Property for the Short or Long Term

Have you ever heard the old adage, "Property is for the long term"??

Of course, this isn't true for everyone, as many folk have made good money using both strategies - short and long term. However, the process of analysing good property is quite different. Let's take a look!


Buying for the Short Term
When buying property for the short term, there a few key methods which are quite similar in approach:
- Renovations
- Development projects
- Quick trade
Where's the similarity? The calculations all involve common elements and can be structure much like a Profit and Loss equation:

Net Selling Price - Net Purchase Price
= Gross Profit on sale of property
Remove the acquisition, input and holding
costs
= Net Profit

(we'll keep it simple and leave out the tax effect for now, although this is also quite important)

What mistakes do most people make when buying for the short term?
- Pay too much for the property
- Overestimate the 'net' selling price
- Underestimate the input costs (renovations, development approvals, etc)
- Underestimate the holding costs (the cost of financing the property while you have it in your control)
- Underestimate the time taken (especially with council approvals - they vary, so check the expected timeframes before jumping into the deep end)

Buying for the Long Term
There are four main considerations for people buying for the long term
- Serviciabilty
- Capital growth
- Maintenance costs
- Potential risks and opportunities

Which are more important to you will depend on your portfolio. Get competent advice in this area to ensure your portfolio expands as quickly as possible.