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Property Investment: Introduction & Strategies

Investing in a property is a decision driven by a number of factors.

Homeownership provides shelter and security, while often decreasing the
financial stability due to mortage expenses and greater responsibilities. Both
commercial and residential properties can be bought for development and
selling, making a great investment for real estate connoisseurs who opt to
increase their income.
What makes Australia a great place for property investment and how can we
take advantage of the local real estate market? We will discuss these
questions in the next part of this chapter.
The Australian Real Estate Market
Australia the country with the lowest population density in the world.
Statistics from 2014 indicate that in Australia there are only 3 people per sq.
ete . That s less tha Ca ada a d I ela d, a d o l G ee la d eats this
record with 0 people per sq. m.
Having that in mind, the Australian government has been encouraging
homeownership for the past few decades. By adding tax reduction and
additional benefits for young people and future investors, who wish to own
part of the land, the country has aided the property investment market for
years. Today, speculators say the so-called Australian property bubble is
soon going to pop. Property bubble is a term referring to the overvaluation
of real estate. Since the property demand has been increasing rapidly over
the years, prices have followed that lead raising roughly equally to the
property search and income increase of the Australian families. Due to the
high market expansion and inconsistent price hike in the last decade,
speculators previse a crash of the estate market. It is expected that the
u le pop
ill drop the property prices significantly to meet the
i esto s pote tial. This p o ess has ee e pe ted fo the past de ade a d
might or might not start at all in the following years. Yet, it is an important
base for the consideration of a property investment and gives owners
fu the pe spe ti e of the ou t s eal estate a ket.

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Property Market Statistics

Financial: Purchasing a property requires high financing, yet

according to the Australian Bureau of Statistics1, the proportion of
homes with and without mortgage has dropped by 10% for the
period between June 1996 and June 2010.
Regional: The Northern Territory of Australia has the highest rate of
rented properties and the lowest homeownership rate. This is due
to the egio s ou g populatio a d highly mobile workforce.
The Aust alia s p efe e es fo u a s deta hed housi g sho s
that in 2010, out of the 5,7 million owned homes, 88% lived in a
separate house. Most rented housing is indicated to be either
apartments, flats or units.
Age Group: Most first-time home buyers are in the age group below
35 years. They are followed by homeowners between 35 and 44.
Family Status: Most dwellings are purchased by couples and families
with children. They are followed by lone homeowners who are third
in the charts for home-ownership. Single parents with one or more
children prefer renting instead of paying mortgage.

Property Types
Getting to know the real estate market is the first step to investing. Having
deep knowledge of the property types and the current state of the local
estate market can aid both homeowners and real estate investors on their
journey to acquiring their goals.
Residential Property Types

ABS - Australian Bureau of Statistics - http://www.abs.gov.au/

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Townhouse: Also known as villa or unit, the Australian townhouse

represents a small-size housing which is often build with a
community focus. This type of property provides little or no land
along with the unit. Most townhouses, available on the market, have
around three bedrooms and sometimes feature fitness or TV rooms
and other community amenities.

Retirement Communities: This housing type is usually located in the

more populated regions of the country. The retirement community
housing limits residents by age, featuring homeowners who have
entered their retirement age. The retirement property features
mainly apartment buildings with well-structured communal
facilities. Parks and lounge areas are an inseparable part of this
housing type.

Rural Housing: The rural properties throughout the country present

a perfect option for future homeowners who wish to purchase a
significant amount of land along with the house. The rural housing
can be divided into two basic types: established farms and
undeveloped land. ( Foreign investors who plan on acquiring a rural
property will often be unable to develop it and will need to pass a
series of requirements. )

Golf Property: Some Australian regions, such as Nerang, feature

new residential constructions built on golf course complexes. The
site of these properties can vary, yet the view is almost always
impressive. Most of the golf residences are part of gated
communities which offer housing security and a lot of additional
services.

Coastal Residences: The Australian coastal real estate features

mostly housing in condominium style which can be also purchased
sepa atel . The ou t s la gest ities a e uilt o the coast which
presents a lot of quality homes.

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Apartment Properties: Also referred to as flats, in the UK, they are

mainly located in the central city parts and come in a wide range of
sizes. Factors such as location, nearby facilities and amenities keep
the apartment prices up. Buying a flat with three or more bedrooms
would often cost more than purchasing a house with satisfying yard
size.

Unit Properties: This property type is part of a terraced residential

building and feature a small-size living area with limited outdoor
space. The unit buildings are created for communal living with
shared parking spaces and waste disposal. Units normally feature
two bedrooms and lower rent and purchase price, therefore are
considered to be a convenient choice for a starter home.

Commercial Property Types

2
3

Office: Building with commercial function which houses and

provides working space to companies, agencies and self-employed
individuals. The offices include single-tenant properties, small office
buildings, services offices and downtown skyscrapers.

Retail: Property unit which sets an operating space for peddles,

small shops and other retail companies.

Industrial: This property type comprises a number of buildings with

various size and functionality. Listed as industrial property can be
anything in between the following: Warehouses, Distribution
centres, Flex2 and R&D3 properties, as well as other Big Box4

Flex - lightly zoned buildings

R&D - research and development

4
Big Box - large industrial properties, with signature box structure above 5000
square metres.

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properties. A defining characteristic of industrial space is Clear

Height. This is the actual height of the building from the top to the
bottom of the steer girders.
Heritage Property Types
-

Historical Housing: Residential building which is connected to the

local or national heritage. A property can be heritage listed for being
o iated ith people, e e ts o pla es ith histo i al i po ta e.

Heritage Land: Often an undeveloped land featuring flora and fauna

of national or local importance. Historical grounds are also heritagelisted and can comprise gardens and landscaping linked to a
building, person or event part of the local history.

Property Investment: The Basics

There are three main reasons for purchasing a property. Residential
buildings can be acquired by investors for renovation and resell. They can be
purchased by homeowners who are interested in occupying them
themselves or renting them out for financial benefits. Houses can also be
bought for land banking5. Same goes for commercial properties which can
be either used by the investor for workspace, leased to other companies or
turned into a land banking investment.
Reselling and development of property requires further knowledge of the
basic rules of property investment. But first, we need to take a closer look
at some terminology.
Property Valuation vs. Appraisal

Land Banking - The process of aggregating properties for future resell or

development.

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Valuation and appraisal are two terms which are often being mistaken as
interchangeable. Yet, behind their meaning hide a series of factors which can
indirectly affect a housing deal.
Appraisals are property price estimates, usually conducted by a real estate
agent. The appraisal is based on knowledge and experience of the local real
estate. Appraisals are done free of charge and have no legal standing. When
requested by potential vendors, appraisals tend to be overstated. Home
appraisals can also be done with the help of free, online tools6 which can
help a homeowner get familiar with the local property prices and therefore,
put an orienting price on his house accordingly.
Valuation is a formal, systematic process which determines the actual value
the property from an independent point of view. It is a complex combination
of research and real estate knowledge and in most Australian states,
valuations have to be conducted only by a qualified valuer. Property
valuation may have a legal standing and be used when obtaining a loan for
property purchase, drawdown or refinancing.
Property valuations are affected by a number of factors regarding the overall
state of the property, its location and features:
-

Physical location
Local Council Zoning
Accessibility ( by vehicles, pedestrians or nearby off-street parking )
Building Layout
Structure, condition and possible faults
Planning restrictions
Encumbrances or caveats

Online Local Price Guide for Australia - http://www.homepriceguide.com.au/

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Maximizing Property Valuations: The property valuation is mostly

determined by factors beyond our control. Luckily, a decently presented
property with no ongoing renovations and a clean, appealing look can
sometimes do miracles for sellers. Any improvements made on the property
in the past years might be of value for the final price estimation.
Quality Appraisal
Purchasing a new dwelling requires a thorough quality check to ensure there
o t e a u e pe ted e pe ses o t ou les i the futu e ega di g g a d
repairs, pest removal and even noisy neighbours. The list will guide you
through the process of appraising7 your future investment and considering
the pros and cons of purchasing a given property. Have in mind that
commercial buildings and properties above the standard price might need a
check from a qualified valuer prior to selling or purchasing.
Outdoor Indicators
Locality: The strongest factor which brings most homeowners to a given
property at first place is the location. The p ope t s proximity to community
facilities, med centres, schools and shops is of prime importance for the
overall life-quality it provides. Most investors make the crucial mistake of
purchasing an otherwise lovely house without researching the
neighborhood, first. Even though most properties in the area might keep a
reasonable price, it will most certainly drop in the future if no regional
upgrades are conducted. When considering the purchase of a housing unit
or commercial building, investors need to watch out for several factors
which determine the level of resilience of the locality.
-

Shops & Malls

Kindergartens & Schools
Medical Centres
Parks & Amenities

Diffe e es et ee app aisal a d aluatio a e e plai ed i the se tio

Te h i ues & I fo atio
7

elli g

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Offices & Facilities

Sights & Views: Most high-end properties on the real estate market feature
a number of amenities which add to its overall value. The proximity of the
residence to nature sights along with impressive balcony views of both
natural and urban landscapes can raise the end price significantly. This factor
counts mainly for the residential market and attracts customers willing to
top the original price in order to, say, wake up by the flickering sun rays
refracted in the ocean. The prices of such properties are usually higher than
others, yet they present a great investment option for future resell with high
profitability, due to increased interest of connoisseurs and foreigners. There
is a number of nature landscapes and sights which could add to your
property s sell p i e a o di g to the u e 's taste.
-

Beaches
Parks
Lakes
Camp sites
Picnic spots

Playgrounds
Cafes
Restaurants
Venues
Night Clubs
Bars / Pubs

Crime Percentage: Doing a complete research of the locality is one of the

first tasks a future buyer should cope with. Even though the area may seem
quiet and well regulated it might not be so welcoming to newcomers. The
crime percentage of the region does not always depend on the overall
quality of residential structures. Therefore, being far from the slum or right
next to the local PD8 o t gi e ou as u h p ote tio as e pe ted. Taking
a look at the website9 of the Australian Institute of Criminology might give
you a slight idea of the crime percentage in the country organized by locality,
crime types and more.

8
9

PD - Police Department
Australian Institute of Criminology - http://www.aic.gov.au/

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Indoor Indicators
Pests: You e spotted a o derful property ith e fur iture, pretty garde
and freshly-pai ted alls, a d hats ore - its way below the normal price
for the locality its in?
Experience tells us there are rarely Australian townhouses which feature low
cost, convenience and beauty. Due to the overpriced urban dwellings and
high demand, property owners sometimes choose to lower the estimate of
their property in order to make a quick sell. Yet, in most cases, the
discounted price speaks of a hidden problem, such as pest infestation. Pests
are sometimes the result of badly maintained buildings, but they can also
depend on the locality the property is built in.
Before purchasing a property, the investor needs to make a complete check
for the most common housing pests. The check can be done either by the
buyer or by a certified pest removal agency.
-

Flies can be found in rubbish, under eaves, in animal faeces, near

open septic tanks, in food leftovers, spoiled products and more
Cockroaches inhabit dark, warm areas with high moisture. The
drains, sewage, kitchen and the area around the heating duct are
their most common habitat. They can also be found between wall
insulation, in the attic or basement.
Mosquitoes prefer cool, damp places with little or no light at all. They
live around water ponds and storage tanks along with septic tanks
and natural bodies of water.
Fleas prefer sandy areas, but will live almost anywhere animals can
be found. They need blood to breed and will bite humans, as well.
They can often be found in bedding and clothing along with animal
living areas.
Bed Bugs need blood to develop and grow. The hide in wall cracks
and dark places during the day, and feed by night.

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Previously infested housing buildings and offices have a 60% change to be

attacked by pests again, if the property is not treated as required. Therefore,
infestations lower the price of the property in spite of its overall quality.
Plumbing: Old plumbing can be a serious issue which may lead to severe
property damage. If not taken care of in time, rusty pipes and badly-fixed
leaks may do more harm in the future. There are several key spots which
require professional attention before a home is purchased.
- Main Sewer: No clogged drain should be taken carelessly. Some
cases have witnessed drain clogs to be the harbinger of a bigger
damage. Small ground leaks or even a collapsing sewer line might be
the reason for many plumbing issues which give the fake idea of
being just a minor issue.
- Toilets: Toilet leaks are relatively easy to detect and are often the
cause of the following signals: light discolouration and warping
around the toilet base; damp floor and loosen tiles
- Garbage Disposal: Old disposal systems might cause continuous
clogging, but are not usually a precursor for major damages.
- Water Heating Systems: The lifespan of these systems is between 5
and 10 years depending on the use. Old, badly maintained water
tanks might cause severe housing damage and need a professional
inspection prior to the house purchase.
Other plumbing issues that future homeowners should look out for are:
-

Low water pressure

Broken fixtures and tap ware
Blocked or faulty sewer pipes
Faulty storm water system
Old hot water systems which need replacement

Structural Issues: While ou eal estate age t o t e a le to sa

u h
a out the uildi g s fou datio , eili g a d sidi g ualit , it is a good
practice to turn to a structural engineer. T uth is, ost selle s do t e e
suspe t the e is a p o le
ith thei ho e s st u ture and therefore

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appraise their property according to the overall appearance and quality.

That s h , u like so e isi le issues hi h sig ifi a tl lo e the e d p i e,
you know if a home is well-constructed and maintained until you make a
thorough check. The structural checklist can be divided into three main
sections: foundation, walls and ceiling.
-

10

Foundation: There is an old, simple trick which can help you

determine if there are any significant issues with the foundation of
a property. Drop a marble on the floor and see how far away it will
roll and make note of its velocity. The marble method works for
indicating severe foundation damages. Any larger slope could mean
an expensive repair.
Ceiling: The lowered, easy-to-install dropped ceilings might hide
significant issues in the insulation and ducting. Beam ceilings should
be checked for aging and other structural damage. Vermiculite
ceilings, also known as Popcorn ceilings, provide good insulation and
soundproofing, yet fell out of favor in the late 80s. Vermiculite once
contained a dangerous amount of asbestos, an ingredient which
causes lung problems and nature pollution. Asbestos removal is a
serious job which should not be taken carelessly. It requires
professional assistance and has to be removed by a certified
company. This should be considered when planning on purchasing a
house with vermiculite ceiling. Get in touch with the EPA10 in your
locality to get further information about handling asbestos ceilings.
Walls: Plaster walls might hide previous wall cracks. Wood molding
needs to be repainted and polished every once and a while. The
insulation behind plasterboard walls might not provide enough air
to the walls and keep the airborne moisture inside.
If you spot cracks in the wall, watch out for structural
inconveniences, such as removal or damage of supporting walls.

EPA - Environmental Protection Agency

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Buying and Selling: Strategies for Success

There are a lot of techniques for property selling that real estate
o oisseu s o t tell ou. e ti g out a oo to students or selling
downsizing your living area by selling a house and purchasing a smaller one
for profit are only a fraction of the methods which homeowners use. The
u e t state of the Aust alia p ope t a ket a d the i esto s pote tial
make space for some higher-fetch strategies which, with determination and
a pinch of luck, can bring a high amount of profit.
HMO Investment
Also called Buy-to-Let11, the investment in a house of multiple occupancy
combines creative thinking and high organizational skills to bring innovative
investors a greater income. It is compiled in the process of purchasing a large
house and renting out separate areas of it to different occupiers. This way a
dwelling, which could be rented to a single family for about 1000 AUD, can
be also divided to different sections depending on the bedrooms number
and be leased to separate renters for 300 AUD each. For about 4 renters, the
final rent amount will be 1600 AUD which is a 600 AUD additional profit.
Websites like FlatMates12 can offer investors a rough idea on the prices and
trends on the HMO investment market.
The difficulties of this strategy include financing the purchase, organizing the
full occupation of the house and a few legal considerations. Whether or not
the renters would be listed as tenants, lodgers or boarders and financing the
house purchase, has an affect on their rights on the property and leave the
homeowner liable to different laws. While tenants have more rights on the
dwelling, boarders, on the other hand, must receive certain services such as
laundry, food, etc. The HMO strategy can provide a considerable amount of
profit for the investor, but needs to be considered carefully.

11
12

HMO means House of Multiple Occupancy and is also called Buy-to-Let

Flatmates - https://flatmates.com.au/

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Property Development & Selling

Purchasing a property for renovation and future selling is another great
strategy. It holds a few concerns regarding houses on mortgage. In some
cases, the homeowner is liable to pay a redemption penalty for selling earlier
than he agreed on. Flipping a house, a term used for property development,
requires further knowledge of the trends in the local real estate market and
depe ds st o gl o the house s appea a e a d st u tu al convenience.
Construction is a great part of this strategy and depends on the dedication
and skills of the assigned building company. John Wilson, a property
investment whiz, suggest that homeowners offer their builders a shared
venture deal to keep them focused on the construction by guaranteed them
their time investment will be worth the pay.
Property development is a long process which requires the assistance of
construction experts, real estate agents, house removals and after-builder
cleaners. The investment may seem higher at first, but if done right, the final
e o atio ould d asti all aise the p ope t s selli g p i e.
Buying Property on Auction
Property auctions are getting more and more popular in Australia and
throughout the world. They provide low-cost housing for the person who
offers the highest bid. The problems which this strategy holds are tied with
building and pest inspections as well as the ability to beat the competition.
A s a t ha k to e su i g ou ll get the p ope t is getti g the highest bid
prior to the auction. This can happen only if you work with a motivated seller
who would be happy to receive the desired money without launching the
auction.
Attending an auction requires signing formal documents in most states and
there is protection from fake bidders who make high bids for the benefit of
the seller. The auction strategy is a great opportunity for real estate
investors with an eye for detail who wish to renovate and resell.

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Renting on AirBnb
What AirBnB has made possible over the years is an excellent opportunity
for open-minded travel lovers and homeowners to rent their housing out to
tourists. The trend which brings most profit to renters is offering a culturallyauthentic or uniquely designed residential space, preferably in proximity to
local sights and monuments.
Renting on AirBnB is a process which closely resembles hotel ownership.
Homes which get the most reviews on the website are usually the ones
which offer the benefits of locality, hospitality and housing comfort.
Despite the possible income uncertainty, this strategy holds many
advantages and opportunities for high profit for a small financial investment.

Adrianna Huester

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About the author

Adrianna Huester is a real estate whiz and marketing strategist who works
in the house removal sector. She works with companies in Australia,
helping them bound with their customers and provide quality services
tailo ed thei lie t s eeds. he is eage to sha e he k o ledge of the
great opportunities the Australian real estate market offers for property
investors and homeowners.
She currently works with Fantastic Removals Melbourne, a Victoria-based
company which delivers removal and cleaning services to homeowners,
tenants and property investors in the residential and commercial sector.
Website: http://www.fantasticremovalsmelbourne.com.au/