Establishing your strategy - how?

Assume you've decided to build wealth through property. How do you go from that to a pen on paper strategy that you will follow to get to your goals?

I understand a few of the various ways in which one can make money in real estate, having read books by the likes of Lomas, Yardney and McKnight. But how can one devise a strategy that is most appropriate for their own scenario?

I like Yardney's philosophy on property investing for example (chase capital gains, ignore yield, buy in capital cities, below market value, with scope to add value through reno's, in areas with limited supply). My gut however suggests that I will hit a finance wall before I can even get IP1 (bought a PPOR 6 months ago, broker says bugger all lending capacity left). On a sole income that is below 6 figures I don't think this strategy would take me very far.

So I guess my question is how do I tackle the process of formulating my own strategy. And which stakeholders would need to be involved in that process?
 
Speak to a broker would probably be the first step but if your gut tells you that you would hit the wall quickly buying properties with poor yields how would you cope with a heavily -ve geared portfolio in a capital city when rates rise above 7%?
 
The first step to developing a strategy is determining what is within your means. There's no point aiming to buy $1M+ properties if you can't afford them.

Call myself or one of the other brokers. Get to understand your borrowing capacity, this will lead to an investment strategy.

The other thing you need to do is understand what the end result might look like. You need to understand where you're going to determine your direction.
 
Well in terms of a strategy why not follow an approach closer to one Margaret Lomas might advocate? Higher yielding properties in metro/large regionals with diverse economies.
 
My gut however suggests that I will hit a finance wall before I can even get IP1 (bought a PPOR 6 months ago, broker says bugger all lending capacity left). On a sole income that is below 6 figures I don't think this strategy would take me very far.

So I guess my question is how do I tackle the process of formulating my own strategy. And which stakeholders would need to be involved in that process?

Work our your goal. Where are you aiming to be, and when?

Talk to one of the great brokers on SS. If they're worth their weight, they'll be able to discuss strategy and how to structure your lending and future acquisitions.

There are many ways to skin a cat.
 
Start at the end, whats your end goal? Then work back on how you're going to get there.

eg retire with 2 million in unencumbered property generating 5% a year in today's dollars.

Seems daunting at the start, but you can map all of this out - what property, costs, theoretical capital growth per year, rent rises per year etc so you can get to it. Make sure you agree on a time line too.

Remember your plan can change and update as you go a long.
 
When we started, our options were quite limited due to low equity and low incomes.
Tried slaving away but was going nowhere fast.
Creating a strategy for increasing income seemed to be the best thing to do at the time, and it worked.
It really opened up many more options on how we could invest, because at least you'll have something to invest in the first place.
I think this is an area which is often overlooked.
 
When we started, our options were quite limited due to low equity and low incomes.
Tried slaving away but was going nowhere fast.
Creating a strategy for increasing income seemed to be the best thing to do at the time, and it worked.
It really opened up many more options on how we could invest, because at least you'll have something to invest in the first place.
I think this is an area which is often overlooked.

Great advice Ace - increasing income over time is the key to fast acceleration. It really opens up so many opportunities (both from a finance and investing perspective).
 
I understand a few of the various ways in which one can make money in real estate, having read books by the likes of Lomas, Yardney and McKnight. But how can one devise a strategy that is most appropriate for their own scenario?

Your strategy will change and constantly evolve. Don't think of your strategy to be set in stone. Markets change which may cause you to change your strategy. Your expertise/knowledge will change (improve) which may cause you to change. Your income may improve/increase which again may cause you to change.

Determine if you are going to be active or passive. Determine (roughly) what your borrowing capacity is. Choose a strategy that fits your personality and have a go.
 
My gut however suggests that I will hit a finance wall before I can even get IP1 (bought a PPOR 6 months ago, broker says bugger all lending capacity left). On a sole income that is below 6 figures I don't think this strategy would take me very far.

Don't trust your gut rizzle, trust those that deal with serviceability calculators everyday. Sit down with your broker or Peter and map out whether you have options.

Once those options are on the table, you can start mapping out an investing strategy. It may mean starting of with cheaper properties that have really strong yields.

Also, there's plenty of ways to stretch out that serviceability wall - more often than not, my clients are pleasantly surprised how far they can go in terms of finance and stretching their serviceability wall based on todays calculators/interest rates.
 
Rizzle,
As others have said, knowing your end goals is probably the most important part of developing a strategy and your time frame.
There are a number of key points you need to understand, borrowing capacity is one, both now and in the future which will be affected by the rent yield and debt you take on. A second key point is the available cash/equity you have to invest and the third is what debt levels and commitments you already have.

It may be if your PPOR is holding you back, consider turning this into an IP or selling to free up equity and borrowing capacity, at least for a period of time. Your access to equity may also in part determine your options, do you have sufficient to fund manufactured growth as an example, or must it be a buy and hold strategy? Where do you invest for rent yield that will allow you to borrow again? What level of debt is too much for that IP that restricts you in the future?

You need to understand these issues so you can develop a strategy that suits your circumstances. As Ace suggested increasing income most often helps.
Good luck with it.
 
Thanks for the feedback all. I'll be planning a face-to-face with my broker soon to nut things out in a bit more detail/see what is possible.
 
My gut however suggests that I will hit a finance wall before I can even get IP1 (bought a PPOR 6 months ago, broker says bugger all lending capacity left). On a sole income that is below 6 figures I don't think this strategy would take me very far.

Quoting the same sentence as Redom - he beat me to it! Hahaha.

My suggestion is to read this thread - http://somersoft.com/forums/showthread.php?t=106722

Work with your current broker and then reach out to brokers on the forum. I would be surprised if you hit the serviceability wall after one IP.

In terms of the strategy. Start with your end goal and work backwards.

Place a number to this goal, and then you can work out what you need and the types of properties to get you closer to your goal.

Difficult to detail without specifics but hope this helps.

Cheers,
Michael
 
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