What makes an investment-grade property?
What makes it different from all of the other properties?
What’s the right strategy for this stage of the property cycle?
What’s the endgame that property investors should be considering at the moment, considering how coronavirus has disrupted our property cycle?
That’s what we’re going to talk about today.
I’m going to share with you my new endgame because my living off equity strategy that has stood the test of time for many years is not going to work for most investors in the current market.
At the end of this episode, you’ll be a more informed investor, and you’ll have a strategy to work toward to help build your own financial independence.
What makes a good investment-grade property?
Not all properties make good investments.
In my mind, only about 4% of properties on the market make good investments.
What makes a property a good investment?
What makes a good investment generally?
- Strong, stable rates of capital appreciation
- Steady cash flow
- The element of easy management
- A good hedge against inflation
- Tax benefits
An investment doesn’t have to offer all of those or all in equal proportions, but those are characteristics of a good investment.
How do you make money out of property?
- Rental income
- Capital growth
- Accelerated or forced growth
- Tax benefits
5 Stages of Your Investment Journey
- Stage 1: Education – learning what property investment is all about
- Stage 2: Saving – spend less than you earn and trap the excess cash flow in a savings account to build up a deposit so you can invest
- Stage 3: Asset accumulation – it will take two or three property cycles to build up enough of an asset base of income-producing properties to move to the next stage
- Stage 4: Lower your loan-to-value ratio
- Stage 5: Live off the cash flow of your property portfolio
6-Stranded Strategic Approach to Buying Property
- Buy a property that has appeal to owner-occupiers – Not because you plan to sell the property, but because owner-occupiers will buy similar properties and that pushes up local real estate values.
- Buy property below its intrinsic value – avoid new and off the plan properties, which come at a premium price.
- Look for a high land to asset ratio – that doesn’t have to mean a big block of land, but one where the land component makes up a significant part of the asset value.
- Buy property in an area that has a long history of strong capital growth and that will continue to outperform the averages.
- Look for a property with a twist – something unique, or special, or different about the property.
- Buy a property where you can manufacture capital growth through refurbishment, renovations, or redevelopment.
Some of our favourite quotes from the show:
“Too many investors don’t recognize, though, that property investment is a game of finance with some houses thrown in the middle.” – Michael Yardney
“Bottom line is, cash flow keeps you in the game, but it’s really capital growth that gets you out of the rat race.” – Michael Yardney
“The rich don’t like to commute.” – Michael Yardney
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