Properties have a special place in the hearts and minds of humans as an investment medium, and plenty investors have made a killing off the property market. In essence, money is made from property by exploiting market inefficiencies. There is hardly any money to be made in a perfectly efficient market, which is probably one of the reasons why the market is so horrendously inefficient. In this article, we're going to briefly explore 9 strategies which can make you money in property.
Before going into the respective strategies, it is important to understand that a strategy is "a plan of action or policy designed to achieve a major or overall aim." Note that these strategies are specific, which means that implementing them with some degree of success requires knowledge and mostly wit. Thoroughly exploring one or two niches and mastering them is infinitely better than tinkering with all of them. Of the strategies below, it is most important to pick the strateg(ies) that suit your circumstance and risk appetite.
So new, and shiny!
Strat#1. Buy from Developers
Properties from established developers have a tendency of showing capital gains of 20-30% from the time of SPA to handover of keys by developer, which usually takes up to three years. The strategy's success is contingent upon buying the right product from the right developer at the right price on the right location. There was a time when flipping was "the way" to go, but with the introduction of the RPGT in 2014, flippers have somewhat, slowed down.
Money makes money! That's how it works, right?!
Strat#2. Invest for Capital Appreciation
Slight variation from Strat#1 because you won't be buying from developers, but from the sub-sale market instead. Properties that have a tendency of showing high capital appreciation are usually landed properties, which are usually poor for rental yield (they are opposite ends of the spectrum). This is why Strat#2 almost always result in a negative cash flow. Strat#2 also comes with higher risk, which requires you to cover the negative cashflow monthly, and to pay particular care to your entry position.
A house can be a money-printing machine...
Strat#3. Invest for Rental Return
Many within the industry will tell you that buy-to-rent is a thing of the past, and you need to move on to greener pastures. Always figure things out for yourself, and do the math on the ROI. Your best bet if looking for positive rental return is to go for low-cost units (duh!). Look for steady pools of tenants such as areas near factories, public transport, and educational institutions.
When a good office view is worth great money...
Strat#4. Investing in Commercial Properties
Commercial properties are another breed of animal altogether, and play by different rules. You'll have to learn the wants and needs of the market, and develop the eye to look for it. Examples include landed shop-lots, retail outlets, offices, and industrial properties such as factories, warehouses and manufacturing plants. Although the stakes are high, seasoned investors have been able to achieve zero monthly cash flow (breaking even) with little to no downpayment.
Have an artistic flair for decoration?
This is one of the more creative ways of approaching real estate. Homestays have steadily and increasingly garnered the interest of foreigners, and it is somewhat a norm for Western tourists to look for such accomodations. Plenty of Homestays have cropped up throughout the country, with many home-owners trying to generate an income with a vacant property. Deciding on a niche of tenants and focusing on their needs would be a good way to get started with this strategy.
There you have it, 5 tried & tested real estate investment strategies. In our next article, we'll be exploring some of the more unusual investment strategies.