Mar 2019

Not all properties are “investment grade”

Not all properties are made equal and not all properties are “investment grade.” Actually, many are not!

Investment-grade properties should double in value every 7 to 12 years which equates to around 7% to 10% annual compounding growth rate. In many countries, however, probably less than 5% would be regarded as investment-grade. This means not every property will double only a select few.

Any property can become an investment – just move the owner out, put in a tenant and it’s an investment, but that doesn’t make it an “investment grade property”.

What items make an investment grade property

  • Appeal to a wide range of affluent owner occupiers.
  • Have a level of scarcity.
  • Are in the right location – one with strong prospects on long term capital growth.
  • Have street appeal and offer security.
  • Have a high land to asset ratio – this is different to a large amount of land. I’d rather own a sixth of a block of land under my apartment building in a good inner suburb of a city, than a large block of land in a country area.
  • Have the potential to add value through renovations.

The most important factor is to focus on quality.

Many of us are not able to find “investment grade property” therefore it is important to seek professional advice.