Common investment strategies – the complete guide

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What methods do investors typically use to make money from property? We reveal the most popular – and the most successful

Buy and hold

This is one of the most common strategies, based on purchasing a negatively-geared property, servicing the debt and essentially waiting for the property value to kick in
Type of property: ‘Blue-chip’ city properties, properties in regional areas with long-term growth potential
Risk: Low
Suitable for: most investors, but especially those with high incomes looking for tax offsets and those looking to build a long-term asset base


Cash flow positive

This strategy enables the investor to draw a direct income from the property, as rent exceeds costs.
Type of property: properties often in regional areas
Risk: low
Suitable for: investors looking for cashflow; beginner investors with lower incomes; those looking to offset heavily-geared buy and hold portfolios


Renovation

In reno strategies, the investor buys an older property that needs work - usually cosmetic – carries out the work and either sells for a profit or holds onto property as per buy and hold. Reno also increases rental income, so can be used to improve gearing
Type of property: older properties requiring work
Risk: Low to medium
Suitable for: investors looking to manufacture capital growth and/or increased cashflow


Subdivision

This is where a property on a large block is purchased and the land is subdivided so that the vacant block can either be held and built upon or sold. Investors should be mindful of zoning and town planning restrictions
Type of property: older properties on large blocks,
Risk: medium
Suitable for: investors looking to manufacture equity


Construction/development

This entails building upon a vacant or currently occupied block. Typically, one property on a large block will be replaced with multiple units or townhouses. These will either be sold or held onto for growth/cashflow.
Type of property: vacant land, old property on large block
Risk: high
Suitable for: investors with high risk appetite looking to manufacture significant equity.

 

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