Short Term Property Investment
You can make money from buying property and holding it for the short term, but this will normally involve at least one of the following conditions:
- Buying the property at less than market value (eg. a distressed sale, foreclosure or deceased estate)
- Buying a property, renovating and then re-selling (commonly known as ‘flipping’)
- Buying in a rapidly rising market and selling at the peak of the market (usually involves some luck or extraordinary market insights)
Short term property investment is a strategy that can make lots of money in a short period of time, but usually requires a higher appetite for risk and a solid implementation plan. Even then, “short term” in the property market is usually a period of at least 6 to 12 months.
Long Term Property Investment
Holding property for the long term is a less risky way of growing your wealth, but it is also no guarantee that you will do well.
It is not unheard of for someone to buy an investment property and after 5 or more years it is still worth the same, or worse, dropped in value. To someone who has taken a blind stab at buying this property, they will most likely be very nervous and want to cut their losses and sell.
But for someone who has done their research and can read the indicators that show the market is due for an upturn, then they will be confident of holding longer in anticipation of that fantastic gain that will make it all worth while.
Long term property investing usually involves some of the following conditions:
Choosing an area where demand is expected to exceed supply (eg. more jobs are being created in the area and therefore more people want to live closeby)
- Holding and maintaining the property for at least 5 to 10 years
- Keeping the property rented with reliable tenants to help cover expenses
- Sometimes taking a net cash loss now, in return for potential capital gains in the future
- So the strategy that you use for your property investing should be chosen based on your own investing personality.
If you see yourself as a “passive” investor, that is someone who is willing to sit back and watch their wealth grow without too much effort, then long term investing is better for you.
However, if you are more an “active” investor and have the extra time to renovate, develop or analyse the market closely, then the short term strategy may be more suited to you.
Having said that, some people will use both strategies and some will use one or the other. The important thing is to decide which strategy you want to use upfront and try and follow it through for best results.