January 27, 2015
12 Imperatives of residential property investment **
Graham Joyce - Joyce Property Investments
Before purchasing any residential investment property, it is vital that you undertake extensive research and back this up with qualified independent advice from your ‘A-team’. Be clear about why and what you are purchasing. Remember, if you regret your purchase, you cannot take it back and get a refund.
The 12 Imperatives
- Set your goals – write them down and review them regularly: do you have a ‘vision’ of
your future? Without a vision you have nothing to work towards or focus on for the future. By writing them down you are more likely to review them and proactively work on achieving your goals.
- Location – understand the demographics and profile: who lives in the area and what is
their income; what are the employment opportunities; where is the transport, school,
shopping; is there family security; what is the percentage of rental stock in the area etc?
- Land content – land is what increases in value; buildings depreciate so have strong land
content as you build your portfolio. Think about the worst house in the best street. It’s the land that has the value not the building. At some stage all buildings are knocked over. The building is what will generate the cash flow via rental but equity is what will be gained with capital (land) appreciation.
- New not old, buy quality – tenants will pay higher rents; there’ll be no surprises with
repairs/maintenance; and there are greater taxation benefits and lower ingoing costs.
- Capital benchmark – know the value of the highest priced properties in the location
you’re investing and invest at about 60% of the capital benchmark in the area.
- Compound growth – one property is not an investment strategy – you need to build a
portfolio of 6 to 10 properties to have the lifestyle choices you want at retirement. As the portfolio grows, so does your compound growth.
- Diversify in location and property type (cottage homes, medium and higher density villas
and apartments) allowing you to gain maximum capital growth and sell into the most
profitable market when the need arises.
- Focus on Yield – (5% min) and capital growth of 7%+ over the long term.
- Look – for ‘traps’ and promises such a rental guarantees that could come back to bite
- Keep it simple and minimise risk – if you don’t understand anything, don’t sign anything –
go back to your ‘A-team’ (accountant, property advisor, finance broker etc.) for further
- Timing – there has never been a better time than now.
- Action – be proactive as it won’t happen unless you act.
Finally, purchase within the metropolitan area of major cities and stay out of the regions; don’t over extend yourself; and pay close attention to the capital benchmark.
Don’t listen to the doubters. It is important to understand that investing in the residential property market continues to be a strong, safe and proven vehicle for generating passive income in the medium to long term as well as being one of the most profitable investments for bricks and mortar superannuation.
**The opinions expressed in this blog are those of Graham Joyce. Mortgage Choice and Joyce Property Investments always recommend that your obtain qualified financial advice from an expert Broker regarding your individual financial situation before considering purchasing an investment property