For the last few day’s we have been focusing on different property strategies. Firstly looking at short-term strategies as a way of making money in the short-term and then long-term strategies, which creates long-term wealth, and ultimately financial freedom.
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Other than the obvious of the duration of time, there are other fundamental differences between short-term and long-term property investing.
A definition of investing from Investopedia
Investing is a way to set aside money while you are busy with life and have that money work for you so that you can fully reap the rewards of your labor in the future. Investing is a means to a happier ending.Legendary investor Warren Buffett defines investing as “… the process of laying out money now to receive more money in the future.”The goal of investing is to put your money to work in one or more types of investment vehicles in the hopes of growing your money over time.
Taking the above definition into consideration, we feel that short-term strategies can not be defined as Investing. It certainly doesn’t result in passive income. We would more term this strategy as active income.
Having said that, there are many advantages that we can take into consideration for short-term strategies. Some of which are:
- Viewing all properties that come through your marketing
- Provide a quick exit strategy to provide a capital injection
- Making below market-value offers on properties
- Establishing up front if the property would be suitable for long-term strategies
- Deciding if renovations would make the property suitable for long-term investing
- If you aren’t able to sell as needed, you can rent the property (to cover monthly expenses) and try to sell again in the future
Taking all of the advantages of short-term property strategies into consideration, we can formulate a plan for the ideal investment strategy.
Let’s suppose you are marketing for property deals, talking to agents, looking for deals every day. You come across deals that make good financial sense and you make an offer based on the numbers that will work.
Remember: the primary objective is long-term cashflow positive properties. We are building a property portfolio.
When we are making an offer on a property, we are in a great position to decide if the deal meets our primary object. If we do our calculation and renting the property out does not provide a good Return on Investment, nor does it result in positive cash flow or the area would not yield a good prospect of future capital growth, we could look at a secondary objective.
Possibly, we can purchase the property at the right price and right conditions, are we able to renovate and sell the property and make our desired return on the short-term?
If neither option will work, then probably this deal is not the right one for you.
Finding the right property is a very time-consuming process that requires a dedicated amount of time, each day, each week, each month. Most investors would not have sufficient time to put towards this process as, generally speaking, most would be employed by some means.
Thus, the majority of investors will focus on long-term strategies. They would receive an income which they would use to purchase property and that would cater to their long-term goals.
On rare occasions, a person, or team of people, would dedicate their full-time efforts to property. This is primarily where short-term strategies come in to play. They would be using short-term flips as a means to provide an income.
The short-term strategy must be combined with a longer-term view to ensuring wealth is created over the long-term.
This is the question on everyone’s mind: Is it a deal?
Unfortunately, this does not have a simple answer. Why? It goes back to what has been said on numerous posts, what is your end game? What are your goals? What is your freedom number?
Property investing is very personal and the deal will only be a deal if it suits your criteria. Invariably, what doesn’t work for one person, may very well be a dream investment for another person. Everyone has a different vision of what a deal looks like.
Again, we would impress on you to look at your goals. Design how you would like to live your life and visualise how you would like to live every day. Once you have this in mind, set yourself specific goal and targets. Further, break these goals down into shorter-term milestones. Often a large goal can be daunting, but once broken down, you’ll see that by taking steps every day, you CAN reach your goals.
We would love to hear from you. Be sure to drop us a note in the forum and let the community know more about your investment strategies.