Episode Details

Today is the first birthday show of the Michael Yardney Podcast.

Rather trying to come up with something new, I decided to try and distill the information, investment philosophies, tips and tricks that I and my guests have shared with you over the past year.

As you listen to today's show you'll hear some of the most important insights I've shared over the past 52 weeks, all in one episode. I've called it….

The Rules of Property Investment

1. Become financially fluent

The secret to financial freedom is to spend less than you earn, save the balance and then wisely invest your savings in growth assets.

Learn how money, finance and property works and start investing early so you have time and compounding on your side.

2. Adopt a proven investment strategy

Smart investors follow a system to take the emotion out of their decisions and ensure they don't speculate.

This may be boring, but it's profitable.

Wealth is created by building a substantial asset base.

You do this by holding good investments for a reasonably long time, reinvesting the income you're receiving and allowing your capital gains to build up.

Residential real estate is a high growth, relatively low yield investment, so I recommend a capital growth investment strategy.

3. There is not one property market.

While many people generalise about "the" property market there are many submarkets around Australia.

Each state is at a different stage of its property cycle and within each state the markets are segmented by geography, price points and type of property.

4. Not every property is investment grade

Remember that while the location of your property will account for around 80% of its performance, it's also important to own the right property to suit the local demographic.

There are around 9.6 million dwellings in Australia and at any time there are about 250,000 properties for sale.

But not all properties make good investments!

In fact, in my mind less than 2% of the properties on the market currently are what I call "investment grade."

While there are a lot of properties built specifically built for the investor market – think the many high rise new developments that are littering our cities – most of these are not "investment grade."

Some would call these properties "investment stock" – they are what the property marketers and developers sell in bulk to naïve investors, but they are not "investment grade" because they have little owner occupier appeal, they lack scarcity, they are usually bought at a premium and there is no opportunity to add value.

On the other hand, investment grade properties:

• Appeal to a wide range of affluent owner occupiers
• Are in the right location. By this I don't just mean the right suburb –one with multiple drivers of capital growth – but they're a short walking distance to lifestyle amenities such as cafes, restaurants and parks. And they're close to public transport – a factor that will become more important in the future as our population grows, our roads become more congested and people will want to reduce commuting time.
• Have street appeal as well as a favourable aspect or good views.
• Offer security – by being located in the right suburbs as well as having security features such as gates, intercoms and alarms.
• Offer secure off-street car parking.
• Have the potential to add value through renovations.
• Have a high land to asset ratio – this is different to a large amount of land. I'd rather own a sixth of a block of land under my apartment building i