Property Investing: What I Wished Someone Taught Me Before I Started Investing

I have been investing in property since 1999. If there is one lesson I wish someone had taught me thoroughly before I started ... it is this ... know what type of investor you are, and be that type of investor only.

Based on over 10 years experience, I personally categorise property investors into two types: passive investors and active investors. Passive investors could also be called buy and hold investors.

Two main rules passive investors should follow are:

- buy property in an area with high potential for capital growth, and

- manage cash flow well so they can afford to hold a property portfolio over the long term, without the need to sell.

It is very achievable for a passive investor to buy a number of properties over a 10-year period. Assuming the properties continue to double in value on average every 10 years, and the properties are not sold, there will be an amazing amount of equity available to enable a very comfortable lifestyle.

Passive investors may need some professional advice to learn how to tap into the equity, but this is the path a passive property investor can be attracted to.

Active investors are less patient and would rather create equity in their property in the short-term rather than waiting for example for 10 years for the property values to double. Active investors are attracted by such strategies as:

- Renovations

- Sub-dividing blocks and building an additional property on the sub-divided block

- Developing units on well-zoned land

- Becoming a developer

- Turning a home into student accommodation

These kinds of strategy require expertise and time, however can be highly rewarding.

I would firstly decide on whether you want to be an active or passive investor. As we found, passive investors, with full-time jobs, no expertise, no contacts and limited time do not make for great property developers. Or active investors who buy a property to hold may get impatient waiting for the market to boom and sell it within 5 years, with no capital growth, or even a potential loss if they consider the costs of holding the property for five years.

Once you have identified what type of investor you want to be, then get educated on how to be successful.

From my experience, investing is relatively easy. What I love about property investing is that we have purchased property, hold them and watch the capital value increase. Our property investment strategy is to build a property portfolio and then hold it for the rest of our lives. You can never say never, so along the journey some properties may be sold, however they are sold with the intention of buying another property that better fits with our strategy. For example, we purchased a property a few years ago because at the time we saw the potential of a development project on the land. The land still has huge development potential, however we are passive investors. Two passive investors attempting a potentially 12-unit project, is not a good idea as a first development project. So the intent is to sell the property and buy another property that better fits with our passive investor, buy and hold strategy.

It is important to consider your Primary Aim and the type of investor you are, before you venture down a path that is wrong for you, as you can certainly get burned.

by: Suzie Crawford

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