How to play the real estate long game
Real estate investment is a long game. In basic terms, the longer you hold on to your property, the more money you will make.
Too many people buy a property expecting a huge windfall overnight. The property market doesn’t work that way. The saying ‘good things take time’ is relevant to playing the real estate long game – the longer you’re in it, the more likely you’ll win it.
Having a clear strategy is key to successful real estate growth and wealth, and a huge part of that is holding on to your property for more than just a couple of years. But what are the biggest challenges to that, and how do we avoid or overcome them?
DO THE NUMBERS
Investigating and understanding aspects of real estate such as cashflow, rent, your outgoings, taxes, and other associated costs is vital if you want to be able to hold on to your real estate for long enough to create significant wealth.
The cost of a property is just the first outlay you’ll have to spend. If you buy an older property, chances are there will be higher maintenance costs. Do you have a buffer for an unexpected bill or an increase in council levies? Taking time to analyse your real estate and do the maths will ensure you’re prepared for every eventuality and can go the distance.
RENTAL RETURN IS KEY
If you can charge the right amount of rent for your property you can cover your debt, cover your expenses and even save to renovate the property down the track. All of this means you can hold your property for the time it needs to grow in value. It’s therefore very important to make sure your rents can continue to increase each year.
The major factors that influence rents are:
Tenants – Choosing tenants who earn good incomes and are able to sustain rises in rents is vital.
Location – Places that are popular to live in will rent well. That’s easy. But it’s important you analyse location for other factors. While your beachside property might have killer views, is it also in an area that’s prone to cyclones? Environmental factors like weather and bushfires can result in sky-high insurance premiums, but also aren’t as desirable to tenants, which can affect rent rates.
Liveability – COVID-19 has forced people to spend more time than ever close to home, meaning liveability is high on the desirability factor for renters. If the area offers tenants things like modern, well-maintained services, great outdoor spaces, and convenient, high-end social outlets, people will pay more to live there.
Be a good landlord – Keeping tabs on your property is key to keeping good tenants who won’t object to reasonable rent increases. Responding to maintenance needs quickly, giving good notice for inspection and ensuring the property and gardens have good curb side appeal (i.e. they look nice), will help make tenants feel valued, which means they’re less likely to object to an annual rent increase.
INVEST IN YOUR INVESTMENT
If the aim is to hold on to your property for many years, it’s obviously important to look after it. If you don’t live close by and need to employ a property manager, you need to do your research and ensure you find a company that cares about your investment success.
Think about the value of your property and how you’re entrusting all of that personal wealth to the care of someone else. Take the time to research companies, meet with them, ask about their track records and find out as much as you can about them, such as how many people are in their team, are they a slick operation who has other desirable properties on their books and do they have long relationships with owners?
HOLDING ON FOR THE BETTER
While it might feel daunting to enter into a relationship with your property for the next two decades, the longer you hold real estate, the better off you will be in your retirement.
There are many different strategies you can employ when it comes to developing a long-term property plan that will result in significant and long-term gains. Get across the basics at our free property investing seminar.
Here you’ll be equipped with the tools, resources and support to thrive, and not fall behind on your path to financial freedom – whatever that may look like for you.
Spaces are limited. Book here.
Sam Saggers
Co Founder Positive Real Estate
