These are properties with a low capital growth profile 4-6 per cent and a high rental yield (return) profile of around 6-10 per cent. Occasionally the capital growth can be very high for a short while.

Advantages:

• Positive or neutral cash flow
• Use surplus cash flow to pay down principal and obtain more equity for future investment
• Small entry price – easy to get started
• Lower stamp duty & land tax
• Occasional good equity jump due to demand for high yield properties
• You can’t lose with money in your pocket (unless you get in too late)
• Easier to get a full-doc loan

Disadvantages:

• Pay tax along the way (money in the taxman’s pocket is not going to create wealth for you)
• Slower capital growth over longer period
• Usually regional or outer areas which can be quite sensitive to economic cycles
• Harder to get low-doc or no-doc loans for some regional properties due to postcode & population
• Lower leverage to reduce return
• Potential higher maintenance of property
• More tenancy problems dur to social economics

These are properties with a higher capital growth profile of 7-10 per cent (and occasionally over 12 per cent for a short while) and a lower rental yield profile of 3-5 per cent (occasionally below 2.5 per cent).

Advantages:

• Tax benefit; negative gearing and delayed CGT
• Usually consistent capital growth over longer term
• Typically inner and high population areas which are not affected as much by economic cycles and interest rate fluctuations
• Easier to get low-doc or no-doc loans
• High leverage available
• Potential lower maintenance of property and less tenancy problems due to better social economics
• Equity increase can be available to invest futher

Disadvantages:

• Negative cash flow if you take on a normal mortgage at a high leverage level
• Usually more expensive than cash flow properties – potential entry barrier for beginners
• Higher stamp duty and land tax
• No guarantee of capital growth every year
• Harder to get a full-doc loan to access a cheaper interest rate mortgage as your portfolio grows

Advantages:

• More consistent growth over long- term in established areas
• You usually own the land
• You have greater control over what you want to do with the land
• High land content for better future growth if it is in established areas
• Usually easier to get finance
• More room for value adding and modification
• Town houses are gaining popularity with smaller families and retirees

Disadvantages:

• Usually lower rent as a percentage of the value
• Can be higher maintenance
• Can occasionally be difficult to get decent rent for large houses
• Less security and facility

Advantages:

• Higher rental as a percentage to price
• Less hands-on maintenance
• Good growth in fully built up areas with height limit
• Increasingly popular with generation Y Meets the demographic trend of smaller family size

Disadvantages:

• Less consistent growth in areas that are not fully built up
• Body corporate fees
• Less control
• Less room for value adding
• Can be hard to get good finance for company title properties and very small apartments

Advantages:

• Higher tax benefit
• No maintenance
• Better tenant appeal due to new design, technology, etc.
• Easy to rent if the asking rent is not to high

Disadvantages:

• Lower capital growth in comparison to established properties in the same area for a few years
• Higher purchase price due to premium for being new
• Usually get hit first if the market slows
• Very little room to add value
• Price set by developers may be artificial or heavily influenced by organised marketing effort

Advantages:

• Purchase price usually set by individual vendor without commercial manipulation
• More solid growth than new properties due to heavier ‘land content’ component
• Less price fluctuation than new properties in the same area
• Potential to add value

Disadvantages:

• Higher maintenance
• Not as appealing to tenants
• Future requirements for renovation
• Lower than usual rent if the property is too run down

Advantages:

• Less number of properties to deal with
• Less ongoing soft costs such as bookkeeping, etc.
• Less work looking for them
• Usually in expensive suburbs that have solid growth performance
• More trustworthy tenants

Disadvantages:

• Luxury items get hit first during bad times
• High price properties in low price suburbs may have slower growth due to lack of demand
• Harder to get finance – lower leverage
• Higher stamp duty and land tax costs

Advantages:

• More stable performance closer to the suburb’s median price
• Lower price properties in established suburbs can handle downturns better
• Better diversification for rent and resell
• Lower stamp duty and land tax costs

Disadvantages:

• More work finding them
• More ongoing soft costs such as legal and accounting expenses
• Not as appealing to tenants
• Lower than usual rent if the property is too run down

Advantages:

• Potential gain before settlement
• Stamp duty saving
• Available to overseas investors
• Little money down through bank guarantee, deposit bond or builder’s terms

Disadvantages:

• Potential loss of deposit plus gap
• Buying without seeing the site
• Purchase price can be set artificially
• Purchaser can be influenced heavily by organised marketing effort
• Area and products may not be tested – performance unknown

Advantages:

• Hassle free
• Usually higher rental if managed properly
• No need to worry about tenants and maintenance yourself
• Desperate sellers

Disadvantages:

• Harder to get finance due to commercial contract
• Can be hard to resell
• Growth is tied into yield and how well it’s operated, not necessarily reflecting local property prices
• Value of the property is affected by the financial viability of the operator

Advantages:

• Usually built to a better quality spec
• Higher rent guaranteed for the contracted period
• No need to look for tenants or do any maintenance

Disadvantages:

• Can be overprices to compensate for guaranteed rent
• Can be hard to get finance from some lenders due to valuation and commercial arrangement
• Display operators financial viability can affect the guaranteed rent
• Property usually in outer areas with slower long term capital growth

Advantages:

• Higher rental if managed properly
• No need to worry about tenants and maintenance yourself
• Affordable purchase price

Disadvantages:

• Can be hard to resell sometimes due to its special purpose
• Growth is tied into yield and how well it is operated, not necessarily reflecting local prices
• The value of the property is affected by the financial viability of the operator

Advantages:

• Potential good profit above cost
• You create the equity instead of waiting for it
• Potential to get finance and capital based on the deal instead of your own capacity
• Allows a lot of creativity to create value
• Multiple exit strategies to make money
• Excitement and pride as you can call yourself a developer

Disadvantages:

• Inefficient use of your money due to long processing time
• Easier to make a loss if you don’t know your craft
• Planning, building, finance and selling risk
• Requires larger capital base than is usually estimated
• Requires a high level of commercial and people skills
• Lower income while holding the site for permit

Advantages:

• Very little or no money down
• Positive cash flow
• Instant equity on entry and/or exit
• You can combine other property strategies

Disadvantages:

• It is necessary to think hard and work hard
• You have to spend more time learning
• Difficulty in managing investor, vendor, real estate and tenant/purchaser
• You need to be very entrepreneurial
• Extra legal and accounting expenses

Advantages:

• Instant increase of equity for further investment or better risk management
• Most money paid to the ‘land component’ to ensure solid future growth
• Instant increase of rent for better cash flow
• More efficient use of funds
• Great tax benefit
• Lower town planning and building risk
• You can buy under market value sometimes

Disadvantages:

• A lot of work of you do it yourself or a lot of management if done by others
• It takes time to find the right property that can make the numbers work
• Easy to underestimate the time, cost and work involved in a renovation
• The increase of equity and rent may not be obvious enough to justify the cost and effort