How to Find a Growth Property

Houses go down in value. They are just like cars, stereo equipment, and golf clubs. Once they are used, they are less valuable. As they get older, they become less valuable still. Eventually you could throw one out as having no value.

The land that the house sits on, however, goes up in value. This is because there is a finite amount of land and an increasing number of people wanting land. The supply of land is fixed. The demand for land keeps growing. This means land prices go up.

The key for a growth investor is location. You need to pick a location where an increasing number of people want to live. Some places don't have a lot of demand. They are places where people don't want to live. You don't want to buy there. Other places have people clamouring to get in. These are the trendy places, the cool places where everyone wants to be. Often these places will be close to the city, because by their nature cities have lots of people.

The key to buying a growth property is to find out what the property is worth and what the land by itself is worth. A good rule of thumb is that if the land value is 30% or more of the total property value, you will get good growth.

Places which have a lot of owner occupiers tend to go up in value faster than other places. This is because owner occupiers do up their houses for personal reasons, and without regard to cost. Owner occupied houses tend to be prettier, better maintained and more lavish than rental places. If you are in a suburb with very few other rental places, then the average value of houses in the suburb is likely to go up as fast as owner occupiers spend money on their houses. A valuation looks at the average price of houses in your area. It may discount this figure if your house is below average, but the average is where they start working the valuation from. It never hurts to have this average going up.

Posts in this blog should not be taken as investment advice, merely as views of a general nature. Individuals should seek qualified advice tailored to their specific circumstances from licensed advisors.