13. Select properties which have land content.

• The general “rule” is that land appreciates in value and

buildings depreciate.

• In certain circumstances, specific high rise apartments might be

worth more than houses in the same area, because they provide

their occupants with fabulous views — water, city, mountains.

14. Select “townhouse style” properties.

• Townhouses should be a preference to apartments, flats and

houses built on large land lots.

• Most Australians still prefer to live in a “house style” living

environment rather than a high-rise apartment building, but

because of the “shift” in our lifestyles people do not want to spend

their free time watering the garden or pulling out the weeds.

• Apartment buildings do not provide the same level of security

and privacy as does a townhouse property.

• There are far greater body corporate rates to be paid in relation

to an apartment building than a townhouse property.

• Townhouses have the greatest appeal to corporate tenants

because of their easy maintenance, increased security, extra

privacy features and outdoor “lifestyle” areas.

15. Select properties which offer high depreciation and taxation benefits.

• Ask the property developer if they have a depreciation schedule

for the property you wish to purchase, otherwise engage a

quantity surveyor to perform a Depreciation Schedule Analysis

on the property.

• The higher the depreciation allowance for the property the

greater the tax benefit, the less money you will have to pay from

your pocket towards the cost of maintaining the property.

16. Select properties within projects whose income potential is not based on “short term” or “holiday letting”.

You are actually buying the tenant not the property.

• As you can now see, with the “holiday based” investment

property such as serviced apartments, you are not purchasing

the building structure, you are actually purchasing the tenant.

• If the tenant disappears, you can kiss your anticipated

investment returns goodbye.

Competitors on your doorstep:

Furthermore, if your apartment is one of 50 or more, you will have 50 to

100 competitors who will want to sell or lease their apartment at the

same time as you.

The old rule of property is that the balance between “supply and

demand” dictates the price. If the property market takes a downturn

and 50 or more “competitors” try to sell or “liquidate” their properties

at the same time as you, it is very likely that your hard earned

investment will be worth no more than 40% of its original value.

17. Select properties that are located within smaller

low-rise “boutique” style properties.

• Select boutique properties, rather than high rise multi storey

developments — less than 35 units in the project.

• Exactly the same problems associated with serviced apartments

as per the above scenario also stand true for any high rise

apartment blocks — 35 apartments or more. Especially the new

warehouse shell based projects.

• If the property market takes a downturn and given the fact that

you will have so many potential competitors on your doorstep,

what do you think will happen to your property’s rental

earning potential or capital gain potential?

• If your neighbours panic and sell their property (which is

similar to yours) at a lower value than their original purchase

price, your property will automatically be devalued. Remember

that property is worth only what a similar property last sold for.

You will obviously have less competition for rental in a

development of 15 units than a development of 150 units. The

less units in the development means the less chance you will

have of having multiple neighbour “competitors” discounting

their rental price, thus reducing your property’s rental potential.

• If similar apartments in your building get sold for prices below

your purchase price, your property will automatically be valued

at the same price, making it impossible to “re-value” the

property and release extra equity in the future.

• In the event where the same financial institution financed most

of the units in the same building and purchasers start “falling

over”, the bank may chose to re-value your property and ask

you to inject extra equity needed to “top up” your loan.

18. Selecting a property where the price of the property offers at least a 5% gross rental return based on the

“long term” rental guarantee the real estate agent is

willing to provide.

• Ask the agent to provide you with a rental price which they are

absolutely sure is achievable in the worst case scenario.

• If the “promised” and agreed to rental is not achieved by the

rental agent after two weeks of trying to lease the property, the

agent will receive no “marketing money” and will have to make

up the difference between the rental guarantee and the actual

rental price of the property.

19. Select properties within projects which are guaranteed to be built and completed.

Avoid the following types of off-the-plan projects:

• That may present a risk of not satisfying bank pre-sale

requirements. If the developer can not obtain the funding, the

project will never get built.

• Which are built by “amateur developers” who can not obtain

the right funding or building price to complete the project. Ask

the real estate agent to name other projects completed by the

same developer, and go and inspect them personally.

• Where the project does not have a builder “attached” at the time

of your purchase.

• Professional developers will have finalised the builder and

construction contract price within the first three months of

entering the marketing phase of the project. If they have not

engaged a builder, you run the risk that a rise in the construction

price will make the project too risky or unprofitable for the

developer and the project will never get built.

• Which are not marked to being constructed within eight months

of commencing the marketing phase.

Even large developers can run into problems and decide not to proceed

with their project.

• If the project does not get finished, you will lose money due to

the transaction costs (e.g. solicitor, accountant fees, bank

guarantee fees, etc.) spent on purchasing the property.

20. Do not purchase off-the-plan property which is being sold “subject to permit”.

21. Select properties which have 3 bedrooms, to increase rental income.

• You must only purchase properties that contain 3 bedrooms or a

minimum of 2 bedrooms.

• One of your goals should always be to increase the rental price

of your property every year as much as possible.

• Achieving the highest possible rental returns is far easier with a

3 bedroom property, 4 bedrooms is an overkill, as you are

unlikely to get tenants requiring 4 bedrooms consistently

renting the same property at the same time.

• One of the only reasons to overlook the above criteria is if the

property is sold at an EXTREMELY low price.

• The only legitimate reason this could happen is as a result of

dealing with a desperate vendor.