How to Spot an Investment-Grade Property

When it comes to real estate, not all properties will make a good investment, so it’s important to understand what constitutes investment-grade.

Recent trends in the Australian property market have brought forward a new crop of savvy property investors who are looking for secure and profitable investments. With more than 500,000 properties sold in 2021 alone, it’s clear that investors have plenty of options when it comes to finding a property. However, not all properties represent a sound investment, so it is important to understand what makes an investment-grade property.

Before looking at what constitutes an investment-grade property, let’s examine why real estate remains such an appealing asset.

Why Invest in Property?

Property investment remains one of the most assured ways of building long-term wealth. Offering strong, stable rates of capital appreciation and steady cash flow, property investment is considered low risk and high reward. Add in the liquidity property offers – the ability to take your money out either through selling or borrowing against your investment – and you have a robust investment option that stands the test of time. On top of all this, you can receive considerable tax benefits, making investment real estate a smart move in today’s economic climate.

How Real Estate Underpins our Economy?

The property industry is a core foundation of Australia’s economy – an industry that carries tremendous significance in our society and prosperity. The pioneering nature of this sector sees it employ more than 1.4 million people and a significant contributor to our economy through taxation revenue (combined tax revenue on property), to the value of more than $34 billion annually (ABS).

Taking a page from Warren Buffet’s book of sage advice, property investors can unlock the key to long-term success. By investing in something they’d happily “hold if the market shut down for 10 years”, property can generate a steady income and provide financial returns that are resilient to inflation. Via capital gains, rental income, tax benefits, and equity, investors can create a secure, reliable income and attain financial freedom.

This is why it is so important for investors to ensure they choose a quality investment-grade property – one that meets their financial objectives and offers a maximum return on their money.

What’s the difference between Investment-Grade vs Residential Property?

When it comes to real estate, not all properties will make a good investment. There’s residential property you buy (a home) for living in, and properties that are designed to generate revenue. When considering purchasing an investment property, you’ll apply a more rational approach, focussing on key fundamentals like location, capital growth, rental yields and tax benefits. Versus a residential purchase, in which buyers will often be swayed by their emotions and family needs or circumstances. This could mean choosing a property with features like a large garden or a pool, that you may put to the side when making an investment decision.

Zeroing in on the fundamentals needed for an investment-grade property means not only better ROI but less risk.

So what exactly makes an Investment-Grade Property?

The potential for high rental yield

Purchasing investment properties that appeal to tenants is key to unlocking a high rental yield. Factors like location, access to public transport, proximity to schools and amenities, will all affect rental demand. A good quality property in a desirable area will attract higher rents than an average one, and should be at the top of your list.
Strong capital growth

History has shown us that property markets trend upwards over time. Your investment should show positive capital growth in order to justify the purchase and be a worthwhile investment. If a property has consistently gone up in value over time, you can be assured that it will continue to do so in the future.
Quality design and construction

When investing in real estate, quality construction and design should always be at the top of your list. Buying an investment property that is well-built, with quality materials and craftsmanship, will ensure the longevity of your asset.
Immediate equity

Purchasing off-the-plan properties from a reputable developer, or partner such as Ironfish, offers an exciting opportunity to potentially access equity from day one of ownership.

Why Location Remains Key?

Location should always be foremost in your mind when making a property purchase. Property is all about location, so understanding the market, current trends, and its potential for capital growth is paramount. Look for properties in areas with strong market fundamentals, such as access to employment opportunities, good schools, and transportation links.

Generally, neighbourhoods with excellent infrastructure, shopping centres, and facilities tend to be in closer proximity to the CBD, which means they are in higher demand and will likely increase in value over time.

Why you should invest in 20-minute neighbourhoods?

The term “20-minute neighbourhoods” is becoming increasingly popular among property investors in Australia. This refers to areas that can be reached within a 20-minute walk or bike ride from home. Suburbs that are designed with convenience and accessibility in mind feature the following hallmarks:

employment opportunities
local shopping
good transport links
local schools
parks and playgrounds
green spaces for communal wellbeing and enjoyment
sport and recreation activities.

As can be seen, 20-minute neighbourhoods provide an ideal environment for families to live and enjoy, meaning that these suburbs are in high demand. This makes them an excellent option for property investors as these areas are likely to increase in value and generate a high rental yield.

By investing in a 20-minute neighbourhood, investors can rest assured that they have invested in an area of high demand and potential capital growth.

Hallmarks of a 20 Minute Neighbourhood

Final thoughts

Not all properties qualify as investment-grade, and it takes a certain level of expertise to identify the right ones. It’s important to do your research and understand what makes an investment-grade property, so that you can make an informed decision when choosing a property.

By considering the factors outlined above – rental yield, capital growth, quality construction and design, immediate equity and location – you’re more likely to make a successful property investment. Additionally, by leveraging the expertise of a professional property advisor, you can ensure that your investment is in the right location and meets all criteria necessary to generate positive returns.

At Ironfish, we only recommend investment-grade properties that are likely to provide attractive returns. Our investment strategy is built upon the principle of investing for the long-term, with a focus on steady capital growth and financial sustainability.

As experienced investors ourselves, we understand the importance of choosing the right property in the right location. Our mission is to provide our clients with knowledgeable and expert property investment advice, as well as access to quality properties that are designed to maximise returns.

If you would like to learn more about our investment strategy and how we can help you achieve your financial goals, our free 45-minute strategic analysis session is a great way to get started.

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The potential for high rental yield

Strong capital growth

Quality design and construction

Immediate equity

Hallmarks of a 20 Minute Neighbourhood