Property as investment vehicle - Part 1

Property is an investment vehicle for wealth creation and financial freedom. Through the implementation and application of the right investment strategy, we are able to generate sufficient passive income from our property portfolio to support our retirement lifestyle.

All property investors need to decide if their property purchase will be centred around capital growth or rental yield. The most significant question is what establishes the best investment strategy. The answer surely depends on each individual unique circumstances and financial position.

We put forward the following case study which is based on a first time investor under the age of 35, currently working professionally and earning above average income. In a nutshell, the ideal investment strategy considered to be the most appropriate is:

1. Target the first investment property with good potential of high capital growth.
2. Funding for the next purchase is subsidised by accessing the equity gained from the first investment property.
3. Target the second investment property which offers strong rental yield.
4. Rental returns from the second investment property provide great aid in paying off mortgages for both investment properties.
5. Appreciate the benefits of positive cash flow achieved through a passive income stream from both investment properties when retired.
6. Ascertain the diversification of property portfolio by investing in two dissimilar properties.

Now we can acquire abundance of information from property books or magazines that teaches us the way to accumulate multiple properties within a short timeframe, such as, acquiring five properties in five years time. However figures from property market research indicates that 91% of all property investors in Australia own at most two investment properties. This suggests quality matters more than quantity and success in property investment cannot be measured solely by the number of investment property amassed. It is therefore critical that we prepare and implement an investment strategy which is sound, accurate and above all suit our investment objectives.

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