During our working lives, there come a time when we begin to look at alternative options which can give us more choices in our lives – and investing in property is one of those options.
The old formula that many, many of us would have heard growing up was to attend school, get good grades, go to university, get a good job, buy a home for your family, and retire comfortably.
It is a system that has its merits and certainly has provided a lot of people with stability over the years, as well as something that they may be able to pass on to the next generation.
As we go through our working lives, there comes a point in time when we realise that we are doing this for a very specific reason and we ask themselves, “what are we actually doing this for? ”
There are many times at this point in our lives when we start to explore other options to give us more choices in life – one of those is investing in real estate.
The topic of property investing seems to be the most talked about topic at every family event or BBQ, probably because of the fact that we all have some sort of connection to it whether we own the property or are paying off a mortgage.
Investing in property: what’s right and wrong?
It’s both yes and no!
However, the strategy you choose for your investment journey will be determined by your individual situation and the timeframe that you have.
Although there are many different strategies that will help you achieve your goals, you should consider the following key principles when implementing any strategy you decide on:
- Loan to Value Reduction
In this phase of your development, the focus should be on accumulating as many growth assets as you can that you will be able to support financially during this period.
In order to get the most out of your investing journey, you have to build a solid “base”, build your foundations, in order to provide growth over the long run.
When you reach the end of this phase, you might find it quite difficult to borrow money from a bank due to the fact that your debt begins to rise.
When consolidating assets, the focus should be on cutting down on the amount of assets with higher growth potential and building a cash flow machine from here on out.
It means that if during the accumulation phase, there were a lot of negative properties that had adverse cash flow effects, now is the time to find the properties that have positive cash flow effects.
Loan to Value Reduction
It is at this stage in the process where all of your hard work starts to pay off, where you are able to reduce some of your debt and start generating cash flow as a source of income.
You can do this in several ways, and one way is by selling your properties and reducing your debt, or you can use the equity that you have built in your portfolio to live off of. This, however, has its risks if your portfolio isn’t growing faster than you need to live your lifestyle, so this has its risks as well.
The investment journey of each individual will be unique at the end of the day and will depend on a number of factors as follows;
Points to start from
Your ability to learn and gain knowledge
Determining and understanding your risk profile
Realising your earnings
There is always a way to get started and build your portfolio in order to provide a better life. No matter where you begin and where you want to go, there is always a way to get started and build your portfolio.