I just want to drive home this message because strategy does not mean where should you buy a property, and it does not mean what type of property should you buy.
STRATEGY means..
Right now you’re possibly thinking….you don’t have much passive income or any at all for that matter. You might even have some negatively geared properties. And if you stopped working you may have to apply for financial support or to Centrelink to help keep the lights on.
How do you get from the circumstances you are in right now, to having a comfortable passive income in 10 years, 15, 20 years from now? Simply put, this means (drum roll please) you don’t have to work any longer to pay for your lifestyle.
People are selling this dream
Full disclosure though; it’s not easy. It doesn’t happen in five years’ time nor does it happen in 10 years’ time if you don’t have enough income right now. But the great thing about it is that you start early enough. IT IS POSSIBLE!
The “HOW” is the Strategy
To reiterate: STRATEGY means is what is the goal?
And HOW will I get from where I am to that goal?
Consider these important investment strategy questions:
- How many properties will you need?
- What is the value of them that you need to anticipate?
- What is the total portfolio value that you need in order to achieve that passive income target?
- How will you pay them down?
- Are you going to use your hard-earned money, or are you going to use the market to pay down your properties?
- Do you have a family?
- Do you have a career with an income such that you can’t really do a five townhouse development yourself, or develop a large-scale land subdivision?
- And then carefully consider this, as your point of departure as you set your strategy….
Are you going to be an active or passive property investor?
An active investor will develop property, do subdivision, do renovation, do refurbishment, etc. You get your hands dirty, as you are highly engaged in manufacturing equity through any one of these capital growth strategies.
As a more passive investor, you would allow the market to lead the way in creating capital growth or equity in your portfolio for you? And as a passive investor, you may want to consider how you will effectively predict short-term and long-term capital growth for your portfolio (since this is your main lever for growth).
And you may need to accept the fact that your passive income target is not going to be achieved as quickly as it could be achieved with a more active strategy.
There’s no right or wrong answer. There’s no binary decision here. Everyone’s different. We all have our sleep at night factor, our individual risk appetite, lifestyle choice, and level of engagement.
