What 3 factors determine if a property is investment-grade?

Successful property investors can make a lot more money from investing in property than they ever will from their day job. Being a successful property investor is simple when you realise that the two necessary ingredients are only: quality and time. Watch the 4:35 minute video below where I explain the 3 characteristics that every quality (investment-grade) property must exhibit. Don’t invest in any property that doesn’t have all 3!

Click here to download a transcript of the video.

Property investing is relatively simple. All you need to do is invest in the highest quality property possible and in time the magic of compounding capital growth will do its thing. For example, if you buy a $500k property today and it appreciates in value by 7.5% p.a. on average (which a good property should), that property will be worth over $2.1 million in 20 years’ time. If you borrowed the full cost of the property when you purchased it, you will have approximately $1.58 million of equity in 20 years (and in 30 years you’ll have $3.8 million of equity). The quality of your property will determine its capital growth rate. So if you are super-focused on quality and you have enough time, it is a reasonable expectation that you can accumulate over one million dollars of equity relatively easily. In the above video I explain that there are 3 characteristics that every quality (investment-grade) property must exhibit:

  • Good land value proportion: more than 50% of the overall property’s value should be land value. Apartments have an attributable land value as well as houses.
  • Scarcity: the supply of land needs to be scarce (i.e. low supply and in high demand). The architectural style and property type needs to be scarce also. You aren’t looking for a diamond but more correctly a pink diamond!
  • Proven performance: there should be strong evidence that the property has appreciated in value over the past 30 years or so. This often demonstrates that the fundamentals of land value and scarcity have proven to work for this property.

Our role is to help our clients develop an astute property investment strategy addressing questions like how much to invest, where, what ownership structure, how much to borrow and so forth.

If you are considering investing in property I always strongly recommend you seek professional advice on which property to invest in (contact us if you need a referral to a reputable buyers’ agents).

If you have any questions or comments on any of the videos, it would be great to hear from you.