Understanding which type of property investor you are is essential in developing the most appropriate investment strategy.
Blogger: Ben Kingsley, Property Investment Professionals of Australia (PIPA)
There are countless strategies discussed, debated and employed by investors in their attempts to build wealth through property investment.
In my role as chair of the Property Investment Professionals of Australia (PIPA), as well as in my own professional business capacity, I have met thousands of property investors. And one of the very first questions I ask these investors is ‘What type of property investor are you?’
Understanding the type of investor you are is really important in terms of identifying the property investment strategies you should consider. These need to be aligned with your risk profile, your capabilities, the available time you have and the financial and personal goals you are trying to achieve.
To help identify the type of investor you are, we have developed five investor ‘types’.
ACTIVE WORKER: You build wealth through property as your full-time pursuit. Development is high on your agenda, from unit development through to strata subdivisions. You will usually have trade skills such as building or carpentry and you make your living out of these projects.
ACTIVE WEEKENDER: You possess a qualification and network of tradies that give you the ability to add value to property. As the name suggests, this isn’t your full-time employment, so you focus on quick reno turnovers to realise untapped equity within a property. Your job costs are significantly less than those who don’t have such a good network of resources.
ACTIVE MANAGER: You want to be an ‘active weekender’, or even an ‘active worker’. Your motivations are usually that you don’t like your job, or you see people who appear to be making good money through property. Because you are such a driven person, you will do anything to get ahead financially. You learn on the job and are all about project management as you upskill. However, you often underestimate the time involved and the cost overruns.
PASSIVE INVESTOR: This type of investor is the first true type of investor, as the name suggests. As a passive investor, you do your numbers and research and invest hands off. You use skill in your asset selection and adoption of your investment strategy and as such, you reap the rewards for this skill without all the ‘active effort’.
We estimate the management of your property investment to be around 10 hours per year.
You may not get the immediate returns that attract ‘active’ types, but you don’t take on the increased risk that they often do.
PURE INVESTOR: You are time-poor and you want the whole investment outcome to be outsourced, or you 'impulse buy' without professional help. Usually, you are a higher net worth professional, but not always. Often you can be outspoken and demanding, as you expect to get immediate outcomes and results as you do in other areas of your life.
Sometimes you can be less willing to take good advice because as a successful and intelligent person, you ‘think’ you know a lot about everything. But your overconfidence, and sometimes impatience, can lead you to change strategy or tactics too often.