3 real estate strategies to build the ultimate portfolio
Commercial, residential, apartments, houses, duplexes; the potential in real estate is endless. There’s different real estate strategies that investors can use for any of the above. Each approach has its pros, cons, and methods that will build your portfolio into something amazing.
Commercial property
There’s more differences between commercial and residential real estate than just the name. When placing a deposit on a commercial property, expect to put down up to 30% of the settlement price. You’ll also need a tenant that guarantees income no matter how competitive the market.
Lots of work goes into researching commercial real estate. Investors must look at demographics, market potential, spending habits of residents, and the like to make sure they get the best return. When the tenant signs the lease, the contract will last a long time compared to a residential one. Think between three and ten years.
Capital growth
You put a lot of work into finding a good piece of real estate, so it should work for you in return. Capital growth means you hold onto the home for a while, expecting it to make a nice profit when the time comes to sell. The resale price is affected thanks to area profile like access to schools, public transport and shopping.
Investors using this strategy must have patience if they want to see the benefits. Working a depreciation schedule into this will also help you net a larger profit. When the building depreciates, so does the cost base. Lower cost base (aka lower worth at resale) means less capital gains tax to pay.
Surrounding suburbs
It’s oh so tempting to buy in a capital city, but it costs more money and there’s often too much competition. The Australian apartment glut means investors are snapping up properties in bulk, almost suffocating each other in one suburb or just one building.
Popular growth areas aren’t just suburbs in the city. Regional, outlying real estate is great for negative gearing, with the eventual goal of a profit at resale. This is because investors see the potential in the homes and the general area and have the patience to wait for the right time to sell.
