opinion

The 4 keys to property success

By Jane Slack-Smith

Collaboration with family, friends and even strangers could become the preferred way to secure a piece of the Australian property market, in a series of new investment practices designed to shift traditional thinking into contemporary opportunities before market regulations change and further hamper investment opportunities.

The four pioneering investment strategies are:

  1. Collaborate either with family and friends, or via crowd funding. This increases borrowing power without individually having the full deposit.
  2. Renovate with ‘home-hopping’ – increase potential rental return on your current home with smart renovation, add value and use the equity for your next home. Creating a rental property from your home.
  3. Rentvest by living in an area you love, but investing in an affordable area with potential for growth, that may be a few hours away or even interstate.
  4. Grandfather current lending, tax and superannuation policies before significant changes.

Despite house prices continuing to grow considerably sharper than incomes, hampering efforts to save for a full deposit or to increase investment portfolios, the property market is still accessible to Australians sooner than they might imagine.

We’re a far cry from the days where we could purchase a home after just a few years of working. A sky-rocketing cost of living and the anticipation of an impending property market overhaul, has meant we need to think differently.

Recognising strategies employed in international markets helps us identify best practice methodologies to consider in our own backyard, and family pooling is one strategy setting precedence in China.

A remarkable 70 per cent of young millennials in China and 46 per cent in Mexico are home owners, which is a stark comparison to Australia’s 28 per cent.

China is leading the way with families pooling in resources to give their children a head start. The driving force behind it is the realisation that there will be 30 million more young men than women in the country by 2020, and families are doing what they can to help their sons compete for a partner!

While the reasoning itself is immaterial, the solution is clearly the world’s most successful approach to creating home ownership at a young age, generating significant opportunities to create wealth. I’m a huge fan of adopting this practice and taking a leaf out of their book, encouraging families to pool resources, or even bring the inheritance forward, to assist our struggling youth to get into their first property.

The concept of partnering to create wealth excites me! In addition to family members pooling their resources, this concept can extend to friends, even strangers, using the approach of combining smaller deposits and increasing borrowing power.

I propose that the first property doesn’t even have to be a first home, as traditionally encouraged. As a ‘rentvester’ myself for 10 years while building my own multi-million dollar portfolio, the longstanding practice of investing away from your home town has seen a significant swing and is becoming a popular investment strategy.

Investing away from where you live, or ‘geographic agnostic’ investing, is another area that more people are open to in 2017. You may love living and working in inner city Sydney or Melbourne with a vibrant work and café culture close by, but your money might be better invested elsewhere where it is more affordable and has good capital growth potential, such as the likes of Geelong in Victoria or Central Coast in NSW.

By understanding the overhaul of regulation changes coming soon to the property market, investors and first property buyers can protect themselves now through a host of low risk strategies such as locking in current capital gains tax, lending deposit requirements and SMSF borrowing policies so they can still build wealth through bricks and mortar.

Whichever strategy best suits your circumstances, it’s important to know there are viable, low risk options out there to help you achieve wealth in the property market.

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The 4 keys to property success
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