at some stage of our life. For many the vision is for financial freedom, career success or family time, but putting a plan together on how to get there is a whole new ball game. Where do you start?
Ultimately, your future starts with making a decision to strive for a goal and gaining an understanding of the steps that will allow you to achieve it.
Speculating or Investing?
Putting your plan into action will rarely succeed on a wing and a prayer mentality. Strategy is your key to getting to that final vision. If one of your goals is to achieve financial security, then setting up an investment plan is imperative to your road to success. There are many avenues in which you can invest – property investing is just one possibility.
Property as an investment is best suited to a medium- to long-term growth plan. Buying a property with an expectation of making a significant capital gain or return in the short-term is fraught with danger and requires precise market timing. The way property grows is largely based within an economic framework. While property on a macro scale responds to global economic pressures, property on a micro level (that is within suburbs and towns), responds to the local economic situation.
In a nutshell, the final growth in both the value of property and its return cannot be predicted despite many ‘experts’ opinions that property behaves in a predictable cycle. You can, however, come up with a list of viable areas which are the most likely to experience growth in the future. This is why having that medium to long term outlook is vital.
Property as an investment class has many sub-sectors, just as there are different asset classes for other investments, there are different types of property investments and property investment sub-sectors. All have different characteristics and market forces specific to each one of them.
For property some of the sub-sectors that exist are:
- Residential: Dwellings (Houses and Units), Vacant Land
- Rural: Acreages with a House, Land, Hobby Farms
- Commercial: Offices, Retail, Industrial, Working Farms
- Niche Market: Student Accommodation, Seniors, Hotels and Serviced Appartments
Each different sub-sector will have a different level of risk and return. This risk and return is further impacted by local market conditions. As a property investor, it is vital you understand this before choosing a property type in which to invest.
Knowing your personal property risk profile and understanding the difference between speculating and investing are foundational to avoiding the pitfalls of property investing. Property investing is a proven wealth creation strategy however the process must be followed and you must try to mitigate as many risks as possible.
A common strategy used when building wealth, and minimising risk, is diversification. Diversification involves spreading your investment capital over the four main asset classes – cash, property, shares and fixed interest securities.
However, property investors can still diversify within their property portfolio by understanding the different features, benefits, risks and returns of different types of property, and ensuring that a good exposure to different types of property is ultimately achieved.
In addition to choosing different property types, diversification can also be achieved by investing in properties across various geographical markets. As one market plateaus or falls, others may be rising.
Another technique for mitigating some of the risks associated with property investing is to engage the services of suitably trained professionals to carry out a number of tasks on your behalf. This ‘external team’ should be experts in their respective fields and provide you with appropriate advice.
These professionals may include accountants, building and pest inspections, buyer’s agents, conveyances, property managers, solicitors, quantity surveyors and qualified property investment advisers.
Remember that if an adviser is selling a property to you as part of their advice model, it is impossible for them to be independent. Only seek the advice from a professional that has an obligation to provide you with independent sound advice rather than provide you with ‘advice’ that suits their own vested interest.
Your future – your move
So, if property is on your “to do list”, please get in touch with Aquila Property Investment, as we're more than happy to chat with you about your goals and how to make them a reality.
Emily Petie is Aquila Property Investment's Brisbane Buyers Agent. If you'd like to have a free consultation with her directly, book here