As a property investor you can be prone to market and investment risks. However, the prosperity of your portfolio is dependent on the types of strategies you use in combination.
There are strategies, assets and advisors that can mitigate the risk you will encumber but will also lead you on a path toward minimal return. With your property portfolio you are seeking a long-term and profitable position to continue building your wealth as the investments increase.
What is a Buy-and-hold Strategy?
Buy-and-hold is a passive investment strategy in which an investor buys property and holds them for a long period, regardless of fluctuations in the market.
Often referred to as a passive investment an investor who uses a buy-and-hold strategy actively selects investments but has no concern for short-term price movements but rather, seeks a healthy long-term position.
Heuristic behaviour is common amongst the uneducated investors. When the less-educated investor notices a drop in the market they can act on emotion rather than on their position or strategy. This can affect the overall profitability of their asset because empirical evidence shows that selling before maturity can reduce the value of property.
Benefits of the Long-term
Historical trends and data indicate that investing in property with a long-term position renders a far greater return than taking a short position. Residential investment property over the past 10 years showed gross returns of 8.8% p/a, where in comparison Australian actively managed groups (investors trading in the short-term) were outperformed up to 70% of the time by passive investments.
If we consider even further long-term of 20-years, property exhibits a gross return of roughly 11%, which is close to 2% higher than the high-performing ASX200 index.
An example of how successful the buy-and-hold strategy is when building a property investment portfolio is evident in the Brisbane, Sydney and Melbourne market.
In 1980 Brisbane property prices were $35,475 and with 20 years appreciation to 2000 the value of property grew to $170,000. This is a 20-year capital return of 379.21% and an annualized return on investment of 8.15%, all the while facing interest rate highs of 17% in 1990 and 11.3% in 1996.
This is a clear example in Brisbane of the 20-year appreciation of property value while facing market risk. However, since the investor would have taken a long-term position (buy-and-hold strategy) the interest rate risk did not have a major effect on their return. This is where understanding the benefits and being behaviourally confident can have a significant payoff, and how interest rate risks can be managed.
Multiple Properties and the Benefits
A property portfolio is a collection of property investments that you, the investor, acquire through different financial methods. As you acquire each subsequent investment over-time your marginal return increases due to the appreciation of the assets, the equity available, growing rental yields, diversification of risk and faster growth in portfolio per property gained.
When property portfolios grow you are able to harness the power of compounding, which is the reinvestment of the money you make from your investments. Couple this with the money you make as an individual and you will be able to expedite the complete payment of each investment property once you’ve acquired your portfolio.
As an investor you are investing for one of many reasons: you are looking for comfort in retiring, build wealth faster for a holiday, provide a better lifestyle for your kids or have current and future financial freedom. The reason most people decide to invest in property is because they are able to tailor their investment strategies, which can be designed with the help of an expert.
What Do You Have To Do?
Investing now in a pre-boom property market is only reducing the risk on your return, and the best thing is when you work with an experienced investor you do not go through it alone. Investing with an experience team will simplify the entire process and keep you assured, as well as updated, on your investment’s situation.
We specialise in helping people to successfully continue to build their property portfolio safely and securely. If you would like to have a chat about your options please contact me directly on email@example.com or on 0423 465 038.
It’s Easy When You Know How
To really uncover all of our property investment secrets download our free e-book HERE.
If you’d like to read more about what Wealthology has to offer and more on the prospectus of investing now, check out the links below.
- “How to Spot Investment Opportunities in Real Estate”
- “Why Investing in Property Works”
Founder and property expert at Wealthology Australia Leonie fast-tracks her clients financial freedom safely and securely, by getting the best results from their property investment decisions. Having purchased her first investment property aged 18 she quickly became aware how closely creating wealth and having the right mindset are entwined and she now delivers strategic, powerful coaching all over the world, having helped thousands of individuals to create life-changing positive influences. Known for her genuine approach to life she works alongside our clients as like us, she is committed to helping those who would like lasting results, while having some fun along the way.