Same Old Rules

Capital Growth and Income

Property investment is a wealth creation strategy using Real Estate. An investment property is simply an investment class (like shares, art, gold, etc) that produces income and capital growth. Make your property investment decisions based on fundamental analysis. Don`t bring your emotions to the decision process.

So what are the fundamentals that determine the income and capital growth of an investment property?

Location

Rental income and capital growth are a function of demand. Demand is driven primarily by location. Better locations generate greater demand from tenants and owner occupiers alike;

– close to CBD

– close to water

– close to infrastructure

– close to designated growth areas

When assessing locations for investment use independent statistical research to help you make an unemotional decision. Look at past and future population growth and capital growth, infrastructure and amenities. As a general rule, avoid holding more than one property in any particular location or suburb. Also, consider properties outside your home State.

Dwelling Types

Within any given location, certain dwelling types generate greater demand than others. For example, a one bedroom apartment close to a CBD may be in high demand from singles or couples, whilst couples with children require more bedrooms and living space, preferably close to infrastructure.

Affordability

The best property in the best location is not for you if you can`t afford it. Understand your budget, both purchase price and holding costs. In particular, for negative cash flow properties make sure that you can afford the ongoing cash contributions necessary to cover the excess of expenses over the rent.

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