Investing Fundamentals

Investing Fundamentals

Taking the step into investing in property requires the buyer to be as informed as possible before making your selection. Not only of the property itself, but also of the location of the property, style, layout, inclusions, how your finance is structured and even down to how valuations have been performing. No one can do all of this themselves so we must have a team around us. Turnkey Property Group has assembled an expert team of professionals to assist you in this important step to secure your financial future.

What does that mean?

Turnkey Property Group provides a ‘concierge’ style service designed to take the bulk of the work away from you to leave you to focus on the important things in your life. Property investing shouldn’t be hard work.

Among other things it means:

  • Giving you access to our expert panel of professionals including Conveyancers, Financial Planners, Wealth creation strategists, Finance brokers etc
  • Educating you on what part of the country represents the best value right now
  • Determining what type of property are you looking for
  • Establishing if you are a positive cash flow or capital growth investor
  • Gaining clarity on your current financial situation

With so much information in the market (and not all of it designed with your best needs in mind), how do you navigate the noise to find a property that is poised for strong capital growth with high yields that suits you?

Here at Turnkey Property Group, we believe that our products speak for themselves. As investors ourselves, we’re only interested in property that fits the criteria of:

  • Strong potential for growth in established locations
  • High yields to secure your cash flow
  • Low vacancy rates to ensure you’re not out of pocket
  • Multiple pillars of industry ensuring jobs in the area
  • Supported by significant government investment in the area

If we look at these criteria more closely you’ll see what we mean.

Solid potential for growth – Chasing positive cash flow property can serve a purpose in some portfolios but may not always be the best strategy to get ahead in property investment. Positive cash flow of a couple of thousand dollars a year is attractive, but the greater gains are made in capital growth.

This can be challenging for some investors to appreciate so look at this example:

  • A property worth $450,000 that appreciates in value only 5% over 12 months rises in value by $22,500
  • Over 2 years with 5% growth p.a. this represents growth of $46,125
  • For a normal purchase this is equity that you will be able to tap into in order to help finance another purchase in future. That capital growth of $46,125 can be used as a deposit for a new property
  • Generally, the greatest opportunities for growth are in the outer suburbs of established cities and right now Australia is seeing very high growth in all capital cities.

High Yields to secure your cash flow – While we don’t directly target cash flow positive properties we still look to ensure our customers are not out of pocket each week. There are hundreds of opportunities around the country where the investor can purchase a quality property in a high growth area and still be in front around $40 per week after taxes and claims.

Turnkey Property Group targes yields at a minimum of 4.5%. A yield is established by multiplying the total rent for the year by the total purchase price:

Rent = $450 / week, annual total $23,400

Purchase = $450,000

$23,400 / $450,000 = 5.2% yield

Yields of this level will ensure you’re not out of pocket each week and you can still own a high performing investment property.

Low vacancy rates to ensure you’re not out of pocket – Vacancy rates over 3% mean tenants will have more bargaining power to request reduced rents or the market will not support rent increases. You need to ensure you asset is protected by having a rent that increases slightly each year.

Turnkey Property Group will target areas where vacancy is low and rents paid are at a premium to be in that area. This will also ensure annual rent increases in line with the growth of the area.

Multiple pillars of industry – This means, don’t invest in one-horse towns. This part is absolutely critical and is where many investors have failed, subsequently losing tens of thousands of dollars.

What’s a one-horse town? A town that relies exclusively on one industry, like mining for example, with no other industry, is what we consider a high-risk investment. Any area you choose to invest in should have at least 5 – 6 solid pillars of industry such as:

  • Government
  • Manufacturing
  • Construction
  • Health
  • Tourism
  • Farming
  • Minerals
  • Port facilities
  • Transport hubs etc.

This way, if any one of those industries close down the whole market is not left exposed in a vacuum.

There has been a push in recent years by property marketers looking to sell ‘opportunities’ for investors in remote mining towns and while some investors did very well from this strategy, it is high risk. The majority of investors have lost money and have a property that declined in value.

Supported by significant government investment in the area – If the state or federal government is spending hundreds of millions of dollars in an area, this is a clue that their research indicates the area is set to grow. Look for things like highway widening or extending train lines, large government offices opening, hospital developments etc.

Infrastructure of this type will always create jobs and attract new people to an area, two of the key ingredients to property investing.

We understand this is a lot to contemplate and in these time poor lives we lead we know that you want the best service possible. If you’d like the opportunity to speak to one of our experts, fill in the form to the side of this page for a free 15-minute, no obligation consultation and you’ll be contacted by a real person to discuss what kind of property investor you want to be.