Ways of Defining Your Investment Strategy

By John H Kerr

Be prepared is the notorious Scout's motto, and it's never more true than when dealing with the huge financial investment that comes with property, failure to prepare can lead to foreclosure, bankruptcy or worse. You shouldn't let this deter you however, preparation and knowledge can significantly reduce risk. Adaptability is key in any plan, you need to recognize potential threats and opportunities and know that they won't unhinge your investment.

The best safety buffer in all honesty is to be conservative with your budget, if you're burning all your income on your mortgage and the day job goes under, you could be financially crippled. It's a balancing act of risk vs reward. Some of the more risky options could be investing in short-term high growth areas like mining towns for instance Port Hedland or the Hawsons Iron Ore Project 60km south west of Broken Hill which currently has quite good rental yield, a very low vacancy rate but low capital growth and a declining population.

A closer look reveals LendLease is going to spend $40million building a shopping plaza, Carpentaria Exploration made their announcement about Hawsons in mid-December and then there is also the new Silverton Wind Farm project and its $2.2billion worth of investment which is the kind of cash injection that could turn property prices around as highly paid miners flood the area, if a big company is willing to bet big money, it's usually a good sign.

It should be said that nothing is set in stone, any one of these companies could encounter trouble and cancel their project leaving you with a worthless property in a dead-end town. Damon Nagel, managing director of property investment advisory firm Ironfish, recommends that investors who adopt a long-term view and strive to build a balanced portfolio will achieve the most success. He stresses the importance of strategy

"From the outset, adopt a clearly defined strategy and aim to build a portfolio that will meet your objectives," he says. Property investment can be broken down into three distinct phases - growth, consolidation and income realisation - and your objectives will determine the strategy and the types of property in which you choose to invest.
Like any good strategy, the key is research and and I like to keep it simple when figuring out my budget so Your Mortgage home Loan Repayment Calculator is pretty great, but the beauty of the internet is that there are almost unlimited resources at your disposal covering the minutiae of property investment.

Friendly communities often form around topics like investing, trading stories and tips such as the Your Investment Property forum which is great for Australians who want a personal look at investing. Of course just because Superdude22 says you should invest in moon real estate doesn't mean you should take this information with a grain of salt but I've personally found some really great information from long time investors sharing their stories.

You should learn about positive vs negative cash-flow, the pro's and con's of each and why certain people advocate one or the other, both are very valid approaches depending on your situation. If you're considering something different like a property syndicate to spread the risk and financial burden the above forum can be a great place to read about other people's experiences.

Tim Riley from the Property Collective wrote, "I've been in three property syndicates since 2006 and am involved with two at the moment. Money issues are a constant presence in any business and a syndicate is no difference. In the syndicates I've been involved in, particularly my first one, had their fair share of money stresses. However, in that instance we managed to work through the issues and arrive at a solution that worked.There you have a few easy methods to start feeling out ideas for property investing. Don't be afraid to go outside your field of interest, it's possible that you may go in looking at residential investment and come out thinking about commercial property. Learn from the successes and failures of others.

It should be said though, learning by doing is the fastest way to become an expert, you'll probably never understand the in's and out's of property investing completely until after you navigate the minefield of your first investment.

ezinearticles.com