Feb 11, 2019
How do I invest?
What approaches do I use and
which strategies do I use?
There is no “secret” to
successful property investing, but there is a strategy I use to
boost my chances of success.
It is to firstly build my asset
base through capital growth and then, once I’d built a substantial
asset base, to move to the “cash flow” stage of
When my properties increase in
value this gives me equity for my next deposit and the greater
rental growth helped pay the mortgage.
The next stage is to slowly
lower the loan-to-value ratio (LVR) of my property portfolio and
then to start living off my “cash machine” of
You see…while cash flow
management is important to keep you in the investment game, it’s
really only capital growth that’ll get you out of the rat
A big mistake I see many
investors make is chasing cash flow positive properties early in
their journey and never achieving a sufficiently large asset
My Top Down Approach
Over the years I’ve honed my
property investment strategy to find that 5% of properties that I
like to call “investment grade” properties, – ones that are likely
to grow at wealth producing rates of return.
I use what I call a “top-down
approach” to my investment selection.
- The Right Stage of the Economic Cycle
starts with buying at the right stage of the economic and property
look at the big picture – how’s the economy performing and where
are we in the property cycle?
I look for the right state in which to invest – one that’s in the
right stage of its own property cycle.
I’m not trying to time the cycle, I don’t want to buy right at the
peak when I’ll have to wait longer for capital growth.
only invest in our larger capital cities, where there are multiple
pillars to the economy – because this is where economic growth and
wages growth will occur.
within that state, I look for the right suburb – one with a long
history of strong capital growth outperforming the
found some suburbs have 50 to 100 per cent more capital growth than
others over a 10-year period.
all about demographics, as these suburbs tend to be areas where
more owner-occupiers want to live because of lifestyle choices and
where the locals will be prepared to, and can afford to, pay a
premium to live because they have higher disposable
general, they’re the more affluent inner- and middle-ring suburbs
of our big capital cities, so I check the census statistics to find
suburbs where wages growth is above average.
- Clearly my approach is very different to the
speculative approach some investors adopt looking for the next “hot
my research has shown me the suburb to explore, I look for the
right location within it.
livable streets will always outperform others and in those streets,
some properties will always be more desirable than others and
outperform as investments by increasing in value.
about the suburb where you live – there would be areas you’d
happily live in and areas you would avoid, like on main roads or
too close to shops, schools or commercial areas.
search for the right property using my ‘6-Stranded Strategic
Approach’ and finally I look for…
not looking for a ‘cheap’ property (there will always be cheap
properties around in secondary locations). house price tag
market property cost save home growth data statistics
looking for the right property at a good price.
choose my properties in that order – a top-down approach – which
leads many people to ask why price is at the bottom of the
make your money when you buy because you buy the right property –
one that will be in continuous strong demand by both
owner-occupiers (who push up property values) and tenants (who help
you pay off your mortgage).
ensure I buy an investment property that outperforms the market I
6-Stranded Strategic Approach
I buy a property that
- Would appeal to owner
occupiers – This is
because owner occupiers will buy similar properties pushing up
local real estate values.
- Is below its intrinsic
value – that’s why I avoid
new and off the plan properties, which come at a premium
- Has a high land to asset
ratio – that doesn’t
necessarily mean a large block of land, but one where the land
component makes up a significant part of the asset
- Is in an area that has a long
history of strong capital growth and that will continue to
outperform the averages because of the demographics in the area
– This will be an area
where more owner occupiers will want to live because of lifestyle
choices and one where the locals will be prepared to, and can
afford to, pay a premium price to live because they have higher
- Is a property with a
twist – something
unique, or special, different or scarce about the property, and
- Is where I can manufacture capital growth through
refurbishment, renovations or redevelopment rather than waiting for
the market to deliver me capital growth.
Each strand represents a way of
making money from property and combining all five is a powerful way
of putting the odds in my favour. If one strand lets me down, I
have three or four others supporting my property’s
IT DOESN’T END THERE…
While most investors just buy a
property and hold it for the long term, strategic investors
regularly review their investment portfolios.
It makes no sense to invest in a
property and then not review its performance every year or
I like to look at my property
portfolio’s performance at least once a year.
my properties performing to my expectations?
they outperforming the market?
that property were for sale today would I buy it again?
this property still fit in with my overall plan?
This is also the time to assess
how our shifting markets will affect your property
What would happen to your
position if interest rates were to rise 1% or 2%? Because in due
course they will.
It’s also the time to assess
your Loan to Value ratio and your cash flow to see if you can
afford to buy another property or two.
Over time you grow, your skills
improve and your circumstances change, so treat your property
investments like a business and evaluate your assets
So as I said earlier – there is
no secret to property investment success, just a
While most investors read a book
or two, do a little research and then buy one of the first
properties they come across, strategic investors are smarter than
They follow a system that is
rooted in the real world and has stood the test of time in changing
So now you know the “secret”,
what will you do with it?
Links and Resources:
As mentioned in the
Special 2 for the price of 1
Book Bonus: How to Grow a Multi Million Dollar Property Portfolio -
in your spare time PLUS What Every Property Investor Needs To
Know About Finance, Tax And The Law.
Metropole Property Strategists
Some of our favourite quotes from the show:
“I look for aspirational
suburbs. Suburbs where people aspire to live there.”
“I’ve found that following my
six-stranded strategic approach, you minimize your risk, and you
maximize your upside.” –Michael Yardney
“Financial freedom comes at a
cost. It comes at a cost of sacrifice, giving up things now for the
future, and it comes at the cost of delayed gratification.”
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