3 Ways to Achieve Financial Freedom through Property Investment

financial freedom

 

When you choose a career as a financial investor, it is important to understand the several strategies you can use to make money. There are several strategies to choose from, which makes choosing the right one overwhelming. Some of the means can help you get your financial freedom while others can lead to great losses.

The method you choose depends on the type of expert you seek advice from. An accountant will advise you to buy old properties and renovate it to the standards, a financial planner will tell you to look for new property and minimize its depreciation while a developer may suggest off the plan properties.

The most important thing is to choose your strategy wisely, by looking at possible methods there are and weighing the pros and cons of each method. To make things easy for you, we are going to look at 3 property strategies that can help you achieve financial freedom. These include;

  • -Renovation
  • -Capital growth strategy
  • -Cash flow strategy

 

Renovation

This strategy involves looking for worn-out property and sprucing it up to meet eye-catching standards that will help it add value and increase rent. While using this strategy, you need to make sure you choose the worst looking property but at the same time which will cost you less to spiff up. In this case, you may need to compare between the costs of renovation versus the possible value the property is going to fetch.

 

Benefits of Renovation Strategy

  • It can add value quickly that even on a flat market- by renovation, you are not forcing growth by relying on organic growth of the market but rather using what the market already has. For this reason, renovation can easily help you accumulate profit even when the market in a stagnant position.
  • An easy way to make a profit- unlike developing a new property, renovation doesn’t take much time or require too much resource. You should view the opportunity to renovate as a chance to make it right and turn the property into a perfect masterpiece. Within a very short time, you will manage to get profits.

 

Disadvantages of Renovation

  • It can cost more than initially planned for- if you fail to do a thorough analysis of all issues, you may end using more and spending more time than you had initially planned for.
  • Lacks guarantee that you will make more than you spend- while you can palliate the risk of realizing losses by smart buying, there is no guaranteed that a renovated property will give you more than you spend on renovation.                                                             

You can use this method to grow your finances if you want to quickly expand your portfolio or if you are experienced in the field and want to add value to your home.

 

Capital Growth Strategy

This strategy involves buying property with the hope that with time it will add value. In this case, you focus on realizing maximum capital growth. While using this method, you need to spend a considerable amount of time on research to ensure you purchase property in an area that is experiencing a high growth rate. After purchase, there is no more effort required and you can only hope your property sell when the market is still lucrative.

 

Benefits of Using Capital Growth

  • It gives you long-term growth benefit- after acquiring property in the right area, you can expect to receive long-term growth value which is the key to financial freedom.
  • It’s a passive form of investment- the only hard part about this form of investment is researching on the right place to buy property. After that, you can sit and relax waiting for your investment to increase value.

 

Cons of Capital Growth Investment

  • Timing the market when it is at its peak can be a bit hard since you want to buy when it is at its lowest and sell when it is flourishing.
  • The method poses a lot of financial constraints as you may be required to cater for mortgage and maintenance requirements.

 

Cash Flow Strategy

The main focus of this strategy is cash flow and although you may consider renovation and capital growth, they are less likely to affect this strategy. In this method, the rental income is more than the mortgage, maintenance, and other extra costs. If you are a beginner in property investment and making little income, you can use this method to make money.

 

Benefits of Cash Flow Strategy

  • You get higher borrowing capacity- since the rental income is higher than maintenance costs, you are more likely to get higher loans to help you invest.
  • It provides you with extra cash flow that can help you cater for other expenses such as on negatively geared property.
  • Offers financial solution during a personal economic crisis- in case you lose your job, cash flow property is self-supporting and will ensure you have enough cash in meantime you get another job.

 

Disadvantages of Cash Flow Strategy

  • The capital growth of such properties is slow since they are located in lower socio-economic areas where demand for rental property is high for renters than for buyers.
  • Minimal tax benefit- the fact that the property earns equal or more income than the expenses, it accumulates low or no tax benefit.
  • Equity build-up is lower meaning you cannot depend on this strategy to carry out further investments.