How to choose an investment which outperforms market averages?

So we’ve discussed the concept of the property cycle, identified the long- and short-term factors that contribute to property price increases, and of course, we already know that investors need to put an effective investment plan in place in order to outperform market averages.

The key to achieving above-average capital growth is buying the right property at the right price, and most importantly, in the right location.

The system that we use at Metropole - which has helped many clients build substantial property portfolios by identifying properties that outperform the averages for growth - is what I call our top-down approach (going from the macro to the micro).

This starts with examining the macro factors affecting our property markets and drills down to the micro-level.

Step one: We start by looking at the big picture – the macroeconomic environment.

Step two: We then look for the right state in which to invest - this is one that will outperform the Australian market averages because of its economic growth and population growth.

Step three: We look for the suburbs within that state which will outperform with regard to capital growth.

We’ve found some suburbs have 50-100% more capital growth than others over a 10-year period so obviously, those are the suburbs we target.

These will be areas 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 disposable incomes.

These are often gentrifying neighborhoods as well.

Step four: Then we look for the right location within that suburb.

Some liveable streets will always outperform others within those streets.

Step five: Likewise, some properties will always be more desirable than others so we look within that location for the right property.

And finally, we only buy at...

The right price, but I’m not suggesting a "cheap” property - there will always be cheap properties around in secondary locations - I mean the right property at a good price.

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Jason Gwerder
Tuesday, 9 August 2022

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