Property Investor Profiles - What type of investor are you?
It turns out, not all property investors are the same. While buying property is one thing they all have in common, that’s where the similarities can end.
Every type of investor has a different approach to real estate. Some are hungry to enter the market without compromising their existing lifestyle, while others have their eye on a quick DIY flipping project.
But most fall into one of four categories. Which of these are you most like?
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 take advantage of capital growth, growing a deposit over time enabling you to buy a home where you'd prefer to live at a later date.
Capital growth is an important factor in rentvesting, so it's 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 term often used for less experienced and/or more conservative investors.
'Mum and Dad' property investors will typically have paid down or are paying off their family home loan and are ready to access equity in their family home to build future wealth or believe investing in property will help reduce tax.
Often their goal is to have 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 well versed with 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.
Know your numbers
No matter what approach you take to property investing, knowing your numbers is the first step to investing successfully.
That starts with understanding how much equity you have and how much you can borrow. Then comes the right structure.
With access to the latest property market insights and reports FinancePath can give you access to the information you need to get started.
Call us today on 1300 780 440 or email firstname.lastname@example.org to discuss your options further.
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