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In the first part of this article, we looked at the causes of under performance of investment returns. (click here to read part 1). Now let’s continue with the flip side and take a look at the drivers for outperformance.
Every individual property is different – Most media commentary suggests or assumes that the property market is one market place and therefore every property ‘product’ performs in the same way. The reality is that every property is unique and therefore will provide different returns over time. Understanding the micro of property is vital, especially when most of the information provided is about the macro. Properties in the same city, suburb, street, and apartment block can be completely different and therefore provide different investment returns. Keeping this fact at the forefront of your mind will take you a long way towards making a better property investment decision and help to shut out the less relevant information.
What causes outperformance – How do you spot the micro determinates for a good property ‘product’ investment? Look at the common elements amongst the properties that have outperformed the market over the last 20, 30 years and so on. Understand that history usually provides us with a greater insight into the future. Finding some of these commonalities around the historically high performing property ‘products’ will ensure you select an investment that is less likely to disappoint. Consider what links the properties that have outperformed the market historically: look at the suburbs, pockets of suburbs, streets, streetscape style, activity in the street, architectural style, floor plan, land to asset ratio, local amenities, aspect, natural light, public transport, as well as many others.
Have a clear financial and property plan – Another step towards minimising risk when undertaking a major investment choice, especially if it involves taking on debt, is to ensure that you complete a thorough financial and property plan prior to selecting the investment ‘product’. This same approach should be used whenever taking on any investment ‘product’, be it property, shares or anything else.
Having a greater grasp of these areas outlined should help you to ensure that you make a more informed property decision and stack the odds in your favour. Take the time to discuss how Property Planning Australia can help you consider each of these elements and how they relate to your personal circumstances.
Written by David Johnston, Director – Property Planning Australia
