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Quality not quantity – investment property portfolios

We find ourselves repeating this phrase time and time again to clients and prospective clients.  It may seem obvious, but it is too often overlooked when buying property.

How this relates to property comes down to building an investment property portfolio. You may have seen stories of people building sizeable property portfolios in a short space of time and thought how incredible this sounds.  It is incredible, but not necessarily suitable for everyone.

The way these portfolios are built is buying low value properties in outer lying areas with high rental yields and potentially adding value through cosmetic refurbishments. The high rental yield makes the loan serviceability more do-able and the low value of the properties makes it more straight forward to continue to acquire more.

So, essentially with low value properties it is easier to buy more and keep leveraging off each property to fund the next.  The issues that may arise from this are:

  • typically poorer quality stock in low land value areas do not grow at the same rate as higher quality areas and styles
  • outer lying suburbs tend to have less access to infrastructure and lower land values which is the main driver for capital growth
  • high volumes of stock flooding the market and keeping prices down
  • acquiring a large portfolio but having very little equity in the portfolio
  • poorer quality properties that are in high supply and low demand are not ideal to hold for the long term
  • more volatility and risk with changes to interest rates

At The Property Bureau, our advice has not waivered. Ensure the asset you select is the absolute best quality location, architectural style and quality of accommodation that your budget allows.

A quality asset is something that you can hold for 10+ years to benefit from the compounding effect of capital growth.  A shorter term outlook is looking for a property with a higher rental return which inevitability is accompanied with below average growth.  If you run the numbers for growth vs yield over the long term, growth from a quality asset will always come up trumps.

Quality of the asset and the equity you hold are the keys to long term property investment success.

If you would like to discuss your investment property plans, please call The Property Bureau

on 9018 9790

About the author

Kristy prides herself on making her clients feel welcome, understood and in safe hands from their very first meeting.  Her 16 years of residential and commercial experience in the Melbourne property market has taught her to ensure every ‘i’ is dotted and ‘t’ crossed and how imperative this is when transacting property. 

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