10 Rules

Rules are made to be broken – just ask any teenager.

But while I’m not always a ‘rules’ kind of guy either, experience has taught me a thing or two about following the right ones.

If you dropped into the Sydney Home Buyer & Property Investor Show last month – here’s a scene, below – you’ll already know that I have 10 rules for successful investment buying.

They have evolved over time – almost 30 years in the industry.  And with that kind of exposure, and having helped hundreds of new residential projects come to fruition throughout the country, I’ve been able to see first-hand what works and what doesn’t when it comes to buying investment property.

My rules apply to “passive” investors – the “set and forget” types (which is the vast majority of the market – more than 90% of investors, according to recent survey results) and not to the “renovator junkies” as I like to call them.  And before you shoot off a comment, there’s nothing wrong with getting your hands dirty, heck I have done it many times before; but if you just want to buy and forgot, then these rules apply to you.

Here are my 10 rules to help you buy well:

The property must be:

  1. New, or at least recently renovated, to maximise depreciation/tax return and gross rental returns.
  2. In a small or multi-staged development.  Preferably under 50 dwellings.  Large properties should not be ruled out.  They must, however, have substantial points of difference i.e. well-proportioned and well-appointed apartments; quality facilities and finishes; and good access.
  3. In a strong location – “infill” highly favoured, with high existing amenity; a great “walk-score”; and more importantly, potential for above average mid-to-long term capital growth.
  4. In an area with five or more pillars of economic support, including cumulative demographic/rental demand and high employment/wages growth.
  5. Within five minutes of “hard-core” infrastructure i.e. major work nodes; secondary schools; entertainment precincts and public transport, especially rail.
  6. Delivered by a proven development team.
  7. High quality in terms of design; materials and construction.  It must require minimum maintenance.
  8. End prices under $600,000; better still, less than $500,000; and they must yield more than a 5% gross rental return.
  9. Limited new dwelling supply when compared to underlying demand.
  10.  Sold with independent API registered valuation support, and within an acceptable range of sales/marketing commission.

So, stick to the 10 and you’ll make millions?  Well, short answer – there are no short-cuts and no guarantees.  But by following my 10 rules, I believe you can, with a little effort and know-how, convert a modest deposit into a sizeable next egg.  But (yes, there is always one), don’t do it blind-folded – seek independent investment advice; have at least a 10 per cent deposit; and have a truly spare $100 per week available to afford to buy that investment property.

So that was just the preamble – there’s more!  If you would like to receive our Matusik Insights Report, What To Buy – 10 Rules For Better Investment Buying, just register here for your copy.  And folks – it’s free, just for you.

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Last call for our Resident and Buyer feedback.  If you haven’t already had your say, click here to give us your responses – and then stay tuned.  The feedback we have received to date has been great and includes some surprises….another Matusik Insights report looms large!

If you want to keep your comments private and confidential contact me directly on michael@matusik.com.au

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One thought on “10 Rules

  1. Hi Michael

    There’s some great advice there but I’m not sure it’s only a choice between new/ near new property and ‘a renovator’s delight’. Some of the best home and investment opportunities are well maintained, established properties in quality suburbs and regions.

    I’m struggling a little with point 1 though. Sure, if you want to buy new because the property suits your lifestyle and there’s nothing comparable then awesome – buy well and enjoy. However, many buyers are picking up great properties below replacement cost in proven markets so why pay full list price when you can buy at a discount?

    Established properties also make up the vast majority of the market so there’s more choice.

    Furthermore, it’s very difficult to add value or create additional equity in a new property. The builder/ developer has likely maximised the value so you’ll be at the mercy of the market for many years to come. While some areas will do well, there’s little prospect of the broader market growing strongly anytime soon so why not buy a property that gives you more opportunity to acquire additional equity at a time of your choosing? That can still be done without resorting to swinging a hammer yourself.

    Finally, please don’t fall into the trap of describing tax deductions as an investment strategy or a key investment driver. That’s a property spruiker’s line and investors deverve better.

    The first is a loss (yes, even if paper one) and the other generates long term wealth. By all means, maximise your tax benefits but they are only the cream on the cake so never, ever allow them to drive your investment decisions. If they are the main reason why the deal ‘stacks up’ then I seriously question the quality of the proposal and strategy.

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