| In a previous article, I wrote about the | | | | creating equity in the property in the short-term |
| importance of knowing what type of investor you | | | | through renovating, and then selling it for a profit. |
| are, and being that type of investor only. | | | | She was asking the questions at the end of the |
| I believe there are two types of investors. | | | | project. Her intent was to buy the unit, renovate |
| - passive or buy and hold investors who create | | | | it and sell it for a profit. Before she bought the |
| their wealth by building a property portfolio over | | | | property, she should have completed extensive |
| the long-term, and | | | | research, to determine if she would make a profit |
| - active investors who would rather create equity | | | | when she would eventually sell the property. |
| or growth in their property in the short-term | | | | Below is just a sample of the many questions |
| using such strategies as buy, renovate and sell. | | | | that should be asked before a purchase is made.o |
| Here's a story to help explain why it is so | | | | How much are comparable properties selling for in |
| important to work out what type of investor you | | | | the market?o How long are comparable |
| are, before you actually begin investing. | | | | properties taking to sell?o Have renovators |
| I was running an information session for a | | | | already entered the market? If yes, what sort of |
| Property Investment Program I facilitated a few | | | | renovations are they completing?o What is the |
| years ago. A lady asked a question about an | | | | right type of renovation in that market?o What is |
| investment property she had recently purchased | | | | the budget for the renovation?o What return will |
| and renovated. The property was now on the | | | | the renovation generate?o How does this return |
| market for sale. She was undecided on whether | | | | compare with other investment strategies? |
| to sell it or not, and wanted my opinion. | | | | When the research has been completed and the |
| I was unable to answer the question directly, as | | | | questions answered, you can then assess a |
| there were too many variables that needed to be | | | | property and know if it is an ideal property to suit |
| taken into consideration. I answered her question | | | | your investment strategy and give you the return |
| by asking her a series of questions. Only she | | | | you are seeking. It is about getting the right |
| knew whether she should sell or not, depending | | | | property, in the right location, for the right price, |
| on what her investment strategy was with the | | | | for the right type of investment strategy. A |
| property. | | | | property that may be ideal for a long-term buy |
| However her question had a huge impact on me. | | | | and hold strategy, may not be ideal for a |
| By asking the question, it told me that she had | | | | short-term buy, renovate and sell strategy. |
| not taken a planned approach on her | | | | Another option could be for her to renovate the |
| property-investing journey. | | | | property and keep it. This strategy is a |
| This is where many people fall over. People jump | | | | combination between a passive and active |
| into investing without having any sort of plan... and | | | | investor. However, this strategy depends on her |
| just hope they will make money. | | | | financial situation. Does she have the cash-flow to |
| A passive, or buy and hold investor does not buy | | | | hold the property and build wealth in the property |
| a property with the intention of selling it. A | | | | over the long term, or does she need to sell it for |
| passive investor would have completed extensive | | | | a profit in the short-term? Is it the right property |
| research before making the purchase. They would | | | | in the right location for that specific investment |
| have only purchased property in an area with | | | | strategy? |
| potential for high capital growth over the | | | | Let your Primary Aim tell you what sort of |
| long-term. She is not a passive investor. | | | | investor you need to be. Your property |
| Her actions of buying, renovating and selling | | | | investment strategy plus your strategy for your |
| shows she is an active investor, or an investor | | | | life need to be well aligned. |