The property investment questions you want answered

It’s the spring selling season and with new government incentives now in play and the end of the year nearing, some pertinent questions are likely rattling around in the minds of the country’s property investors.

What should a first‑time investor focus on?

First things first; investing of any kind requires a long-term view.

If you go in expecting short term results, you will be doomed from the start, particularly with property where the costs of getting in (stamp duty, legal fees, etc) and out (sales and marketing, legal fees, taxes) are so high.

A first‑time investor should also understand that investing is about managing or mitigating risk, because you can’t avoid risk altogether.

The best way to manage and mitigate risk is buy land near a capital city. Around 90 per cent of Australia’s population growth occurs in the Big Five (Sydney, Melbourne, Brisbane, Adelaide and Perth), and with population comes demand for more housing and, given their not making any more land, the value of land can only go up in value.

There are plenty of opportunities to buy land in the Big Five so stick to that.

Let me just say that land is the biggest driver of growth for any investor. The most fundamental rule of investing in property is that land will always provide a greater return.

I bought my first block of land in 2011 for $250 per square metre.

Today, that same land is worth$1,200sqm. Again, you didn’t read that wrong, it is a five-time increase. Property prices doubled in that time; land prices provided even more returns.

The block of land I bought is 600sqm, which by today’s standards is a huge block. I could subdivide this one block into two 300sq m blocks today with no resistance. In 10 years, I'll be able to cut it into four 150sqm blocks.

As the population increases, so does the land’s value. With every policy shift, every rezoning change and every infrastructure upgrade, the same land becomes more valuable, more usable and more in demand.

What would you say to tentative first home buyers?

We have never seen a stimulus package for first home buyers the likes of what we are seeing today.

On 1 October, the Federal Government rolled out its Home Guarantee Scheme, which allows home buyers of all income levels, in unlimited numbers, able to purchase a property with just 5 per cent deposit.

You will never be able to save money faster than real estate prices increase.

While purchasing property is one of the biggest things you’ll do in your life, my advice is that if you don’t act soon, there will scarcely be a house under $1 million in Sydney, Brisbane, Melbourne, Adelaide or Perth come the end of next year.  

Is established or new the best approach investment-wise?

When I’m speaking with prospective investors, I always tell them that cash flow is king. Run out of cash and it’s like running out of oxygen: game over.

Therefore, make sure you have an investment that is going to more or less pay for itself via the rent and tax benefits.

Buying an established property, depending on its age, often means minimal tax deductions, which reduce after-tax returns; hidden maintenance; and less control over the land content, what I mean by this is that in established suburbs, land-to-asset rations may be poor unless you pay a premium.

Finally, established homes may tie up more of your capital in one deal, making repeat investment slower.

Where ideally should investors be looking?

The Big Five and, within the Big Five, the best locations for investment are those growth areas where land is affordable (below or near median price) but with good infrastructure growth, population growth and rental demand.

Holmview in Queensland is one example. It’s in a growth‑corridor where future growth is almost guaranteed and land availability good.

Consider areas that have schools, transport infrastructure, medical facilities and so on. If you plan on renting your property out, these are considerations for tenants as is rental pricing.