Your Property Investment Strategy for 2022 and Beyond REVEALED

It’s no surprise that 2022 is already shaping up to be a mighty growth year in real estate, with property investors and buyers already seeing major uplift across most major Australian and New Zealand markets. 

Right now, everyone wants a slice of the real estate pie, the problem is that many investors don’t know where to start. This is because 82 per cent of Australians and Kiwis don’t have a wealth plan. Only a measly one per cent actually end up wealthy, with a mere three per cent classed as financially secure. 

Real estate is going to beat inflation, your savings, and your superannuation. Having a solid property investment plan in place could put you in that one per cent as you move closer to retirement. 

The strategy I’m going to dive into is the one I’ve used personally because it allows you to not only end up asset rich, but also cashflow rich. I call it the Five Cities, Five Properties Plan.

FOCUS ON YOUR DEFENSIVE ASSETS FIRST

When I’m investing, I like to break up my assets into three sections – defensive assets, dividend assets, and speculation assets.

The success of the Five Cities, Five Properties Plan is built on defensive assets. These are the backbone properties of your portfolio and what they do is ensure your investing plan is backed by growth. 

When growth happens in real estate it can be short but very sharp. So, we need to ensure we have some strong assets that are always going to be in demand and be the first pick of the litter. 

Buying well means choosing A-grade properties, and whether these are houses or apartments – location and quality of the real estate are what will determine its value. The better we buy, the easier it will then be to extract equity from that property to service more debt and buy again.

Therefore, our first property may actually give birth to a second property, and eventually a third property – as long as we choose real estate that will perform. 

WHY LOCATION DIVERSIFICATION MATTERS

The reason why I call this the Five Cities, Five Properties Plan is because quite often, after you purchase your first winning asset, it might not be possible for you to buy again in that same premium location. 

In Australia we have five core cities: Perth, Adelaide, Melbourne, Sydney, and Brisbane.

For our first asset, we want to put in a major city within one of the best performing capital growth suburbs. 

However, if we spend $800,000 on our first property, we might only have $600,000 we can use to put towards the next. So, when it comes time to lock down that next asset, you’ll need to branch out and choose a more affordable city where you can still get that prime level of real estate.

Imagine you’re building an Australian portfolio right now. You might start by looking at A-grade Sydney properties, then move to A-grade Melbourne, then Brisbane, Perth and finally Adelaide or Canberra. This pattern, that I dive into further below, is how we build a strong portfolio using value propositions. 

Additionally, while the compounding effect of having your assets in different marketplaces really allows for growth, it also allows for diversification so that your portfolio isn’t just experiencing the impacts of one particular market.

FOLLOW THE TOP-DOWN APPROACH TO CITIES

In Australia, we have some incredible cities which we get the opportunity to invest in. However, when following the Five Cities, Five Properties Plan, there is a top-down strategy we should be following as mentioned above.

Firstly, we want to buy into the best cities we have – global cities – that attract huge attention both domestically and internationally. These are undeniably Sydney and Melbourne. 

If you can afford to buy quality A-grade real estate in Sydney, you absolutely should. Of course, most people can’t with the median housing prices hitting $1 million. Premium property in Melbourne isn’t that much better either. However instead of compromising on quality or top growth suburbs, we then move on to the next tier of cities: new world cities. 

New world cities are places like Brisbane and Perth. Next comes the primate cities: Hobart, Adelaide and the Gold Coast. Then finally, the fetus cities: places like Toowoomba and Wollongong. 

When you follow the Five Cities, Five Properties Plan you will likely end up buying real estate in each of these city types. Just ensure that you’re buying from the top down, with your first two assets being A-grade properties in global or new world cities. 

IMPROVE YOUR FINANCES IF YOU NEED TO

Now if you want to build your Five Cities, Five Properties Plan to the point where you end up earning say $3,000 a week from your investments, you’re definitely going to have to have a strong understanding of finance. 

Before you even get started, you’re going to need a deposit. That could be savings in the bank, other investments that have already gone up, equity from your home, or grants from the government like the first home buyer scheme. 

Unfortunately for many this is where the extent of their relationship finance ends, and it’s not good enough. Did you know that in Australia there are approximately 145 different loan types you can get?

For example, borrowing money off Westpac might mean you can afford a $500,000 property, but borrowing off Commonwealth Bank could see you affording a $600,000 property. See how this makes a huge difference when it comes to buying that first A-grade property! 

On top of that, going for your second, third or fourth property means you have to sort out a deposit all over again. You can’t simply buy a property and expect it to pop out two more, especially if lenders consider your serviceability to drop. 

In this instance, you’re going to have to hustle. Asking for a pay increase, getting a second job, starting a side business – all of these things may require a commitment if you want to build a portfolio. If you’re still struggling to understand your finance, a good financial broker can also help.

EVERY STRATEGY NEEDS A FOUNDATION

With the Five Cities, Five Properties Plan, purchasing your core assets well is what is going to help you succeed. Aim for five A-grade properties as these will become fantastic growth assets for you in the long term. Once you have the backbone of your real estate portfolio in place, you can accelerate. 

Not sure where to go from there? Our expert property coaches are exceptional at finding new opportunities for investors to pursue based on their goals. You have a chance to meet the team and pick up some insider tips at one of our free real estate investing nights. 

Becoming a better investor is only one click away – book here. 

By Sam Saggers