The Seven “S’s” of Property Investment
By Guest Blogger, Peter Koulizos, property lecturer and author www.thepropertyprofessor.com.au
If you are interested in buying property for long term capital growth, I’d suggest that you remember the 7 “S” of Property Investment.
The property cycle plays a big part in determining price increases (and decreases) so when you do buy, you want to ensure that you buy in a state that is about to enter the upward swing of the property cycle.
City or Town
(I know the word “city” doesn’t start with the letter “S” but it does start with the “S” sound!)
Sydney and Melbourne have enjoyed some great price rises of late but they are now both in the downward phase of the property cycle. However, this doesn’t mean that the whole state is in the downward phase. Often what will happen is once the capital city has had its price rises, there is a ripple effect and nearby regional areas take off. This is often because the capital city property prices are too high and more people look for cheaper accommodation outside of the city and just commute to their work in the city. Think Newcastle or Wollongong or Blue Mountains.
It’s just not enough to buy in the right state and city/town; you also have to select the right suburb. Some suburbs do better than others for a number of reasons such as proximity to the CBD, sea, and great amenities, facilities, etc. You need to do the research and pick the right suburb. I particularly like up and coming gentrifying suburbs that you will find close to the CBD and/or sea.
Once you have selected the right suburb, you then need to look for the best streets. There’s no point in buying in a state and city/town that is about to experience the upward swing of the property cycle, and a suburb that is close to the CBD and has great amenities if the property is on a very busy main road. This might be a great place to buy commercial property but it is not such a great place for residential property.
Assuming you have the right location, it is time to select the style of property that will help ensure good capital growth. The best styles of property, especially in our eastern and southern states are period/character style buildings. These properties were generally built before World War 2 and include such styles as Californian bungalows, Federation, Edwardian and Victorian.
Size does matter in property, especially the size of the dwelling. Bigger is not always better. For example, a brand new seven bedroom home might look great but it’s not very practical when it comes to finding a tenant and it may also diminishes your capital growth prospects. Not many renters are interested in seven bedroom homes and if the house is so big, you have probably sunk most of your money into the depreciating component (the building) rather than the appreciating asset (the land).
(I would normally refer to this as “Land” but as it doesn’t start with the letter or sound “S”, it’s the best synonym I could come up with!)
If you want to make money in property, you’d better make sure that you buy a property that has a valuable land component. Interestingly, bigger is not always better. A house on a large block of land on the outskirts of the metropolitan area with limited amenities and facilities will probably not perform as well as a property on a smaller block of land which is close to the CBD. If you can’t afford to buy a house but a flat or unit (never a new high rise apartment!!) is within your budget, buy a flat/unit that is in a small group so that even though the flat/unit shares the block with other flats/units, it doesn’t share it with hundreds of other high rise apartments.
Before you buy, remember the 7 “S”:
- Soil (Land)
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