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The Perfect Property Portfolio

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ib-property-portfolioDifferent people prefer different property investment strategies depending on their knowledge, attitude to risk and how much they want to be involved.

If you are medium to high income earner who wants to create passive wealth quickly while reducing your risk as much as possible then I believe the best strategy is to buy:

  • Properties that are 5-15km from major cities as they are close to transport, leisure and work and the scarcity of land underpins the value. CBDs have no height restrictions so technically there is no limit to supply, whereas suburbs usually have height restrictions.
  • Properties that are within 10%-20% of the median price for that area as that means 80% of the population can afford to rent them.
  • Properties that suit the median price of that area, i.e. a house in Queensland or a unit in New South Wales or Victoria.
  • A mix of new off-the-plan properties to get growth with little deposit and second hand properties that can be renovated to add immediate value.
  • Properties that have a minimum two bedrooms, as they are more attractive to well paid professionals and young families who may rent them. Houses could have even up to four bedrooms and any property that I buy definitely needs to have parking.
  • Properties that are in smaller blocks as they are unique since there is usually less up for rent at any one time. Big blocks have big strata levies with expensive lifts, pools and gyms which don’t give you any more rent or capital growth. As soon as someone else more desperate than you knocks down the rent or reduces their sale price for a quick sale, every other property in the block gets devalued.
  • Properties that have plenty of sunlight, are on quiet streets and are walking distance to either shops, leisure facilities or water. I avoid being too close to industrial/commercial/retail premises such as school, churches, factories etc.
  • Properties that are likely to grow steadily for evermore. While it’s great to buy at a discount, it’s the return I get year after year that matters.
  • Properties that are in proven areas of capital growth, or areas you know well. It may be more exotic to buy interstate or to take a punt on an up-and-coming suburb but by investing in proven areas you are putting less at risk and guaranteeing what will give you a competitive edge over other buyers.
  • Properties are bought for capital growth

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