The primary strategies for investing in the real estate market are bargain purchase, double-digit capitalisation rate and increased value. All of these strategies work in their own way and will help you to effectively create the steady flow of income that will give you the wealth you desire.
Bargain Purchase
A bargain purchase is when you purchase a property for a minimum of twenty percent less than the current market value. Right now is the perfect time to find a bargain purchase. With more and more homeowners being motivated to sell due to foreclosure, unemployment or a number of other situations, it is easier than ever to find a great deal.
Increase Value
You may decide that the increase value strategy is the way you want to go with your investment. This is the term that is used for purchasing a property at current market value with the realization of untapped potential. You make any necessary changes and repairs to the property immediately to increase the property’s value. In order to be successful, you need to increase the value of the property by no less than twenty percent within six months from the time you make the purchase.
Double-digit Capitalization Rate
Double-digit capitalization rate is the term used to describe buying a property on the terms that the capitalisation rate is at least ten percent. To calculate the capitalization rate, you need to figure your income minus your expenses for operating and maintaining the property divided by the amount that you pay for the property. This is the rate of return that you would see if the property were in your possession free and clear. Double-digit capitalisation is rare, occurring most often in small market niches or depressed markets.
No matter what type of investment strategy that you decide to put into motion, you need to start with the most important investment: yourself. Take classes and attend webinars as often as possible. It is important to always be learning in order to stay on top of the market and be successful.
Property Options Australia
Property Options Blog © 2006 – 2009
Hi Sean,
Thanks for breaking down the three most popular investment strategies. Now I just have to choose which one suits me the best. Firstly though, I have to do a lot more learning to do.
Obviously bargain purchase and increase value are the ones I’m most naturally interested in. But, after reading your blog, I can see a lot more possibilities.
Some good advice here on investment strategies. I have heard it mentioned that if you buy a property at 80% undervalue, tidy it up, get it revalued by several valuers…take the new higher value and pull out the equity in a offset mortgage that you can effectively create tax free income. I havn’t done this..I have only heard it mentioned.