Set and Forget

The set and forget option for investors can be broken up into two options. High Yield with average growth and high growth with average yield. Please note that anyone who tells you they can get you high yield and high growth without high risk is simply lying. If it were possible then every conglomerate, every hedge fund and SuperFund from AMP down would have bought the properties.

High yield with average growth is the option chosen by those with plenty of equity in their current properties but not much spare cash. With this option we are looking for a modern dwelling to maximise depreciation tax deductions, higher rental returns and lower maintenance costs. This option also tends to have smaller land content as tenants do not tend to pay a premium for land – they pay for accommodation. Typically this could be a modern townhouse in an established suburb with very good infrastructure or a family home in a new estate with good infrastructure. Both these options tend to have average capital growth, mainly due to the smaller land size and distance to the Central Business District.

The alternative is to target high growth properties but this may mean the yield percentage will drop. Typically these properties are older dwellings and have a larger land content than townhouses or new estate homes. The upside to getting a property closer to the CBD is that capital growth is usually better. Due the dwelling being older the majority of what you pay will be land value. AND LAND APPRECIATES WHILST BUILDINGS DEPRECIATE! The downside is the maintenance may be higher and the property may be harder to lease out. There is another upside to older style properties on larger land. There may be Value Add options and or land banking and Development Options.