in properties benchmark presentation
TRANSCRIPT
Property Investing from the Foundations Up
What should you look for when investing in property?
HISTORICALLY HOW HOUSE PRICES HAVE CHANGED
SYDNEY7.56%*
on average per year
over the last 34 years
BRISBANE7.27%*
on average per year
over the last 34 years
MELBOURNE8.16%*
on average per year
over the last 34 years
PERTH7.88% *
on average per year
over the last 24 years
MAITLAND7.99%*
on average per year
over the last 34 years
MUSWELLBROOK7%*
on average per year
over the last 34 years
31-Dec-8
0
3-Dec-8
1
3-Nov-8
2
3-Oct-
83
3-Sep-84
3-Aug-85
3-Jul-8
6
3-Jun-87
3-May-8
8
3-Apr-8
9
3-Mar-9
0
3-Feb-91
3-Jan-92
3-Dec-9
2
3-Nov-9
3
3-Oct-
94
3-Sep-95
3-Aug-96
3-Jul-9
7
3-Jun-98
3-May-9
9
3-Apr-0
0
3-Mar-0
1
3-Feb-02
3-Jan-03
3-Dec-0
3
3-Nov-0
4
3-Oct-
05
3-Sep-06
3-Aug-07
3-Jul-0
8
3-Jun-09
3-May-1
0
3-Apr-1
1
3-Mar-1
2
3-Feb-13
3-Jan-14
3-Dec-1
4$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
Median House Prices From 1980 to Present
Sydney Brisbane Melbourne Perth Maitland Muswellbrook
Capital GrowthTo show consistency in a location Capital Growth must be above 5% over the last 10 years and/or above 5% predicted over the next 5-8 years.
Once place to source this information is
Capital Growth largely depends on where and what you buy in the hope that the value will rise over the medium to long term. Sustained levels of Capital Growth over a period of time is essential for a property to perform well for an investor.
Rental YieldFor minimal outlay to the investor the rental yield needs to be above 4% per annum for capital cities. Higher rental yield should be expected in rural areas.
Keep the property you’re investing in lower or similar to the median house price in the suburb to maximise rental yield.
Rental Yield is calculated by multiplying the annual rental income divided by the property value (as a percentage). *
*can be sourced from
Vacancy RatesTo ensure ongoing income Vacancy Rates should be below 4% at the time of research, 4% and above is acceptable in highly owner occupied areas.
The lower a vacancy rate is for an area signifies a high rental demand or areas where there is limited availability of investment properties.
Where could you find this information?
InfrastructureLook for improving infrastructure.
Long term tenants look for; schools and shopping facilities, nearby parks and sporting fields, sufficient public transport and close to areas with employment opportunities.
Where can I find out about infrastructure in different suburbs?
Do you think your tenants would prefer outlets and amenities like this? Or this?
Area Population GrowthWhen an area experiences high levels of population growth, infrastructure improves and the desirability of an area increases.
For asset protection invest in cities and locations with more than one industry.
Where can you find this information?
Heavily Owner Occupied AreaOur preference is to have the rate of owner occupied properties above 70% within the suburb or adjoining suburbs.
Area Comparison: Cameron Park Redbank Plains -IpswichOwner Occupied 1,327 (83.2%) Owner Occupied 2,203 (47.5%)
Tenanted 243 (15.2%) Tenanted 2,309 (49.8%)
Affordability - TenantFor a tenant to be able to afford a property they need to be using no more than 40% of their gross income. This allows for the ability of rental increases in the future as needed.
This works the same as the old 3rd/3rd/3rd rule.
3rd Living Expenses, 3rd Tax and 3rd for Rent/Repayments.
Affordability is calculated by dividing the median weekly rent of an area by the median weekly household income for the area (as a percentage).*
*can be sourced from
Affordability - InvestorWhy purchase a new property over an old property? Lets take a look at an
example. New Property
Purchase price: $500,000
Total loan amount required: $522,000
Rent received: (51 weeks x $500) = $25,500LessRental expense per year: $32,000Net rental loss: ($6,500)
Out of pocket expense (before tax variation): $125 per week
Depreciation:Depreciation on buildings: $5,000Depreciation on fittings: $4,000
Yearly Loss: $15,500
Tax Benefit at 37 cents of the dollar: $5,735
Out of pocket expense: $765 per year or(after tax variation) $15 per week
Old propertyPurchase price: $350,000
Total loan amount required: $365,000
Rent received: (51 weeks x $350)= $17,850LessRental expense per year: $25,000Net rental loss: ($7,150)
Out of pocket expense (before tax variation): $138 per week
Depreciation:Depreciation on buildings: $0Depreciation on fittings: $0
Yearly Loss $7,150
Tax benefit at 37 cents of the dollar: $2,646
Out of pocket expense: $4,504 per year or(after tax variation) $87 per week
Affordability - InvestorEven though older properties may cost more to hold they may also offer the following:-Ability to develop to increase rental yield therefore affordability by subdividing/duplex/granny flat/renovations.
SummaryIf you’re wanting to look at investing in property ensure you consider the following before making your investment:
• Capital Growth• Rental Yield• Vacancy Rates• Infrastructure• Area Population Growth• Heavily Owner Occupied Area• Affordability
To accomplish great things, we must not only act, but also dream; not only plan, but also believe.
-Anatole France
Where do you go from here?
