What would you do with a $1 million property investment budget? (Q&A)
All property investors work with different budgets and no matter how big or small they are, you have to consider which strategy is best for you.
Today’s conundrum involves property investors with a $1 million budget, weighing up their options to determine the best return on investment.
So the question is… would an investor with a $1 million budget be better buying one property, or splitting the budget and buying two or more investments?
Property Wizards director Trevor Dunkley says:
“For our market, I would pick two properties every time. The key factors being cash flow and diversification. Although maintenance costs are doubled, two $500k properties should offer a significantly higher rental return than one million-dollar property, while still affording you a solid investment for most strategies, such as add-value or buy and hold.
In this scenario you’re also less vulnerable to risk. When you lose a tenant, which happens to all landlords at some point, only half the rental income is impacted. Alternatively, if the unforeseeable happens and one location experiences a setback, this could be balanced out by the strong performance of your second property.
Of course, it’s essential to spend the $500k budget wisely by investing in areas with solid growth drivers and an individual property that fits your portfolio.”
The other alternative for an experienced investor of course is to stick with the one property, but in a better suburb, and with add-value opportunities. Adding value to a high-end property has great potential because the price ceiling is higher. A top-end renovation or development can reward you extremely well, but it comes with greater risk. Aside from the investment and development risk, you also need to be ready to handle more negative cash flow while you hold the property.
What would you do?
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Whether you’re a first-time investor or re-entering the market, it will help you navigate the sometimes complex world of property investment and associated issues you need to consider.
We think you’ll find it invaluable.