Our Approach

Our Approach

How do I find the right investment property & what should I look for?

Rather than concerning yourself with the 'right investment property', think about it as your 'next investment property' and look for TOTAL RETURN PROPERTY. To gain wealth through property accumulation, rather than thinking about each investment property in isolation, you need to consider how each relates to the ones that follow. If you make a poor choice for your first investment property, it will not only limit your wealth in that property, but also delay buying the next property, compounding your opportunity loss.

Our approach at DPN is to focus on what we call ‘TOTAL RETURN PROPERTY’.

TOTAL RETURN PROPERTY is property that;

1. has a strong potential for Capital Growth with a solid Rental Income,
2. is new property with significant tax benefits to help keep your cash-flow momentum, and has a substantial Land Component since land is what appreciates over time.

1. Capital growth & rental income

Capital Growth is the gain in property value over time, while Rental Income is what you receive as owner of the property. This helps with the holding cost of the investment property.

When you add the Rental Income and Capital Growth together, they need to be greater than your borrowing cost or you’ll be losing money. Investment properties in growth areas also display rental growth, which in turn make the properties cheaper to hold or help with the next property purchase.

At DPN we pursue properties with a strong potential for Capital Growth since this creates equity for future property purchases and substantially helps toward your retirement target. The illustration below highlights the value of capital growth in an investment property.

2. New investment properties

Our customers often want to acquire a number of properties over time.

DPN’s approach is to make the process efficient from a financial point of view and personal time input from our customers. There are three key reasons why our customers favour new properties to old:

• Tax benefits from depreciation. New investment properties in Australia have tax benefits in relation to the depreciation of the building cost and the fixtures and fittings. The tax deductions on a new $450,000 property can be about $8,500 a year in the first few years. The tax benefit for an investor in the 38.5% tax bracket is $3,272 pa or about $63 extra per week. This helps with servicing the current property and further investment property acquisitions. This cash-flow momentum would not be achieved with old properties.
• Rent quicker and for more. Tenants are often looking for newer properties that are cleaner and better equipped than older properties. Hence newer properties are often tenanted sooner and for a higher price than older properties. 
• Lower maintenance and lower risk with unknown building issues. People are busy with life, work and family. The last thing you want to do is deal with maintenance or be surprised with the unknown issues of older properties like termites or roof leaks, especially if you have a reasonable-sized property portfolio. New properties in Australian states often come with 6 years or more of structural guarantees along with many other standards such as pest treatment and energy efficiency to eliminate and minimize your having to deal with these issues.

3. Substantial land component

When you're investing in property, you want something that increases in value over time (called 'appreciation'). The part of property that increases in value is land. In comparison, buildings go down in value over time, and this is called ‘depreciation’.

Statistics show that the value of house and land has consistently outgrown units in the same location over time. Land is finite and harder to produce. If you invest in an apartment building that contains 200 units, you'll be sharing the land appreciation with the other 199 owners, but if you own your own land, you'll have 100% ownership of the appreciation over time. At DPN we favour houses and townhouses versus units, as these types of properties have a larger land component and hence a greater portion of the property is exposed to appreciation. We consider units only if they are in an exceptional location with a higher rental income to offset the lower capital growth.

OK. That sounds fine but where do you find such properties?

The basic principle of supply and demand is the key to all financial success.

Find something that people need and invest in it.

This principle applies perfectly to property. The best property to invest in is where people want to live, work and play. Investors, banks, retail stores and businesses know that property located in areas of demand is where profit is made.

The saying ‘position, position, position’ says it all.

The challenge is to find affordable properties in emerging suburbs where demand is expected to surge. This is where DPN excels.

First we focus on capital cities

People tend to congregate around other people, and over time, more and more of the world's population are living in cities. In 2008, for the first time in humanity, over 50% of the global population lived in cities, and it is expected that by 2050, this figure will reach 70% , representing 6.4 billion people. (trendwatching.com 2010 briefing)

From a demand point of view, more people want to live close to cities for the usual reasons, so it is wise to minimize your risk by investing where people will continue to want to live and where the population is growing. Banks get nervous about holiday and country towns due to the lack of population growth and demand, hence they will lend you less in those areas and require a larger deposit from you.

At DPN we limit our property sourcing to Australia’s major capital cities to ensure consistent and enduring returns. This also means you’ll have access to more buyers in the event of having to sell.

We focus on mainstream properties and avoid serviced apartments, holiday rentals and time-shares, as these have proven to be a higher risk with a poor secondary market.

Secondly, we focus on emerging suburbs

No one buys a whole city, so to generalize and say Melbourne is better than Sydney or Sydney is better than Brisbane is no guarantee of success for choosing the right property. Often newspapers and various experts declare which city will have better growth on average – the problem being that it’s a citywide average, but you need to buy a specific property.

A growing suburb in Melbourne is better than a stagnant one in Sydney, and an emerging suburb in Brisbane is better than a suburb that has peaked in Perth.

Finding properties in the right price bracket with a potential for capital growth & rental returns are critical if you want to continue to acquire property.

Thirdly, search via research

DPN employs strict search and research filters to find the suburbs with a strong potential for capital growth. We use proven independent research houses to find the next emerging suburbs. The research also includes population movement, demographic shifts, local infrastructure and lifestyle options.

A basic snapshot of the Methodology and Filters we use:

1. Reviewing the Residex* Quarterly Top 100 Suburbs identifying the emerging suburbs in major cities
2. Searching within the Top 30 suburbs and only targeting those within a 35km radius of the CBD of a major city 
3. Locating new house & land packages or townhouses within those suburbs 
4. Aiming for a price point of less than $500,000 
5. Easily tenanted properties near employment, education, lifestyle amenities and transport.

Doing it by the numbers ensures you avoid emotion and marketing hype

That’s why for the past 15 years Australians, expatriates and overseas investors have turned to DPN for property investment advice. Customers value our informative, no-pressure approach that is both personal and professional. Save yourself from potential mistakes and the grief of trying to do it all yourself with our research and proven track record. Leverage our experience and resources to accelerate the building of your property portfolio.

What’s next?

Check out Property Valet & get an investment property “home delivered”. Receive a Property Accumulation Analysis to make sure you have a good idea of the costs and considerations before you buy an investment property

*Residex is one of Australia’s leading property research houses & has been validated by the Reserve Bank of Australia as being the most accurate in predicting the growth of suburbs in Australia.