Being a real estate investor in Sydney can be complex as your success can easily be affected by the changes in the economy, new trends and fluctuations in the property market. The type of investor you are will play a major role in how you will navigate Sydney’s real estate market. Of course, if you are seeking further guidance, do not be afraid to turn to professionals such as financial advisors and Sydney property valuers.
What Kind of Real Estate Investor are You?
Before you jump into the wide world of Sydney property investment you must first explore the many types of real estate investors. This can help you find the approach to real estate investments that best suits you.
Speculator
A speculator is a property investor who is more interested in short-term gains. A house flipper will fall into this category as they aim to buy, repair, renovate and sell a property as quickly as possible to secure their estimated profit.
It is a risky business to be in as unforeseen complications may arise, delaying the sale. Worst case scenario, the delays could be enough to mean the investor sells in a less-than-ideal market, losing out on a hard-earned profit.
If all goes well, however, this can be a lucrative and highly profitable way to invest property, especially if you prefer a more fast-paced venture.
A-REIT Investor
For the investor who prefers a more distant approach, you may want to consider investing in an Australian Real Estate Investment Trust. Otherwise known as an A-REIT, this is a traded company whose very business is investing in real estate. Such companies can invest in a variety of properties, or they may specialise in a specific type such as commercial, residential, or special-use properties.
With an A-REIT, you are not the owner of any property yourself. You do not need to go through the process of finding a property and securing the finances for each purchase. Instead, you are an investor in the company. They manage their portfolio of properties and go through the tiresome process of adding to it themselves.
Long-Term Investors
This is perhaps one of the commonly known versions of a property investor. A long-term investor would use the Buy and Hold investment strategy. Property would be bought, and then a profit is made via rental income, selling the property once it has appreciated in value or by taking advantage of any applicable tax deductions.
Landlords fall under this category as they earn their income by collecting rent from their investment property. There are two main types of long-term investors:
- Active: This is typically the landlord that would manage such things as maintenance and repairs, themselves. They may not necessarily be a DIY landlord, but they are still involved in the property’s general management.
- Passive: The passive long-term investor is not as far removed as the A-REIT investor, but they do leave the general day-to-day responsibilities of owning real estate to property managers. They will receive updates on the property’s condition, but they will not have any direct contact with the tenant.
Owner-Occupant
Perhaps the most traditional, or the very least, involved type of investor. The owner-occupant not only invests in the property but also resides within it. Tenants may be renting out a room, granny flat, or in the case of multi-tenancy sites, one of your units.
Often, an advantage of a landlord's investment property also being their primary place of residence is the potential tax savings when selling the property. However, some disadvantages such as a loss of privacy or tenants having direct access to yourself at any time will mean that being this type of investor isn’t for everyone.
Coming to a Decision
Remember, you do not have to decide right away what kind of real estate investor you want to be. There is so much to consider when coming to a decision such as your financial situation, lifestyle, the current market conditions, and local property values. To help with making well-informed decisions that best work for you, consult with realty brokers, financial advisory and property valuation services to get the full picture as well as extra guidance.