Becoming wealthy enough for early retirement is a popular dream among everyday Australians. But it can often be a pipe dream, a wistful “wouldn’t it be nice” sort of thought.
It used to be that you could work hard, pay off the house and retire at fifty-five or sixty.
But with stagnant wage growth, the rising cost of living and a highly competitive job market this is a dream that can be out of reach of many.
But what if we were to tell you that it is possible to generate wealth and live comfortably?
Here at Little Fish, we love to help. That’s why we’ve put together this helpful article. It’s three proven strategies for Australian residential property development investors.
We’ll share some of the common ways regular Aussies are investing.
Make sure you keep reading to the end of the article as we’re going to share what we think is the lowest risk and highest return investment you can undertake!
Ready? Let’s get cracking.
1. The Capital Growth Angle
The idea behind this strategy is to acquire property that is then let out on the rental market.
Most people start this way by leveraging equity in their main place of residence. And then get another mortgage to buy an investment property.
The rental yield then pays for the mortgage with hopefully a bit leftover. Once they are able to use the equity in the second home. They buy a third, and so on.
The aim of this is to sit and wait for the properties to increase in value (capital growth) and then sell them for a profit.
Yet, you still need to pay the mortgages, pay the rates, pay for any repairs required to keep the homes liveable for your tenants and pay for any renovations or improvements along the way.
Some people can chip away at this approach for ten or twenty years before finally building up enough profit and passive income to live comfortably.
And, all this time they’re at the mercy of the market and its fluctuations and variations.
And also, any time a property is vacant you are without that income, not to mention bad tenants that can be a real nightmare, even with landlord insurance.
So while this may be a common strategy, we think that there are better ways to invest in property in Australia.
2. Investing in a Joint Venture
A joint venture in the Australian residential property development game is when two or more investors pool their money into a large-scale development. It’s an option often turned to when investors experience issues borrowing from a traditional lender for their development.
Like an apartment block or a mixed-use development (i.e some retail and some residential).
These have the potential for a massive return on investment but can be much riskier. Definitely riskier than the capital growth approach.
Joint ventures are a great alternative for residential property development finance.
Heaps of problems can appear during the construction and development process.
Have you ever seen those empty lots that sit around for years with a fence around them advertising a shiny new development?
They are prime examples of when a large venture goes wrong, the project gets stuck in planning, it ends up at VCAT and/or the money runs out.
There are higher stakes in a joint venture. And a lot of properties to sell once construction is complete.
There are a lot of moving parts and variables that can hold up the project and significantly impact the bottom line.
For example, something as simple as union action on the site can blow the project’s completion date out by weeks and even months.
As can disputes between contractors and the project team.
Small issues can have huge impacts on larger scale developments, it’s a high stakes game. If all the pieces fit together you can see a nice ROI for sure.
But we recommend a different approach, an approach that offers far less risk but still has the potential for significant returns on your investment.
Are you keen to know what that is? Awesome, here we go.
3. Small to Medium Residential Property Developments
This is the type of residential property development for Australian investors that boutique property developers Little Fish specialise in!
We believe that instead of sitting around and waiting for capital growth that our clients should roll their sleeves up, get busy and work towards creating it.
There are a few ways to go about this. If, chances are, that you currently own a house on a large lot that’s suitable for a side by side dual occupancy design. Then you can get cracking right away.
The great part about this strategy is that you usually only have to worry about selling two, three or sometimes four properties and you’re selling them off the plan meaning you access your funds upon practical completion.
Other benefits include a faster town planning turnaround time. Faster project development time. And also much less risk than in the aforementioned strategy.
We think this is the lowest risk, highest returning residential property development strategy for everyday Aussie investors.
The beauty of a service such as our development consultancy service here at Little Fish low is this low-risk residential property developing isn’t just reserved for the rich and wealthy as its previously been.
Now there’s an opportunity for regular landowners like you to begin building wealth by developing small-scale residential properties.
Which One is Right for You?
This will depend on personal preference, your risk-taking profile and how fast you want to see your returns.
If you don’t want to take many risks, are willing to play the long game and can be very patient about seeing your returns.
Then the capital growth angle is probably the best for you.
Although be aware that it can take years for a decent ROI to appear. And you’re always at the mercy of both the rental and property markets.
A few bad months and there is every chance you can end up in the red.
The joint venture approach is the riskiest, but it can result in some solid returns if everything aligns at the right time.
But, at Little Fish, we seriously recommend the third option, especially if you’re into low-risk, high-returning investment opportunities in the Australian residential property development space.
For more quality information check out these hand-selected property development books.
Want to Begin?
If you’re keen on residential property development in Melbourne and the third strategy sounds like it’s up your alley.
Then we’d love to hear from you! Give us a call on 1300 799 277 for a free no-obligation initial consultation.