An Investment Strategy
When investing in property it is always good to have a strategy of what you want
to achieve. Property will generally always make you money provided you are in it
for the long term. The property market is broadly not a short term game, unless
you have other strategies in mind.
If you look back historically you will see that property has generally doubled in
value every 10 years with a period of about 2-3 years of rapid growth.
Interest rates and cash flows are the main concerns of the property investor. You
must manage your cash flow to ensure you can hold on to the property for a long
period of time. Generally after 10 years your loan is very small in comparison and
the rents would be more than covering the costs of mortgage repayments.
Interest rates are what catch many investors off guard. If you calculate what you
can hold on to based on the current interest rates you may want to change that.
Interest rates can increase 2% or more over a period of year adding substantial
repayments to both your own mortgage and that of your investment properties.
This is where positive cash flow properties come into the picture. It is best to
have some positive cash flow properties for stabilising your cash flow and a negatively
geared property that will achieve the large capital gain.
Negative cash flow properties are designed to be high capital growth assets, otherwise
what’s the point in having it? But to get these properties we need cash flow to
support it. If you have other means of high cash flow such as a business or very
high income you could also use these to purchase negatively geared property.