Investment & Development Advice

If you’re looking for the fastest way to generate huge profits through the real estate market, look no further than property development.

As an investment strategy, property development requires you to navigate significant risks and pony up a large amount of money – probably more than any other method. Property development also involves working to strict timelines and having strong plans in place.

But if you can pull all this off, the result will be one or more properties that have significantly increased in value and the ultimate reward of potentially life-changing wealth! 

As property development consultants in Melbourne, my team and I offer an end-to-end service for residential developments. From planning and project feasibility to securing a profitable development site to finalising the planning, design, permits, and tender documents, we do it all.

Property Analytics knows how to do it, and now you can too. Here is our introduction to how you can make money through property development.

What Is Property Development?

Property development is the process of acquiring a block of land, looking past the existing structure, and developing that block to help it reach its full potential as a wealth-generating investment. Property developers use three basic strategies to add value and increase profits.

The first two are subdivision and construction. By subdividing the right block of land, you create multiple lots that you can sell for a greater price per metre squared. And by constructing residential properties on each block that homebuyers will pay a premium for, you generate even more value. 

For example, a common approach to property development includes buying an old house, knocking it down, subdividing the land into smaller lots, and building anything from a side-by-side duplex to 12 separate townhouses.

As well as subdividing and building, renovating is the third value-adding tool that property developers use. For example, some developers will retain the existing dwelling and renovate it to add value. This is usually paired with a strategy where the land is subdivided, and a new property is built next to or behind the newly renovated dwelling.

Not every property development project is about turning a single block into as many lots as possible. Rather, property developers seek to understand the needs of an area and select a block and development strategy that will provide maximum value – all while considering the impact of zoning constraints, easements on the land, purchaser demand, market values, and more.

Property development projects can be as simple as subdividing a block of land, but the most successful projects usually combine at least two of subdivision, construction, and renovation.

In the example above, Property Analytics secured the property and the client rented out the existing dwelling while we subdivided the back portion and later sold the vacant block.

Property Development vs Real Estate Investing

A real estate investor is someone who purchases one or more properties with the goal of selling them in the future when capital growth has skyrocketed. Some investors will aim to positively gear their investment properties by renting them out for income. Others will be happy to simply retain the property and enjoy the tax benefits of negative gearing.

A property developer is someone who aims to actively value-add to their asset through the processes of subdivision and construction described above. There is a lot of skill in developing a property to its full potential, and the process usually comes with tight timeframes and small margins for error.

So, in essence, both developers and investors are aiming to generate profits through real estate, but a developer is much more actively involved in increasing the value of their asset.

Of course, there is plenty of crossover between the two. A developer will choose to leverage their completed properties for equity, high rental returns, or a profitable sale – just like any other investor. And while investors often rely on passive asset appreciation to generate capital gains, a good investor will know when to put on their renovator or developer hat and actively add value to their investment.

Here’s How Property Developers Make Money (It’s Simple… In Theory)

Just based on what I’ve told you so far, it’s easy to see how property developers make money. Turning one $800,000 block of land into five subdivided blocks worth $300k each is a profitable undertaking.

Similarly, taking an old house in a good neighbourhood and turning it into two modern, double-storey townhouses – like in the plans below – can more than double the value of your investment…

So, what do you need to make this happen?

5 Things You Need As a Property Developer

1. You Need Money to Get Started (and to understand every cost)

There’s no getting around it – you need a base of funds and some cash flow to get into property development. This could come from cash savings, pooling funds with someone you trust (but only someone you trust) or equity from your home or another investment property.

The harsh reality is that you’ll need to spend at least $1 million to make $200k+ in profit in the Melbourne property development market. 

Just some of the funds you will need include:

• 25-35% deposit for your development loan
• Funds for stamp duty on the property purchase and other professional and government fees/charges
• An allocated budget per block of land you want to create
• Legal funds (conveyancing)
• Money for construction costs and consulting fees
• Cash to pay rates and taxes
• Significant extra funds if you go over budget during the development process (your buffer/your contingency funds).

It’s hard to talk exact numbers without understanding your current financial position and development objectives. When you partner with Property Analytics, you can be sure that all costs have been detailed thoroughly prior to purchasing your development site. This includes the costs you care about most – the profits you can expect for rental income, sales, and future capital growth.

2. You Need a Trusted Team Around You

The best way to lose money in a property development project is by trusting the wrong people to help you with the process or by trying to tackle everything yourself.

Or in other words, it takes a village.

For example, you will need a buyers advocate in Northcote or any of Melbourne’s other 400+ suburbs you are targeting. These experts can research, shortlist, and secure the property that’s ideal for your property development project. 

You will need tax and financial advice in relation to Capital Gains Tax (CGT), Goods and Services Tax (GST), holding costs, development costs, and forecasted profitability.

You will need a mortgage broker or development loan expert to help you secure and structure a loan that’s best suited for your project, and you will need someone to deal with local councils, navigate zoning complications, and more.

Some other professionals that will be important on your developing journey include:

• Architects/home designers
• Town planners
• Lawyers
• Accountants
• Engineers
• Contractors
• Quantity surveyors
• Project managers
• Real estate agents (a necessary evil)

As you can see, assembling the right team is hard enough – and that’s before you’ve put anyone to work. 

That’s why your property development consultant is the most important professional in your network.

Property Analytics not only does the hard yards to select the right property for your project, but we also help you establish the relationships that are crucial for property development success.

3. You Need a Development Plan Backed By Feasibility Reports

Minimise risk. Maximise ROI. These are the goals that you must keep in mind when planning a development project. 

A property development plan lays out your financial position, your borrowing power, and your development objectives. Essentially, it creates the brief that your development advisors and buyers agents can follow to create a concept of what your development might look like.

Once you have this concept, you need to measure it against reality. That’s where a feasibility report comes in. For every potential project site, you need to ask yourself:

• What are the costs? Including acquisition, holding, construction, council fees, planning costs, etc.
• How much equity/funds are required?
• What kind of debt will you be required to take on for the project?
• What are the tax implications of the development?
• What restrictions are there, including overlays, covenants, and easements on the title?
• How long will the project take to complete and what is the market going to do in that time?
• What is the projected profitability of the project based on the development plans?

Development planning and feasibility are all about giving yourself as many facts as possible before jumping in. You need to know what you want to achieve; you need to understand what you can achieve, and you need to secure the right piece of real estate to make your development as seamless as possible.

4. You Need the Right Block of Land in the Right Location

Land has always been a fundamental aspect of property investment, but it becomes even more important when you’re planning to actively develop the land.

How large is your block, what zoning constraints does it have, and what easements, covenants, and overlays are on the title? Is the block flat or sloping, what trees and vegetation are on the land, and are you allowed to remove these trees?

These are just some of the land-related questions you need to ask before buying a block.

Many developers recommend buying a block that can be turned into at least three properties because there is a lower profit margin for dual occupancy projects. But it’s also important to work within your limitations and towards your goals. Going bigger on your development isn’t always the easiest move, especially if you could achieve similar results with multiple smaller-scale development projects. With this approach, you can also take the equity or funds you generate from your first development to more easily fund your next one.

When it comes to location, I don’t need to tell you how important it is to pick the optimal suburb for your development.

Let’s put it this way. You could have two identical blocks of land with the same features and the same restrictions. One could be a development disaster and the other could be a roaring success, just because they’re in different postcodes! This could be due to differences in demand from end buyers, the strength (or weakness) of the market in your chosen suburb, and a range of other factors.

Different locations also come with different local councils, which could make your intended development a nightmare or a breeze depending on how they view your plans. 

5. You Need to Know When to Buy

Knowing when to buy isn’t always quite as important as knowing where to buy, but it can make or break your development project, so it definitely shouldn’t be discounted!

Broadly speaking, Australia’s property markets are cyclical, especially in capital cities and major metropolitan areas. Your goal should be to buy when the market is at a low point, complete your development on a strict timeline, and sell your properties when the market reaches its peak. Property markets typically experience up to 10 years of steady growth at a time followed by 3-7 years of retraction, and hundreds of fluctuations occur within these periods of growth and retraction.

Of course, you can still make money at any point in the cycle because you’re actively adding value to your purchase, and that’s the beauty of property development. But nobody wants to buy at the peak, blow their development budget, and sell when the market is at its lowest!

Timing the entry and exit of your property development can help you compound your capital growth even further, protect yourself against unexpected costs, and maximise your profits. 

The Property Development Process

Before You Buy

We’re at the very beginning of the process. It’s time to determine your savings, your borrowing capacity, and your equity position. You can then apply for pre-approval to buy your development site.

At the same time, your property development consultants can begin planning your development concept and shortlisting sites that suit your vision. Feasibility studies can be completed to determine every site’s development potential and outline all your costs and projected sources of revenue. This part of the process also includes checking the contract of sale and attaining advice from a range of consultants, from arborists and architects to town planners, project managers, and the local council.

Once you’ve settled on the perfect development site, it’s time to act.

Sealing the Sale

If your development site is as good as you think it is, you won’t be the only interested party. It’s time to edge out the competition and get the best price for your development site through expert negotiation.

The best development consultants should also be expert buyers advocates. For example, if you partner with Property Analytics for your development project, we can act as your buyers advocates in Brunswick, Kew, and across Melbourne. Our team will shortlist properties and help you negotiate the best price through private sale or auction.

This goes a long way toward ensuring the profitability of your development project.

Planning and Approvals

With the preferred property in your possession, you can finalise your plans. This is the time when you polish up your designs and submit development applications in line with council guidelines. It’s also time to confirm title boundaries and draw up your plans to subdivide, as necessary.

With the due diligence that was completed pre-sale, this process should come with few surprises, although additional requests, objections, and delays may emerge during the process.

Some of the experts you will consult with at this stage include architects, town planners, and land surveyors.

Documentation and Drawings

With everything approved, you can have working documents and drawings written up and get started on the building contract. Depending on the scale of your project, you may need to consult with a quantity surveyor at this stage of the process. To finalise the working documents, you may need to consult with various engineers, including structural, civil, and soil engineers.

Before You Build

Everything is set in stone, and everyone is on the same page. If you haven’t already secured a builder, now is a perfect time. You should also finalise financing for the construction phase of the project. Your builder will want to see the building contract, and you will need to agree on everything from pricing and payment structures to the scope of the development, the responsibilities of each party, and timelines for completion. 

Provide the builder with all your drawings, calculations and specifications, and ensure that your contract states that all work must comply with these approved plans, as well as all other relevant regulations.

Construction and Completion

If you have partnered with Property Analytics, our team has project managed your development from planning to design all the way through to tender documents. We’ve partnered with our preferred team of consultants – from town planners to architects to engineers – and we’ve left you in a position where you’re ready to build.

Now it’s time to watch all those plans come to life. The construction process can typically be completed in around 12 months, and after paying a deposit, payments come at various stages throughout the process (base stage, frame stage, lock-up stage, fixing stage, and project completion).

Once the project is in its final stages, you can submit your subdivision plans and obtain separate titles for each property. After this, you must decide what to do with your completed development project. 

To Sell or Not to Sell… That Is the Question

At this point in the process, you’ve got your completed development project and you’ve spent a lot of money. But if you’ve done it right, you’ve also set yourself up for a handy return on investment.

I always say that a beginner developer should shoot for 12-15% ROI while experienced developers should aim for 20% Return on Investment. Whether that number is closer to 10% or 20%, you will gain invaluable skills and experience to make your next development even more profitable.

When it comes to cashing in those profits, you can sell your properties for an immediate profit or hold onto some of them as investments. Some people will complete a side-by-side development to live in one and sell the other. Many developers choose to sell it all and cash in, while others choose to hold onto all their properties for long-term gain. You can even sell your developments off-the-plan partway through construction!

Retaining your developed properties as high-value assets lets you benefit from generous rental yields, refinancing and equity options, as well as depreciation and capital growth in the long term.

The ultimate value of your real estate is often realised in the long term, but in the end, the decision to sell now or hold for later will depend on your financial position and the goals you set heading into the process. 

Property Development Can Change Your Life… Want to Find Out More?

After reading this article, you’re probably either keen to learn more about property development or ready to run a mile!

If you are still interested in property development in Melbourne, I would love to hear from you. My name is Andrew Stone from Property Analytics, and my team and I specialise in finding quality sites for small developers of all experience levels.

Property Analytics can find and secure your development site for a great price as your buyers agent in Kew East and throughout Melbourne. I can then guide you in all phases of property development, setting you up so you’re ready to build profit-generating properties.
Property Development changed my life, and it can change yours too. Call or email Property Analytics to find out more.

There are dozens of different strategies that you can adopt when investing in real estate, but generally speaking, there are two different philosophies or mindsets.

Short-term real estate investing and long-term real estate investing.

Both of these mindsets can result in big gains for property investors, but there are certainly differences when it comes to risk management, personal investment, and quite frankly – how stressful the whole process can be.

The good news is that you don’t need to commit to one or the other, and you could have a real estate investment portfolio with properties that are selected for the short term and others that have been selected for their long-term capital growth potential.

But is one of these mindsets superior to the other when it comes to real estate investing?

Let’s find out.

Pros and Cons of a Short-Term Real Estate Investment Strategy 

Short-Term Investing Advantages:

• Realise your Return on Investment faster by moving on the property and pocketing the profits sooner.

• A higher risk higher reward strategy, so you may end up with bigger net profits compared to long-term investing.

• No need for rental headaches, including zero property management costs, no difficult tenants, and no need for ongoing property maintenance.

• Learn a lot in a short amount of time. Short-term property investing will teach you about the local market, help you build relationships with property investment consultants in Melbourne, and introduce you to a range of other professionals. You can also get insights into renovating, developing, negotiating, dealing with councils, and more. Some of these lessons might be hard lessons, but you will learn them quickly and can apply them to your next investment!

Short-Term Investing Disadvantages:

• There are high transaction costs associated with both buying and selling real estate. If you’re buying and selling in a short period of time, you have less time to absorb these costs, which will eat into any profits.

• Real estate is illiquid, meaning it can be difficult to buy or sell, unlike other asset classes such as stocks. In this respect, real estate investing is much more suited to long-term strategies.

• If you can’t offload your investment by the set date, you will also need to consider the growing holding costs that you pay just for owning the property. 

• Short-term real estate strategies are usually hands-on and can be stressful! They often involve renovating or developing property – on a budget – in order to fast-track capital growth.

• Capital gains tax is higher for real estate investments sold within 12 months. If you sell in less than a year, you pay 100% of the capital gains at your income tax. If you hold the asset for more than a year, you are entitled to a 50% CGT discount.

• The sooner you sell your property, the less time it has to naturally appreciate. Melbourne real estate appreciates at an average rate of 8% annually, and a longer-term strategy could allow you to cash in on more asset appreciation and greater capital growth.

Common Short-Term Property Investment Strategies

• Usually lasts 12 months or less but can be on a timeline of a few years

• Typically high-risk high reward

• If you follow the data, complete feasibility reports, and do your due diligence, you can maximise your short-term rewards while minimising the chance of catastrophic failure

• Our Melbourne property investment advisors can help you define your timeline and build your portfolio for short-term gains, long-term retention, or a mix of both.

Renovate for Short-Term Gain

Your real estate investment isn’t likely to increase much in less than a year, and as a short-term investor, you need to overcome this obstacle. 

Often known as the “fix and flip” method, renovating for short-term gain involves selecting an investment property, making some smart renovations to add value, and selling it for a tidy profit.

It sounds simple, but a huge body of work goes into selecting the right property, making the right renovations, navigating council approvals, and overcoming those high entry and exit costs.

As a rule of thumb, you should aim to add $3 to your investment property for every $1 you spend. To maximise your ROI, focus on the bathroom, kitchen, and laundry. Smart, cost-friendly renovations like ripping up carpet to expose natural floorboards or a fresh coat of paint indoors can also go a long way to adding value. Landscaping and outdoor living upgrades should also be considered – especially at the front of the property (remember, first impressions count!)

Some other things to consider for a fix and flip strategy include:

• Choosing a property with good structural integrity. You want a fixer-upper, but not a money pit!
• Targeting properties that you can buy below market value, wherever possible, for increased short-term capital gains. Look for distressed vendors, dilapidated properties with good bones, or anyone who wants a fast, hassle-free sale.
• Finding a property in the right location – either a hot suburb or an up-and-coming area.
• Ensuring you have the short-term resources and finances to fund the renovations on a tight timeline
• Determining how much of the renovations you can do yourself and what needs to be left to the professionals.
• Taking care of all the admin and paperwork (approvals for work if required, consideration of tax implications, etc.)

Short-Term Rental Property Strategies

Strategies that focus on rental yield are usually longer-term strategies, but some investors approach rentals with a short-term mindset.

For example, if you own a property in a coastal or beachside area where demand regularly skyrockets, it might be worth pursuing a short-term rental strategy where occupants sign leases for weeks or months at a time – not years. That way, you can ensure your property is free for renters with deep pockets during the holiday season. 

Short-term rentals can generate much higher profits during peak season, and a shorter occupancy time makes it easy for you to have the property professionally cleaned and maintained regularly, helping to keep it in good condition. 

As well as flexibility and greater earning potential, short-term rentals also allow property owners to use the investment property themselves if required. The end of the current rental period is never too far away, making it easy for you to plan a holiday of your own once in a while!

Of course, this Airbnb-style approach to renting is highly situational, and you need to own the right type of property in the right sort of location. But if you are in a position to pursue a short-term rental strategy, it may be worth its weight in gold. And the best part about it is that you can reap the benefits of short-term investing while retaining your asset and repeating the strategy for years and years.

Property Development As a Short-Term Investment Strategy

The short-term approach to property development is much like the renovation strategy mentioned above. You buy a property or block of land and develop it to add as much value to your purchase as possible.

You could subdivide and build multiple townhouses, keep the existing property and build a new detached house on the remaining land, or buy a block that has already been approved for specific property development projects – plans and all!

Once the project is complete, you can sell your developments, pay off your loans, pocket the profits (minus taxes), and move on to your next project.

An even more stripped-back approach to property development is simply purchasing a large, vacant block, subdividing that land into multiple blocks, and selling the land for a higher price per square metre. You might have paid $800k for a 1,000m² block, but if you can sell four 250m² blocks for $300k each, that’s $400k in your pocket. Selling smaller blocks of land for a lower price will also attract more buyers, meaning more competition and more opportunities to drive up prices.

Of course, you will need to consider capital gains taxes, stamp duty, the selling agent’s commission, and other costs that will eat into your profits. Compared to the renovation approach, there will be more focus on the land and less on the house for development projects – especially if you plan on buying a vacant block or bulldozing any existing structures. It’s important to understand what you can and cannot build on the land, considering council bylaws, overlays, easements, covenants, and any other restrictions that may prevent your block of land from reaching its full potential.

Property development (and all the approvals and processes involved) take time, so this might not be the shortest of short-term strategies. For most projects I work on, there’s about a 2-year process from when you first purchase the development site to when you sell your developed properties. But as long as you manage the development costs, turning one property into two, or one block into five can be a profitable short-term strategy.

Pros and Cons of a Long-Term Real Estate Investment Strategy 

Long-Term Investing Advantages:

• Long-term real estate strategies allow you to invest passively. There’s a large body of work upfront to choose the right investment, but once this is done, you can enjoy the benefits of property appreciation and rental income without doing much at all.

• Long-term investments can generate extra cash flow via rental income. If you’re looking for a steady stream of extra money every month, a stable long-term investment could be perfect for you.

• The longer you hold onto your investment property, the more equity it can build. You can then leverage that equity to make additional purchases. In this way, you can use one long-term property investment to fund another (and another, and another – continually growing your portfolio).

• Long-term real estate investments come with tax benefits such as negative gearing or writing off interest, depreciation, and other property expenses.

• Investment properties have historically been able to weather rising inflation. Increases in the cost of living are also offset by increases in rental prices, allowing you to charge more for your rental property.

• Capital growth is the holy grail of real estate investing. And apart from proactive value-adding, the best way to add value to your investment property is to let it appreciate over time. 

Long-Term Investing Disadvantages:

• The longer you rent out your property, the more likely you are to come across troublesome tenants. From damaging your property to not paying rent on time to wasting your time with frivolous legal claims, bad tenants can be a headache for anyone pursuing a rental yield strategy.

• Empty properties that aren’t generating any income still have holding costs that need to be paid. If you’re struggling to find your next tenants or you’re foregoing a rental strategy altogether, these costs will need to come straight out of your pocket.

• Depreciation can happen, and when it comes time to sell, your property might not be worth as much as it once was. There are many steps you can take to select the “right” property and mitigate these risks, but you never know what things will look like economically or politically in 10 or 20 years. All these factors and more can cause your property to drop in value over time.

Common Long-Term Investment Strategies

• Medium-long-term strategies last as little as 4 years and as long as a few decades!

• The aim is to ride out the many cycles of the property market and emerge with significant capital gains

• Along the way, you might take advantage of rental yield (positive gearing) or tax offsets (negative gearing).

• Typically lower risk, although nothing is guaranteed in property investing

The “Buy and Hold” Method 

The “buy and hold” method essentially involves purchasing an investment property, waiting for it to appreciate as the years go on, and eventually selling it for a tidy profit. This approach involves chasing capital gains by selecting a property with ongoing appeal and growing demand.

You don’t need to renovate to add extra value, and you don’t need to rent the property out to take advantage of rental yield (although, you can do both these things as part of your buy-and-hold strategy if you choose). Just sit back, relax, and use a negative gearing strategy to offset your expenses and lower your taxable income if necessary.

If you don’t want to sell the property, you can take an even longer-term approach. Assuming your property has increased in value as planned, you can leverage the equity and use those funds to purchase your next investment property – double the assets, double the gains.

If you were attempting a short-term “buy and hold” strategy, the timing would become extremely important. If you are not giving your property years to appreciate, you need to try and buy at the lowest point of the cycle and sell at the highest point. 

Timing is still a factor for longer-term “buy and hold” strategies, but if you have all the fundamentals in place, then the years your property has had to appreciate will mean you’re still making a great profit, even if you sell when the market is a bit flat. But hey, you’ve held the property for this long – why not wait a little bit longer?!

Long-Term Rental Property Strategies

As I mentioned above, you can always combine a “buy and hold” method with a rental yield strategy. Properties that are good candidates for capital growth are often also suitable for producing plenty of rental income. Look for homes in strong or emerging neighbourhoods and consider things like school zones, population growth, nearby amenities, proximity to universities, hospitals and other high-wage industries, and overall changes in the job market.

If your investment property is positively geared, it’s generating more money in rental income than what it costs to upkeep the property. You can then use that extra income to fund your next investment or any other expenses. If your rental income isn’t making you enough money, you can still take advantage of the tax benefits associated with negative gearing.

Long-term rentals are much more common than short-term rentals. Some things to consider when pursuing a long-term rental strategy include:

• Are you going to manage the property yourself or will you hire property managers/agents to find tenants, deal with issues, perform inspections, arrange/approve repairs, and take care of your investment property?

• Do you have a budget in place to pay for rates, repairs, insurance and more, even if you don’t have enough rental yield to fund these purchases?

• Do you understand all the tax benefits and drawbacks associated with this approach, including declaring your profits for the financial year or what expenses you can write off as part of your tax return? 

As investment consultants and buyers advocates serving Fitzroy and the wider Melbourne area, the team at Property Analytics can help you understand the pros and cons of long-term rental property strategies. While rental yield is a useful tool for property investors, we would not recommend prioritising it at the expense of capital growth.

For example, you may find a property with some appeal for renters, but you should also focus on the land and how this may contribute to the value of your investment over time. The endgame for any asset – even a rental property – is selling it for profit, so it pays to set yourself up for long-term success.

Land Banking

Land banking is essentially the “buy and hold” method except it skips the property altogether and focuses on acquiring blocks of land or undeveloped farmland. The idea is that you sit on this land for years – maybe even decades – while you wait for it to appreciate in value. Land is a limited resource, and eventually, you may be able to sell your investment to an aspiring home builder, a big developer, or maybe even a fellow investor for a tidy profit. Theoretically, there will be little to no maintenance costs for owning a block of land, but loan repayments, interest, land taxes, and council taxes can still apply.

Land banking still comes with its risks though, especially if you are buying undeveloped land that may not be zoned or approved for development for many years. Be aware of land banking schemes and scams, and make sure you do your research before buying an empty block of land.

Property Development As a Long-Term Investment 

We’ve already talked about property development as a short-term investment option, and many of the same points apply.

Your aim is to buy a property or block of land and develop it to its full potential. That could take the form of multiple townhouses, a duplex project, or even just a vacant block of land that you subdivide.

The difference here is that you don’t sell your development as soon as construction is complete. Instead, you hold onto the property for the long term and take advantage of all the benefits that come with it.

You could enjoy high rental yields from multiple brand-new properties, take advantage of depreciation tax benefits over time, refinance your property to access extra funds for your next development, and watch the strong capital growth roll in.

If you’ve done it all properly, that project that you poured so much time, money, and effort into is now a valuable long-term asset. You could cash in and enjoy the short-term wins, but it often makes more sense to retain your asset and reap the longer-term benefits.

Short Term vs Long Term – Which Is Better for Property Investing?

If you’re wondering whether long-term investing or short-term investing is better, you’re asking the wrong question.

Some better questions to ask would be “what should I look for in an investment property?” or “how can I grow my real estate portfolio?” Basically, whether you want to invest in real estate for the short-term or the long-term, you need to know how to do it well.

That’s where Property Analytics comes in.

My team can help you put a strategy in place, find the perfect property or development site, and help you close the deal through expert negotiations.

Based in Ivanhoe, we’re buyers advocates serving Kew East and all Melbourne suburbs. That means we’re experts in shortlisting suburbs and properties and buying investments on your behalf.

We’re also property investment advisers and development consultants in Melbourne. That means the properties we select are built around your financial goals and investment strategy. From detailed feasibility studies to putting all your development plans in place, Property Analytics takes care of the whole process.

All our services are backed by valuable market research that we not only have access to but have personally cultivated over the last decade. Our real estate analysts have their fingers on the pulse of emerging trends and historical data, and some of the largest, most successful industry professionals subscribe to our database. When you partner with Property Analytics, we put that data to work for you.
Become a master of real estate investing in the short-term and the long-term. Get to know Property Analytics and talk to us about your investment goals.

It’s easy to see why real estate is such an appealing investment option.

Residential property is all around us and unlike stocks or other asset classes, we all broadly understand how to make money from real estate.

You buy property, rent it out to pay off the mortgage, and eventually sell it for more than you bought it for.

Simple. 

Well, we all wish it was that simple. And as a property investment advisor in Melbourne, you might think that I would paint a rosy picture of real estate investing where it is all upside with no downside.

That’s what I’d love to tell you, but it’s not the truth and it’s not the way I’m built. A big part of successful real estate investing is being honest with yourself and those you work with.

In this article, I’ve compiled a list of 10 advantages of real estate investment, and I’ve paired each pro with a related drawback you could experience.

That’s 20 facts about what the world of real estate could have in store for you.

If you’re still serious about investing in real estate at the end of this article, I would love to chat with you about my approach to generating real wealth through real estate.

My name is Andrew Stone from Property Analytics, and here are 10 pros and 10 cons of investing in real estate.

PRO #1: The Average Annual Appreciation of Houses in Melbourne is 8%+

There aren’t many asset classes that you can rely on to consistently appreciate at around 8% a year, but Melbourne real estate is one of them.

Generally speaking, you can expect any well-chosen property to appreciate over time. 

This doesn’t mean that there won’t be corrections in the property market that hurt the value of your investment.

And it doesn’t mean that you can’t lose a lot of money by choosing the wrong property in the wrong place at the wrong time.

But with the right research and guidance, you can look forward to strong annual appreciation on your real estate investment over the long term. 

CON #1: Interest, Income, and Profits Can All Be Variable

Yes, investing in real estate is considered “as safe as houses”, but no, that doesn’t mean things won’t vary.

Interest can vary depending on a range of factors, and we’re not just talking about interest rates. We’re talking about interest in your property.

Depending on the state of the property market and the wider economy, consumer confidence can go up or down. This may cause your rental income to drop and the value of your asset to decline. At different points in time, there may be little to no interest in people wanting to rent out your property or buy it for a profitable price.

Maintenance costs will also vary over the life of your property, and the longer you hold your asset, the more chances there are for something else to go wrong. To avoid catastrophic maintenance costs, it’s essential to ensure a property is structurally sound before you buy it.

Of course, actual interest rates can also vary, which will affect your monthly repayments, and the implications of property taxes can range from beneficial to detrimental depending on your overall financial position. 

PRO #2: Real Estate Offers More Stability Than Other Investment Classes

When you leave annual appreciation and general variability aside, you’re still looking at a very stable asset when you choose real estate.

Yes, the property market goes up and down, but a more reliable growth trend means you can still take advantage of capital growth in the long run, assuming you buy and sell at the right time.

You can sometimes see investors losing millions overnight on the stock market, but it’s safe to say that the property market just doesn’t work this way!

CON #2: Real Estate Investments Take Time

Things don’t move as quickly in the real estate market, and while that means reduced volatility, it also means you need to be patient.

Real estate investing takes a long time in many respects. Firstly, a large body of work should go into selecting the right property for your investment. Once you’ve selected your property, you still need to be successful in buying it.

From there, managing a rental property can take up a lot of time – either your time or the time of the professionals you are paying good money to do it for you.

And if you’re going down the path of renovating or developing on your land – you guessed it – that will take time too.

Generally speaking, real estate investments are long-term investments. The huge, wealth-generating benefits of capital growth are what most people want, and it takes years for capital growth to reach its full potential.

Even if you’re planning to “flip” a property, you’re still looking at months to select, secure, renovate, and sell your investments.

On the other hand, you can usually buy and sell shares in moments, and if you’ve timed it right, you can enjoy big gains.

So yes, investing in property takes time. But yes, it can also be well worth the wait!

PRO #3: You Can Generate Positive Cash Flow with Real Estate!

Seeing your shares go up in price can be exciting, but you can’t actually use that money unless you cash out – and then your investment is over.

With real estate, you can generate passive income as long as your rental income is higher than your monthly mortgage repayments (and any other monthly payments you need to make).

With a higher rental yield, you can enjoy an investment that pays for itself, plus a little bit of extra cash that you can start using for anything you wish – including your next investment.

CON #3: Higher Ongoing Costs Associated with Investment Properties

I’ve already mentioned that investing in real estate will cost you time. And if it’s not costing you time, it’s costing you money (or it’s costing you both).

Buying and selling shares often comes with a small management fee, but while you’re holding your shares, it’s costing you nothing (except for the money you lose if it drops in value).

With property investing, you need to think about maintenance costs, insurance, council rates, owner’s corporation levies, advertising fees for finding a tenant, and professional service fees for a property manager.

And that’s just naming a few. 

Your rental income might be enough to offset all of that, but it might not. And tax breaks might give you all the help you need, but they might not. If you’re not interested in using your investment as a rental property, some of these expenses might not apply to you.

But regardless of all this, it’s important to consider all the costs associated with holding an investment property before you get started.

PRO #4: Real Estate Investment Unlocks the Power of Leverage and Equity

Leverage is one of the most powerful tools available to you as a real estate investor. Basically, this is the process of using borrowed capital (debt) to make your next move in the real estate market.

Leverage works because you are allowed to buy, control, and benefit from an investment property without paying the full price.

If you look at the common scenario of a 20% deposit, then you can buy an investment property worth $800,000 for just $160,000 upfront.

If that property appreciates a modest 5% in a year, it would then be worth $840,000 – a $40k increase.

But if you took that $160,000 and bought something outright, it would only be worth $168,000 – still a 5% increase, but $32K less for the same upfront price.

Better yet, you can take advantage of your property appreciation by refinancing and accessing a pool of money that you can use to make your next investment.

Finally, if you also have rental income that is paying off the capital on your mortgage, you are building equity in the property. This allows you to access even more funds, because not only is the property worth more, but your remaining debt is worth less!

CON #4: The Risk of Overleveraging

Leveraging can be highly beneficial if you understand the risks and act wisely. But ultimately, it still involves playing with borrowed money, so too many wrong moves could be dangerous.

Overleveraging is when you’ve borrowed so much money to keep making investments that you can no longer afford to keep making the minimum mortgage payments.

Maybe the market has dropped and your properties are suddenly worth much less, not more. Maybe repair and maintenance costs are spiking while rental income is drying up.

Your debt has become a burden that you cannot manage.

This may sound dramatic, and with the right advice, you can afford overleveraging. But becoming overleveraged is an all too common pitfall for over-eager investors, and they can quickly find themselves stuck in deep waters.

PRO #5: The Tax Benefits of Investment Properties

You can take advantage of several tax breaks when you own an investment property, most notably negative gearing.

Negative gearing is when the combined costs of your investment property outweigh the rental returns that are coming in. This puts you in a position of net loss, but you can then write this off at tax time.

Let’s say that you lost $5000 on your investment property in the financial year. Negative gearing allows you to remove $5000 from your taxable income, which reduces the overall amount you’re taxed on and may even move you into a lower tax bracket. 

Some investors deliberately pursue a negative gearing strategy that focuses on lowering their taxable income and waiting for the property to generate capital growth. 

Investors can also claim for the interest charged on their loan, as well as property depreciation (natural wear and tear), and certain rental property expenses.

CON #5: The Tax Drawbacks of Investment Properties

Investment properties can also add to your income tax, which is something to consider if you’re concerned about cash flow.

Any rental income you earn when your property is positively geared will be added to your income tax. This could ultimately push you into a higher tax bracket.

You will also face taxes for any profits you make when you sell your investment property (Capital Gains Tax), while an annual land tax may also apply.

Another potential tax drawback is choosing to pursue a negative gearing strategy without job stability. If you lose your job and you no longer have an income tax to reduce, then your negatively geared property is simply burning a hole in your pocket. If you cannot increase your rent or generate money from elsewhere, you may have to sell your investment.

Similarly, if your wage isn’t increasing, then a negative gearing strategy may have little or no benefit for you.

PRO #6: Real Estate Is a Physical Asset

Asset classes like bonds and shares can seem so abstract, but real estate is real.

You can visit your investment property. You can see it and you can touch it.

If the need arises, you can live in it, you can switch to a rental yield model to generate income, or you can knock it down and start building a series of townhouses.

Said simply, having a physical asset as your investment is not only comforting but also practical.

CON #6: Real Estate Is Illiquid 

Having a physical asset is great, but the problem with real estate is that it’s a physical asset with low liquidity. In other words, it can be much harder to buy and sell property compared to shares and other asset classes.

This makes it harder to get started in real estate investing, and it can put you in a tricky situation if you need money and you have to cash in your investment.

Selling property and accessing that money takes time, and even refinancing to leverage equity requires you to navigate the endless red tape and bureaucratic checkpoints that come with dealing with a lender.

PRO #7: You’re in Control and Can Actively Add Value

When you choose to invest in shares, that’s pretty much the last investment decision you’re actively involved in until you choose to sell.

Whether or not your shares grow or shrink in value is dictated by uncontrollable market forces and decisions that are being made by other people, probably sitting in a boardroom in a country on the other side of the world.

Real estate is local, not transnational, meaning you are right there and actively involved in the decision-making process. From the moment you buy, you can start making choices that add value to your property  

You get to choose whether you’re primarily pursuing capital growth or rental yield, positive gearing or negative gearing.

Most of all, when you choose the right investment property, you can quite easily add value to it through smart renovations and improvements.

If you want to take this one step further, you can target blocks that are ideal for developments such as duplex construction or multiple townhouses. Sometimes, you can even buy blocks that are already approved for specific development projects.

With our Melbourne property development consultants on your side, you can expertly select properties for development and have all the plans approved so you’re ready to build as soon as possible.

Sure, you’re still dealing with some uncontrollable property market forces. But you can smartly renovate your investment or turn one property into two, three, or more. This is a great way to actively increase the value of your investment, even when the market is flat or slightly down! 

CON #7: Investment Properties Are a Big Money Expense

Yes, you can actively add a lot of money to the right investment property. But real estate is also expensive to buy upfront in general. Any property worth investing in will come at a comparatively high price (even if it is a bargain), and this comes with inherent risks.

Sure, you can get into the market with a 20% deposit (or maybe less), but that other 80%+ will always be looming large in the background.

If something does go wrong and you need to sell, you’ll have to pay off a mortgage worth hundreds of thousands of dollars. And that price doesn’t drop just because your property value does!

Investment properties are big-ticket items that come with big risks, but also big rewards. It’s up to you to navigate those risks and come out on top.

PRO #8: You Can Build a Portfolio of Investment Properties

The aim of any investor is to build a strong and diverse portfolio that yields long-term gains. Ultimately, you want to be rich enough that you can forget about investing altogether and retire on a beach somewhere!

With investment properties, you can take advantage of a high-performing property to generate money that’s used to buy your next property. And your next one. And your next one.

You can invest in some properties that are positively geared and others that are negatively geared in a range of different high-performing suburbs.

And it’s possible to do all this without having to sell a single property, meaning your portfolio just keeps growing and generating robust long-term returns.

We’ve already discussed positive cash flow in point 3 and leveraging equity and debt in point 4, so we won’t revisit this here. But needless to say, real estate can be one of the best asset classes if you want to continually build and strengthen your investment portfolio.

CON #8: Higher Costs for Buying and Selling

Building your portfolio is all well and good, but you’ll need plenty of funds every time you buy a property. Sometimes you can access money by leveraging an existing investment, but you will invariably need to dip into your own pocket too, especially for your first investment property.

Buying costs for real estate can include:

• A substantial deposit
• Stamp duty
• Legal fees
• Transaction costs and transfer fees
• Mortgage application and registration fees
• Lenders’ Mortgage Insurance (LMI) 
• Connection or reconnection fees
• and more!

Selling costs for real estate can include:

• Advertising fees
• Auction fees
• Legal fees
• Building reports
• Any maintenance required
• All costs related to discharging your mortgage, including early repayment fees
• Capital Gains Tax 
• and more!

This is without mentioning the ongoing costs or holding costs associated with an investment property, which you can read about in Con #3.

PRO #9: Real Estate Often Outpaces Inflation

In 2022, we’re all familiar with inflation. This economic concept describes the rise in our daily cost of living due to the decline in the value or purchasing power of our money. Basically, it means your dollar doesn’t go as far.

For investors, inflation can also mean an erosion in the value of their assets. You see it all the time with the stock market. The actual profit you make from shares may be lower than the gains you see reported simply because of a reduction in purchasing power.

Investment properties tend not to have this problem due to their ability to keep pace with inflation and even outpace it in the long term.

Basically, as prices go up due to inflation, the rent you’re charging will also go up. Of course, interest rates also rise due to inflation, but theoretically, your increased rental yield should cancel this out. And if you have a fixed-rate mortgage, inflation cannot touch it. 

This is why real estate investments are often called a “hedge against inflation”

Regardless of inflation, the right investment property will still increase in value over time, and you can still take advantage of equity, leveraging, tax benefits and more.

CON #9: Exceptional Sales People and Exceptionally Difficult Tenants

This drawback can occur regardless of inflation, but it’s only more frustrating when market conditions are difficult!

Let’s start with exceptionally difficult tenants. The nightmare tenant can add to your expenses by increasing maintenance costs and waste your time with disputes and even legal action! Of course, the worst tenant is sometimes no tenant, especially if you’re aiming for a strategy built around rental income and positive gearing. If you’re aiming to use your investment property as a rental, it’s important to do your research to ensure your property and your tenants are both working in your favour.

Now let’s talk about exceptional salespeople. On the surface, that sounds like a positive, but what we’re saying is that real estate agents are sometimes very good at selling properties. If you don’t know what to look for, you can easily be convinced to invest in a lemon!

Basically, what we’re saying is that there are bad eggs in the real estate industry – just like there are in every industry. Sly real estate agents, nightmare tenants, and dishonest property marketers who are masquerading as buyers agents are just the tip of the iceberg.

But when you partner with the right people, you can avoid all the negatives associated with those bad eggs, and much more!

PRO #10: Real Estate Investing Is Accessible

We mentioned at the beginning that real estate investing is easy to understand. Yes, there is a lot to learn but anyone can understand the basic premise in just a few minutes.

On the other hand, concepts like shares, stock markets, and bonds can feel very opaque to investors. And when you start researching, it can sometimes become more confusing, with lots of contradictory advice from “experts” with vested interests.

Said simply, investing in shares can feel like trying to break into an exclusive club while real estate usually feels like “the people’s investment”.

And the more you understand something, the less help you will need to be highly successful.

CON #10: It’s Easy to Get Lost in All the Real Estate Data

Have you ever heard of decision paralysis?

Basically, it’s when you’re presented with so much information and so many options that you simply can’t make a decision. 

Real estate can be a bit like this. It’s easy to get started, but if you go down the wrong rabbit hole, you can quickly find yourself overwhelmed and unsure of what to do.

It’s important for investors to have access to reliable data, as well as someone who can tell them what that data means and how to take advantage of it.

The Melbourne investment consultants at Property Analytics can give you access to proprietary data and analyses that help you make smart investment decisions. Our data is so highly valued that some of the real estate industry’s biggest names pay for access to it.

As a Property Analytics client, you get this valuable data included as part of the service. Best of all, I will help you understand the data and actively provide services to find and secure the right investment property with the best strategy for your overarching goals. 

Want to Learn More About Real Estate Investing?

At Property Analytics, my team and I take a data-driven approach to finding and securing high-growth investment properties and development projects.

I won’t just advise you on real estate investments. I’m also a specialist buyers advocate in Metro Melbourne – from Kew East to Brunswick to Northcote. My services cover everything from shortlisting to bidding and negotiations to getting all the paperwork in order so you can start developing.

A big part of what I do is also advice and education. If you would like to learn more about investing in residential properties in a manner that leverages the pros, mitigates the cons, and generates real wealth, reach out today for a discussion!

When you’re buying or selling a home, you will partner with the same group of professionals for advice and services.

Lawyers or conveyancers, banks or brokers, property inspectors and pest inspectors. The list goes on.

But there’s one type of professional that sellers engage and buyers tend to skip. The real estate agent.

Sure, you will chat with plenty of friendly agents when shopping for property, but never forget, they are there to represent the best interests of their paying client, the seller. They are the seller’s agents.

Fortunately, there is a professional service for buyers that represents their best interests in the buying process from start to finish.

I’m talking about a buyers agent, also known as a buyers advocate. In this article, I’m going to tell you all about buyers agents, including what they are, how they can help you, and what to look for in a buyers agent.

What Is a Buyers Agent?

Buyers agents are licensed, accredited and insured professionals who represent buyers in the property purchasing process. A buyers agent will represent your best interests from start to finish, completing everything from researching a list of properties to auction bidding and negotiations.

It’s incredibly common to hire a buyers agent in North America and throughout Europe, and the profession is steadily growing in Australia. There are now many buyers agents in Melbourne, including the advocates here at Property Analytics.

Some buyers agents will help you to buy your dream family home, while others – like our team – focus on acquiring high-value, high-growth investment properties and blocks that are suitable for profitable property development.

Basically, a buyers agent or advocate buys property for a living, and the best agents have this process down to a fine art. So, a great agent can help you with everything from selecting profitable investments to negotiating the best price, and sealing the deal with a seamless handover.

What Exactly Does a Buyers Agent Do?

Property will be most people’s biggest asset. Even if you’re just looking at it as a roof over your head, it’s wise to select a property that will put you in a stronger financial position in the future.

In a nutshell, that is what a buyers advocate or agent can do for you, all while taking care of each step in the buying process.

For example, if you choose Property Analytics as your buyers agent in Preston, I will:

• Determine an overall strategy: Including what, where, and when you should buy. I will also explain why you should acquire each asset and how much you should aim to pay.
  
• Step-by-step tactics and tasks: Including property market analysis, shortlisting, property appraisals, feasibility reports, auction attendance and bidding at auction on your behalf, negotiating private sales, having contracts looked over, and full property handover services.

Your buyers agent will ensure building inspections and reports have been carried out, complete pre-settlement inspections, provide advice and reports based on proprietary data, and ensure the best price and terms have been negotiated to maximise the value of your purchase.

Buyer advocate services encompass risk management and reduction, client education, and more, resulting in a simple, time-saving experience for investment property buyers.

Buyers Advocate Benefits: When Do I Need a Buyers Agent?

When You are Time Poor, A Buyers Agent Does All the Legwork

If you’ve ever bought a property for yourself, you know how time-consuming the process can be.

When auctioneers tempt you with the idea that you could “get your weekends back”, they’re trying to whip you into a frenzy and get you to overspend… BUT they’re also right – buying a house is a full-time job.

For time-poor families and professionals, it only makes sense to hire someone who actually buys property as their full-time job. A buyers agent can save you a lot of time while achieving the best result much quicker and easier than you ever dreamed.

The buyers agent will be the one inspecting properties, scouring databases, attending auctions, and more.

The time-saving advantages that a buyers agent offers are particularly useful for property investors who are also time-poor working professionals, like doctors, lawyers, and administrators.

This is exactly the kind of client that my team serves every day as buyers advocates in Northcote and throughout Melbourne. We help you make valuable, wealth-generating investments that you otherwise just wouldn’t have time for.

Of course, buyers agents can also be valuable for busy families who want to save time in their property search, and there are agents out there who can help you with this exact task.

When You Want to Find Properties That No One Else Can, a Buyers Agent Is There

Most properties for sale go through the process of online listings, open for inspections, and auction or private sale. But sometimes sellers want to skip this process altogether, and that’s where off-market properties come in.

Off-market properties are either yet to be formally advertised or won’t be advertised at all. Instead, local real estate agents try to find prospective buyers for these properties quickly and privately.

A good buyers agent will have a relationship with local selling agents, giving them inside access to these properties. Because off-market sales have fewer advertising costs for the seller, you can often secure these properties for a better price, especially when you have a buyers advocate negotiating on your behalf.

Sellers who choose the off-market route are often attracted to the quick, no-fuss process, and it may also benefit them to offload their property swiftly and without any of the theatrics. This is another reason why off-market properties may go for a lower-than-normal price.

Off-market sales aren’t the most common. But if you have access to these properties via a buyers agent, you can snag a great deal – especially if you’re a savvy property investor.

When You Want Expertise Combined with Emotional Detachment, Choose a Buyers Agent

A good buyers agent doesn’t just know which property is right for you. They have data, a network of contacts, and real-world experience to ensure the optimal outcome without any missteps.

Buyers agents have a finger on the pulse of local market trends, a knowledge of how tax concessions can benefit your investment, and the ability to make decisions that strengthen your financial position and achieve your overall lifestyle goals.

The best buyers agent will be local with expertise in their niche, without being slavishly devoted to one developer or a single area.

For example, if you need buyers agents in Fitzroy or buyers advocates in Brunswick to help you find an investment property, there’s no point choosing an agent on the Mornington Peninsula who partners with owner-occupiers.

On top of all this expertise and professionalism, a buyers agent can completely remove the emotional element of property buying.

Even investors get caught in the trap of buying a house because they like a few features or they’re worried about the state of the property market. A buyers agent will remove all of this from the process to help you make practical decisions based on realistic information and up-to-date data.

When You Want to Bid at an Auction or Negotiate a Private Sale, A Buyers Agent Can Represent You

Buyers agents are there for clients at the pointy end of the buying process, and they know the best moves to make because they’ve done it all before.

A buyers agent can bid at an auction on your behalf, bidding confidently and working with the budget you have discussed. A professional buyer will sum up the mood of the auction and use a range of bidding strategies to achieve the best possible outcome on the day.

If a property is passed in or it’s being sold privately or off-market, a sales agent will leverage their relationships, objectivity, and negotiation expertise to achieve the best purchase price and terms for you.

A strategic approach to auctions and negotiations could save you tens of thousands of dollars.

When You’re Located Interstate, a Buyers Agent Can Help You Buy Locally

Picture this: You’re relocating your family from Perth to Melbourne and you want to have a home to move into when the plane hits the tarmac. A buyers agent can liaise with you to understand your needs, shortlist and inspect suitable properties, virtually share the properties with you, and secure a new home for the right price.

Now let’s look at a situation more relevant to Property Analytics. An interstate client might come for me to diversify their portfolio by purchasing an investment property in Melbourne. Without ever physically meeting, I can find and secure an investment based on the strategies and financial goals we outline together.

Buyers Agent Fees: Can a Buyers Advocate Actually Save You Money?

Real estate is expensive, so it’s natural to wonder if a buyers agent will save you any money on property prices, especially when they have fees of their own.

The truth is, there is no guarantee that a buyers agent, or anyone else, can save you money by ensuring a house sells for cheaper. At the end of the day, you still need the highest bid or offer for the successful purchase of property, and sometimes that will mean spending up to your budget.

But one thing a professional buyer can do is prevent you from making costly mistakes, and this can result in tens of thousands in savings:

• The impartiality of your agent will prevent you from overcommitting to a house you’ve fallen in love with when it’s not the best investment.
  
• The bidding and negotiation skills of your agent will prevent you from overspending due to emotion or inexperience.
  
• Your agent’s access to data and real estate market knowledge can mitigate risk, help you choose the right time to buy, and help you select the perfect property. This can play a large role in maximising the value of your purchase.
  
• Using a buyers agent for investment properties can generate wealth that goes well beyond knocking a few thousand dollars off the property purchase price. Their strategic and tactical thinking can help you secure investments that are likely to appreciate greatly in value, with further value-adding opportunities that can unlock even more capital growth.

This is without mentioning the countless hours, stress, and hassle that a good advocate will save you.

For their work, your property agent will charge a fee, which will either take the form of a fixed cost (which usually varies based on your price bracket) or a percentage of the sale price (usually +/- 2% plus GST). Some buyers advocates may also charge an engagement fee at the start of the process.

More Quick Buyers Agent FAQs

Buyers Agent Vs Mortgage Broker – What’s the Difference?

A mortgage broker is a finance professional. Mortgage brokers compare home loans and provide financial advice to help you find the right lender.

A buyers agent is a real estate professional who offers an end-to-end house-buying service. Your agent will create a shortlist of properties to help you find the right investment and take care of everything from negotiating prices to helping you facilitate a seamless handover.

Buyers Agent Vs Real Estate Agent – What’s the Difference?

A real estate agent is essentially a selling agent. Or in other words, they’re on the other side of the process than the buyers agent.

While prospective homebuyers regularly come into contact with real estate agents, these agents are representing the best interests of the vendor and will try to get the highest price for their property.

A buyers agent is a professional who represents you and your best interests during the home-buying process, helping you find the ideal property for the best possible price.

When Is Hiring a Buyers Agent Worth It?

It can be worthwhile engaging a buyer advocate every time you engage in the real estate buying process.

A buyers agent can save you time, money, and hassle while helping you avoid the significant risks involved in real estate investing. They can help you find the right property in the right place at the right time to maximise the value of your purchase. A great buyers agent will make decisions based on a coherent shared strategy that’s built around your financial and lifestyle goals.

Buyers agents can be useful for owner-occupiers but they are especially worth it for property investors. A buyers agent who is also a property investment consultant can almost completely eliminate the guesswork involved in identifying and securing properties that can generate serious wealth for you.

A buyers agent can also identify properties that are perfect for developments that can further increase the value of your investment, such as duplexes or townhouses. For time-poor professionals who like to invest, a buyers agent can take care of everything from finding and securing the block to ensuring all the paperwork is in place to you can start building once the hammer falls.

When Is Hiring a Buyers Agent Not Worth It?

Buying property isn’t cheap, and as we discussed, buyers agents come with their own costs.

Even at $600,000, a 2% fee adds an additional $12,000, and that’s before conveyancing costs, stamp duty, and other transfer and property transaction fees.

So, if you’re an owner-occupier, especially a first homebuyer or someone with a low deposit, then it’s probably not worth it for you to hire a buyers agent.

What Should I Look for in a Buyers Agent?

• Independence: Conflicts of interest are rife in the real estate industry. Make sure your buyers agent doesn’t also sell property, work for a specific property developer, or have any other conflicts that would affect the properties they recommend to you.
  
• Credentials: Don’t hesitate to ask for a prospective agent’s licence, accreditation, and insurance details. A good agent will not only be fully qualified but also highly transparent, with nothing to hide!
  
• Experience and expertise: Ask your agent how long they have been in the industry and when their most recent purchase was. Make sure they’re experienced in the areas that matter to you (i.e., type of property, commercial vs residential, owner-occupiers vs investors, active in your target areas).
  
• Fee Structure: Find out exactly what they charge and how they charge for it (e.g. fixed fee vs sale percentage). If your so-called buyers agent doesn’t charge a fee, run a mile! They’re making their money somewhere, and it’s probably a conflict of interest! On that note, make sure you ask if they make money in any other way, especially from selling properties.
  
• Go with your gut: At the end of the day, you need to be happy with the buyers agent you choose. You will be making huge decisions alongside them, so you need to trust them and feel comfortable working with them

Consult with Property Analytics: Buyers Agents in Melbourne

A vendor is never seen without an agent by their side (if they’re ever seen at all). It’s about time buyers had an agent of their own.

Property Analytics is run by me, Andrew Stone, your local buyers agent and investment property consultant. I specialise in helping property investors find and secure wealth-generating homes and blocks of land with serious development potential.

If you like what you’ve heard so far and you’re looking for buyers advocates/agents in Kew, Ivanhoe, and across Metro Melbourne, please reach out to discuss my approach and find out what I can achieve for you.

So, you’re looking to invest in real estate. You either want to buy your first investment property or strengthen and diversify your investment portfolio. 

But who do you call to help you make this happen? There are bad actors and conflicts of interest in today’s real estate industry, not to mention “experts” who are ill-equipped to help you make your next move.

Sometimes, it can feel like you don’t just need investment advice – you need advice on where to get advice.

Engaging a property investment consultant is the best way to get the real estate investing advice you need.

In this article, I’ll explain why you should choose a property investment consultant and not another industry professional, and I’ll outline what you should look for in a property investment consultant.

What Is a Property Investment Consultant and What Do They Do?

A property investment consultant may also be known as a property investment advisor, a property wealth planner, a property strategist, and other variations. The main thing you want to ensure when choosing one of these professionals is that you’re talking to someone who is licensed and accredited to purchase for others and not actually talking to a property marketer or property spruiker in disguise.

If your “consultant” is recommending property that they are selling or have a vested interest in, then it’s almost impossible for them to have your best interests at heart.

A true property investment consultant will offer you impartial and expert advice, services, and education to secure investment properties that match your financial goals. Your consultant or advisor will help you navigate risk, advise you on lending options, and ensure you don’t overpay for your investment.

Other things an investment property strategist can do for you include:

• help you forecast and understand property holding costs
• assist you in interpreting overlays, easements, covenants, and zones
• ensure your investments are profitable and hassle-free

A good property advisor will do a myriad of work and research to put you in the strongest possible position before a single property is even inspected.

Look for These Qualities When Selecting a Property Investment Advisor

1. Look for a Coherent Investment Strategy and Philosophy

Your property investment consultant should have a consistent strategy that they share with you from day one. You should be able to understand the fundamentals of their approach, even if you don’t know all the details. Everything should add up, and you should feel confident in the journey you’re about to take.

A coherent and consistent investment philosophy does two things.

It ensures that your financial goals are in line with your consultant’s approach, and it shows you that there is a method behind the madness.

Of course, a good investment property strategist will tailor their approach to your needs and your planned financial future, but the philosophy behind their approach won’t change. 

So, ask yourself – does your property advisor focus more on capital growth or cash flow? Do they encourage property development or prefer passive rental income? Can they leverage distressed sales, and do they have an eye on future zoning changes and how this could affect your asset?

At Property Analytics, our property investment strategies focus primarily on future capital growth prospects, because real estate cash flow can be achieved through rental income, but real estate wealth is achieved through asset appreciation.

In line with this approach, our property investment advisors in Melbourne focus on:

• The land rather than the dwelling because the land is what appreciates most over time
• Metro Melbourne because capital cities historically offer greater capital gains
• Nearby infrastructure and amenities because people want convenience in their homes
• Assets with value-add opportunities or increased gains through property development

2. Find a Professional Who Specialises in Specific Property Types and Areas

Some people will advise you to choose a consultant who focuses on the entire Australian property market, but that advice usually comes from people who are a Jack of all trades but Master of none.

When you really stop to think about it, the decision you’re making is between a specialist and a generalist. For most of us, that choice is simple. A generalist will typically do an ok job of everything without producing any excellent results.

And when it comes to your real estate investments, you want excellence.

Do you want a consultant who focuses on commercial, industrial, or residential real estate? Acquisitions in regional areas, your capital city, or interstate?

And on that note, there’s really no such thing as the “Australian property market” as one single entity. There are differences in the market from area to area, neighbourhood to neighbourhood – and sometimes even street to street. The very notion that the advice you get from a specialist will somehow be limited shows a complete misunderstanding of the nuances that are at play in every corner of the market.

Our property investment consultants operate in Melbourne. We specialise exclusively in residential real estate, but we don’t just stick to what we know in terms of the same old areas. Our data-driven team have an eye on the future and emerging trends, including potential growth areas and suburbs that are in decline.

The types of property we secure are consistent with our property investment strategies. We focus on generating wealth through capital growth, value-adding opportunities, and future developments, rather than primarily focusing on rental income.

The types of Melbourne property investments we secure are:

• Quality Townhouses;
• Established Houses; and
• Blocks with Future Development Potential

3. Choose a Property Advisor Who Doesn’t Get Paid To Sell Property

There are three words that dominate the real estate industry that no one ever wants to talk about.

Conflict of interest.

You see it when a real estate agent tells you that “you’re a good shot to get this property” when they’re just trying to drum up the best price for their vendor.

You see it when so-called property strategists and buyers agents recommend property from a specific developer or agency because they get a kickback.

And you see it when a property investment consultant is also actively engaged in selling property. They might be trying to find the best asset for you, but how can you know for sure when they also have a stake in selling properties? Are the properties that they’re recommending to you also on their sales list, and how much does that really matter?

You shouldn’t have to answer that question, and you don’t have to. Avoid potential conflicts of interest completely by choosing an investment consultant who does not actively sell real estate and is 100% transparent with their fee structure and all the ways they are renumerated.

I’m not here to defend the seedy underbelly of the real estate industry. There is a dark side and there are conflicts of interest. But I can tell you with 100% certainty that Property Analytics does not actively engage in selling real estate. All the ways I make money are directly tied to generating wealth for my clients.

If I didn’t already love my job, this alone would give me the motivation to acquire the best high-growth investments and profitable development sites for my clients.

I’d love to have a chat and outline the way I work for you and your financial future.

4. Find a Consultant Who Is Numbers-Focused Rather Than Sales-Focused

The relationship between a property investment consultant and their client should not be transactional. It should not end with the buying of property, but rather it should be future-focused and long-term.

What development or renovation opportunities should I pursue to increase market value? How does this property propel my long-term wealth creation goals, and how does acquiring this asset position me for acquiring more properties – and more wealth – in the future?

Your investment advisor should have answers to all these questions (and more). Every suburb they recommend and property they advocate for should be backed up by sound reasoning and quantifiable research.

Basically, you should be looking for a long-term relationship where every property decision is driven by numbers, trends, analyses, and insights that are the result of not just years of real-life experience, but solid and sought-after research.

And we’re not talking about research provided by developers or real estate agencies to paint a pretty picture of their own work.

At Property Analytics, we’re not just data-driven – we’re powered by proprietary market research. In other words, all the numbers, trends, analyses and insights that we provide to you are independent, free from bias, and uniquely ours.

The market research that we undertake is so thorough and valuable that Financial Services and Real Estate professionals pay us for access to digestible data that helps us understand important market trends.

When you partner with our investment property consultants and buyers advocates in Melbourne, you get access to all that data and more, and it’s all geared towards making the best investment decisions for you.

Other real estate professionals may be mired in conflicts of interest. But we take the only other way we make money and harness it to make the best decisions for our investment clients – conflict-free!

5. Search for An Investment Advisor Who Is Also a Buyers Agent

Do you want an investment advisor who is just going to advise you on which property you should buy, or do you want someone who’s also going to make it happen?

Some property investment consultants will give you all of the information and none of the results. They either don’t offer services to help you buy, or they offer buying services without being experts in the area. Others will offer their “expertise” through a free workshop or seminar, but free advice can quickly become very expensive if it’s bad advice or you don’t know what to do with it.

Some consultants will be part of a huge firm, and they’ll pass you on to a buyers agent once their part is done. But wouldn’t you rather have an end-to-end buying process where the same person handles everything?

At Property Analytics, we’re not only investment consultants. We’re also buyers agents in areas like Kew East, Thornbury, Preston, and Greater Melbourne.

You might have heard that buyers agents are nothing more than order followers, but we’re different. We are consultants and advocates specifically for property developers and investors. 

We don’t just find the property we’re ordered to. We help you discover exactly what type of property you need based on our proprietary market research and a deep understanding of your goals.

Only then do we start shortlisting real estate and conducting due diligence checks. This includes project feasibility studies for buyers who are considering development to supercharge their capital gains. We then take care of negotiations and bidding. 

The whole process is often completed within 90 days, if not sooner. You have your new investment property and you’ve saved time, reduced stress, and minimised risk. If the plan is to develop, Property Analytics will also ensure everything is approved and in place so you’re ready to build.

That’s what you can do with a property investment consultant who is also a buyers agent. And then you can do it again and again.

6. Choose An Expert Who’s Track Record Speaks for Itself

There’s one thing that not even market research can tell you about a property investment consultant. Are they actually capable of producing the sort of results that you’re looking for, and have they done it recently?

You want an advisor and advocate who is active in the market every day, with good reviews and happy clients that they can point you to in order to demonstrate their skills.

When you’re looking for an advisor, always ask them about their last purchase.

I can tell you about my last purchase, and I’d be happy to share the stories of past Property Analytics clients (most of which are still active Property Analytics clients).

Here Are a Few Other Areas Where A Great Property Investment Advisor Should Be Able To Help You:

• Professional advice on equity planning and cashflow management
• Building your investment property portfolio (not just finding you one property)
• Long-term risk management
• Retirement planning and tax planning, as they pertain to property investment 
• Getting property development projects off the ground, from zoning constraints to dealing with the council to full project approval
• All services related to buying your investment property or development block

Go to the Right Professional for Property Investment and Development Advice

When you go to a financial planner, they’ll recommend an approved list of products, and they usually won’t include real estate in their investment options. A property marketer will point you towards projects they have a vested interest in, a property management professional can take care of the day-to-day, and a real estate agent is in it for the vendor.

Brokers and accountants are both financial professionals, and family and friends are well-meaning, but none of the above is likely to have the specialist knowledge you need to meet your financial goals through real estate.

Of course, you can try going it alone. You might hit it big, or you might make a big mistake. Regardless of all this, maybe you just don’t have the time to commit to trying to do it yourself.

My name is Andrew Stone, and as Director of Property Analytics, I’m the guy you will work with from the very start if you choose us for your investment and development needs.

We do it all – from tailored property investment advice to data-driven asset selection; thorough feasibility studies to expert negotiation, and all the prep work required for property development clients.

You can learn a bit about me and the team at Property Analytics here. But if you’re a property investor or developer of any kind, at any stage in the journey, interested in rental income or capital growth or both, I encourage you to reach out for a chat.

Everyone who is interested in building a real estate portfolio has the same over-arching goal.

We all want to make money, and preferably, plenty of it!

Some people are starting from the ground floor and looking to purchase their first investment property, while others are looking to diversify and strengthen their position.

Many investors are more interested in a passive income and generating cash flow, while others are in it for the long-term gains and big wins that can come with capital growth.

But it still all comes back to money.

In this article, I’m going to explore 5 real estate investment strategies that can bolster your real estate portfolio and help you make more money through property. 

What’s the right strategy for you? This will depend on your goals, circumstances, and a range of other factors. Not all strategies are made equally for every investor, but each of these strategies can help you to buy more properties and make more money from real estate.

As well as these 5 property investment strategies, we’ll also discuss:

• What the ideal real estate investment portfolio looks like
• The red flags that you should always exclude from your real estate portfolio
• Investment strategies that will work in turbulent and changing market conditions
• And more!

Understand Your Goals and Parameters Before You Begin

Every property investor is asking “what’s the best investment strategy?”

But what they really should be asking is “what’s the best investment strategy for me?”

To answer that question, there are a number of questions that I would ask you (and that any worthwhile buyers advocate or property investment advisor in Melbourne should also ask you).

• What is your objective? A goal of $1 million profit in 7 years will have a different strategy to a goal of $100,000 profit in 4 years. Cashflow and capital gains strategies can also look very different
  
• What is your timeline? Are you looking for quick wins or are you in it for the long term?
  
• What is your financial and budgetary situation? Your income, savings, borrowing power, and the position of any existing investment properties will all come into play when determining what to do next.

These are just a few of the questions I will ask if you come to Property Analytics to generate wealth through real estate. Once I understand your situation, I can pair this with proprietary data and analyses to determine what your goals should be and the investment strategies you will need to get there.

Strategy #1: Finding the Right Location Is the Backbone of Any Property Investment Strategy

“Finding the right location to buy” isn’t an investment strategy on its own, but it is one constant that will make or break any property investment strategy.

It doesn’t matter what your financial position is or whether you’re looking for rental yield or capital gains, it is essential to select the location of your investment property strategically and carefully.

Here’s what a great investment property location will typically look like:

• Close proximity to Employment Hubs, Activity Centres, Restaurants, Retail, and Recreation options. The Property Analytics database is specifically designed to identify areas, suburbs, and neighbourhoods in Melbourne with strong future growth potential. We have triangulated the location of Train Stations, Hospitals, Universities, Activity Centres, and other key infrastructure to improve the shortlisting and selection process.
  
• Demographic profiles and their impact on capital growth over time. If you want your property to generate greater profits, you need to target individuals who are willing to pay a premium when buying or renting (or both). Understanding demographic profiles and targeting areas that attract higher-income individuals or families can point you in the right direction.
  
• House price trends tell you the right time to purchase in the right area. The right location to buy your investment property can become the perfect location if you know when to buy. Every suburb in every state is its own micro-market with unique trends and price fluctuations. With access to historical data and the right experts to analyse the trends, you can pinpoint the best times to buy in your target area.
  

Strategy #2: Invest in Residential Properties That Appeal to Owner-Occupiers – Not Investors!

These days, just about everyone seems to be a property investor, but the vast majority of the property-buying market is still dominated by owner-occupiers. 

When you’re targeting properties to purchase for investment purposes, the last thing you want to do is buy a property that has been specifically designed by a developer to sell to real estate investors.

This “investor stock” is often good for nothing other than making a profit off you!

An important part of your investment strategy should be looking at properties that owner-occupiers want to buy. 

Location, land, livability, the status of the area, and the character of the property are all features to consider. Remember that while you are buying with your head, many would-be property owners are buying with their hearts.

Strategy #3: If Income Is An Issue, Start Building Your Portfolio with Cashflow Positive Properties

If we’re talking endgame, then capital growth – and not just high rental yield – is what most investors are looking for. Many investors are even willing to run their investment property at a loss and cover the gap while they wait to eventually cash in.

However, if you’re a starting investor on the lower end of the income scale, it can be beneficial to target a property with a higher rental yield in order to generate positive cash flow

By positively gearing your first investment property, you can put yourself in a better financial position to purchase your next investment property. The excess income you generate can form the basis of the deposit for your next investment loan.

Targeting a rental property with higher yield often means sacrificing capital growth, which can also make the process to build equity slower. You also can’t leverage the tax benefits associated with negative gearing if your property is in the black.

However, as a way to generate passive income that can be used to fund your next investment, a cashflow investment strategy can be useful. Investors may also target cashflow positive properties at different stages of their investing journey to balance their portfolio or “retire” debt that has accumulated while investing.

Strategy #4: A “Buy and Hold” Capital Growth Strategy Can Work Well (in a booming market)

Cashflow and rental yield are excellent tools for Australian property investors, but capital growth is the Holy Grail and your key to wealth creation.

When you choose Property Analytics as your property investment consultant in Melbourne, we will always prioritise and emphasise the importance of purchasing properties with high capital growth potential.

One way you can take advantage of these properties is through the “Buy and Hold” method, which looks a little something like this:

• Buy an investment property. 
• Rent it out. 
• Let the housing market do its thing. 
• Leverage the equity from the increase in property value (or sell the property for a tidy profit).
• Repeat.

The key to this strategy is finding the right area – and the right property in that area – to maximise your chances of significant capital growth. “Buy and Hold” strategies can be short-term if you time your entry and exit well, or they can be longer-term when you invest in a property with ongoing appeal and increasingly high demand.

Properties with good capital growth potential often come with high purchase prices compared to rental yield, which puts you into a negative cash flow position in the short term. However, this also gives you access to potential negative gearing tax write-offs and the promise of financial freedom via future capital gains.

If you’re in a financial position to cover these short-term losses, you can even establish your investment portfolio by making your first purchase a property with high capital growth potential.

“Buy and Hold” capital growth strategies are easy in investor-friendly markets where desirable properties are going up in price across the board. But when the market goes flat or prices begin to drop, fewer and fewer investment properties will be able to net you the capital growth you’re looking for in your planned timeframe.

There are always methods to beat the market, and our data-driven buyers agents in Templestowe Lower, Preston, and across Melbourne know how to find properties that can better weather market changes. The location data mentioned at the top of this article is just one tool at our disposal, while a focus on land content and thorough due diligence checks are a few other steps we take.

But if you want a capital growth strategy that more effectively weathers market changes, then a passive “Buy and Hold” method might not be the best approach.

With that in mind, let us tell you about a strategy that will be the future of property investing in Melbourne.

5. A Value-Adding Property Investment Strategy Can Help You Make a Profit (even when the market is flat!)

Most of the property investment strategies I have discussed so far are pretty passive.

You buy the right property in the right area, you rent it out for some cash flow, and you watch it appreciate in value over time. Once you’re in a stronger financial position, you take the next steps and keep building your real estate investment portfolio. Assuming you hire someone else to act as the property manager, you’re not doing much to the property at all.

But smart property investors understand that you can’t always rely on the market to help you out. Sometimes, you need to actively take steps to add value to your investment property.

Renovations are one course of action you can take to value-add and improve your return on investment. Upgrading wet areas, ripping up carpets, overhauling outdoor spaces, and even changing your curtains and blinds can have a big impact on property prices. 

Houses that need a bit of work can often be picked up for a bargain, and smart renovations can be a great way to increase your capital growth. It will work wonders in a hot property market and can even help you turn the tide in a flat or slightly downturned market.

When you’re selecting a property for this type of investment, it’s important not to get caught up in the cosmetic details. If you can find the biggest eyesore in the best neighbourhood at the right price – all without nasty underlying structural issues – you could be on a winner.

Renovation is really just the tip of the iceberg. If you’ve got the right block of land in a good suburb, you can proactively add value through property development.

You will need to navigate the world of property design, planning permits, council approvals, zoning constraints, construction documents, and tenders (to name just a few). But if the property you’re targeting ticks all the boxes, you could turn a rundown property into multiple townhouses, 2 fully detached homes with their own street frontage, or other appealing, brand new properties.

Getting to that point takes time and planning, but once you get there, the world is your oyster. You can rent or sell multiple properties, leverage them for equity, and keep growing your property portfolio.

So, What Should My Property Portfolio Look Like?

A Property Portfolio Is…

A series of investment properties that are owned by one individual, a group of individuals, or a larger entity like a company or trust. The vast majority of individual property investors never get past their first or second investment property due to bad decisions, a lack of expert advice, and a combination of other factors.

The investment properties in your portfolio could be development projects or they could be rental properties. Some properties will be positively geared – where the rental income outweighs your outgoings, and others will be negatively geared – where the monthly income is less than the mortgage payments and other money you’re spending. Both positive and negative gearing have their perks, from increased cash flow to tax write-offs.

A Balanced Property Portfolio Is…

A property portfolio that pays for itself, grows in value and is diversified.

It can be tempting to buy the same sort of properties in the same area for the same purpose to make your property portfolio more predictable. After all, you’ve already got a few properties that are generating a handy rental yield. You can just keep targeting similar properties in the same area for a snowball effect and a never-ending stream of income!

But when the rental market turns and all your properties have the same problem, you’ve multiplied the risk by 2x, 3x, 4x, or more!

Instead, it can be useful to have some properties that generate decent rental income (depending on your financial position), while you add high-growth properties to your portfolio. Some of the properties that you target for capital gains may also be rentals, while others will turn into development projects that can accelerate your capital growth and access to equity. 

Properties with high capital growth are the golden goose that all serious investors are chasing, and they’re the properties that will eventually get you out of the property game altogether (and onto the beach!)

A Real Estate Investment Portfolio Should NOT Contain…

Investor stock.

If you’re buying a high-rise unit or an apartment that you couldn’t pick out of a line-up, then you have to ask yourself why?

Is anyone going to want to buy or rent your unit in a market flooded with this type of property? Do you have any land to play with, and is there anything you can do to actively increase the value of your asset?

Or are you just buying an “investment” that’s been sold to you by a developer with vested interests?

It’s properties like this that you absolutely don’t want or need in your portfolio!

The Real Estate Market Is Changing. With Property Analytics, You Can Invest with Confidence

Talking about an investment strategy is easy, but pulling it off takes time, data, and expertise. You’re probably a busy professional. You’re already short on time and your expertise is better used elsewhere. But you do have the potential to succeed in the property investment market.

Property Analytics offers a proven, data-driven process for buying investment properties and development sites in today’s market.

Property Analytics was founded by me, Andrew Stone. Since 2010, my team and I have been supplying market research to some of the industry’s biggest names. We can take that same data and leverage it to deliver results for you. Not just your first investment property – but permits and tenders to get developments off the ground and feasibility reports to help you make your next move.

As buyers advocates serving Rosanna, Thornbury, and Greater Melbourne, we specialise in the whole process, from strategies and budgets to purchase negotiations and development planning.
Reach out to Property Analytics to determine the best investment strategies to establish or grow your real estate portfolio.