7 Step Investment System


"Location; Location; Location" has been the saying for many years by property experts as representing the "3 GOLDEN RULES" for success in the Australian property market.

Whilst LOCATION is certainly very important, it is certainly not the only important criteria. And, certainly, LOCATION is one of the "Golden Rules" to live by when investing "down-under".

However, there are other very important points to consider before making an investment, and putting perhaps years of savings into an investment.

Australian property does represent an exciting opportunity to increase wealth, but like all investments care should be taken.


Long before you look at things like "location", "tax" or "financing" it is important to "define" what you are looking for in an investment.

Are you after:-

- Good rental returns?

- Strong capital growth?

- A combination of the above?

- A short, medium or long-term investment?

- Who are you targeting as your tenants –

Yuppies?          DINKS?          Families?          Singles?            and why?

- Do you want NEW or OLD property? If so, WHY?

These questions are many, and varied. Yet, many investors do not consider them before investing. They decide (perhaps because their share portfolio’s have not performed; or they have spare money and "should do something with it"; or their friends have done well in property) that a property investment is required. And that’s about all the thought they give it, until they see an ad, contact a developer or agent, and "voila", they’ve bought a property!

If this sounds like you, keep reading. If you think this sound ridiculous, you’d be surprised how many investors buy property this way. Armed with the knowledge provided in this report alone, will put you ahead of the game.

What Actually Does Australian Property Offer?

You can obtain reasonable rental returns, and preserve the value of your capital, with the strong possibility of capital again, while limiting the downside risk.

It is a safe, secure yet profitable investment. Yet, there are traps for the unwary. Industry insiders have developed a "7 Step System" which, while not a guarantee for success, will if followed greatly limit your risk factor, or "downside", and increase dramatically your chances of investment success.

This 7 step system will give you many of the tools professional investors to maximise their profits, maintain control of the investment, and reduce the risks associated with a poor investment decision.

Remember, however, there are many other criteria involved in a property purchase, but when these 7 steps are followed, the chance of a successful investment is greatly enhanced.

Long before you define where and what you want in a property, you should know why you have come to these decisions.

Whilst LOCATION is important, it is certainly not the only criteria for success in the property market.

Nothing can beat research and knowledge. 

However, people lead busy lives. Most people just don’t have the time to study demographic trends, construction costs; lifestyle changes; population growth; and so on.

The research alone is a full time, never ending occupation. In fact, many companies and individuals do exactly that. Make no mistake – the research is available, and if you have the time, nothing can beat doing the research yourself.

At this point, many people think "I know, I’ll ring my uncle, he lives in Sydney, (or Melbourne, Brisbane or wherever) he’ll tell me what’s happening. After all his house has done well."

Hopefully, just by pointing this out, we’ve been able to show you the error of this type of thinking.

If not, just ask yourself "how many properties does your uncle have? How long has he been investing in property? When was his last purchase?"

If he has a "couple" of investment properties, do you really think you want to trust his judgement? Maybe. But maybe not.

Secondly, you could speak to a property professional. This is a good option. As long as you remember everyone is pushing something. So keep your options open. Try to speak to someone for a couple of hours, on an informal, "information gathering" basis, not as part of a sales presentation.

A 2 hour session with an experienced property person, one who is not pushing any particular development, can be invaluable. After all, they have often been in the market for more than 10 years, and offer a huge amount of firsthand knowledge and experience.


Time itself is a big key to successful investing. The property market moves in cycles.

Assuming the property is well selected, well financed and well located, and you hold for a full property cycles, even if you didn’t maximise your "purchase timing", you should still be able to make between 15-20% per annum return on your capital.

The worst mistake may be not to own any property at all. 

The Australian capital cities property cycle generally spans 14-18 years. That is, property will generally go up for 14 years, then have a downturn for 4 years, before going u again. The ideal time to invest is at the beginning of each cycle. However, as the long-term trend is nice and steady, there is ample time to invest and get excellent growth.

3) GET THE FINANCING RIGHT (don’t be too scared of debt)

Property has one enormous advantage not available on other types of investments – leverage. Use this advantage to maximise your returns.

Many investors are able to buy additional properties without using any more of their own cash. They only need to use the equity created in their existing properties. 

This is one of the great secrets of property wealth. Once the process has started, it tends to relentlessly increase, exponentially, using the magic of compounding to build further wealth.

 What can go wrong? 

When borrowing becomes negative, that is, the property is generating a loss each year, the investor is exposed to a financial commitment. If the investor is unable to keep that commitment, they may lose the property.


This point should be the shortest. Just ease your mind back to either (or both) of the following two scenarios:-

a)         Think back to properties you were offered or NEARLY BOUGHT in the 1980’s or 1990’s.

b)         Think back to properties you have PREVIOUSLY OWNED in the past and sold.


For most people, the above two scenarios fill them with dismay. And the point has been made.

If you are too young to have experienced the above, think back to your parents house; what they bought it for compared to what it is (or could be) worth today.

And don’t you wish your parents had bought three of them!

BUT, there are times when you need to sell, or SHOULD sell.

Buy low, sell high… or simply shift your emphasis to real estate's other benefits.

Some experts advise "Buy, NEVER SELL" and while this is preferable to selling, there are times you may need to sell (to finance a business; for example).

If you have a good property, that is on the capital growth cycle, think always first about refinancing rather than selling.

Think twice before selling your investment - there may be other options available.

You don’t want to shudder in five or ten years thinking what the property you are selling today is now worth.

There are times when you SHOULD cut your losses, sell, and get back into a better property. This is when you have really made a poor buying decision and purchased something that is unlikely to move up in value for many years, or is getting such a low rent it is costing you too much.

Everyone knows the "theory of investing":-


Buy a stock for $100, and sell it a few months later for $200. Simple. However, in reality, you actually buy at the market price today, and wait for it to go up. You hope it will rise in value. You have not really "bought low" – it only "seemed" low when you eventually sell it (though for many people, it seems with stocks they BUY HIGH/SELL LOW!)

In real estate terms, you buy a property for A$500,000, rent it out to cover the banks interest, and sell it for A$1,000,000. What happens though if you bought high, and it's just not going to double for a long time?

You could cut your losses and sell. OR, you could shift your emphasis to real estate’s other benefits.

Assuming the property will grow in value (perhaps just not as quickly as you hoped) you can use the property to generate rental income, recoup your initial investment in tax benefits, pay it off faster to get higher cash-flow to use for another property, or refinance it for further investments.

Once it gets older, you could renovate it to increase the value. 

In other words, unless the property is a read "dud", you may not need to sell it to still obtain benefits.

You will make your money when you buy – so buy well. But, you don’t need a "bargain" to do well.

A high rise apartment building may have a two bedroom apartment on a low floor available at A$400,000, but the same apartment on the 30 floor is asking A$800,000. Which is the better investment? Which one will give you the best return?

These are the kind of answers you need to know to avoid mistakes.


Many people typically use a Principal and Interest home loan, even for investment property.

Professional investors use an Interest Only Investment Loan.

 However, these types of loans are NOT always available.

Let’s briefly look at the difference.

The first property loan we take out is often the typical Principal and Interest home loan. We are generally bought up to believe that home loans should be reduced or "paid off" as soon as possible.

Mostly we can only agree.

BUT, when these loans are used for property investment purposes, different rules come into effect.

If you are reasonably disciplined, organised and wish to acquire more property, then there is absolutely no doubt interest only loans were designed with you in mind.

If on the other hand you tend to worry, don’t want a portfolio or are a bit disorganised then a Principal and Interest loan could be the way for you.

Borrowing on a Principal and Interest basis for investment while still paying off a home loan is usually inappropriate.

Finally, always buy with the least amount down. Buy with 20% down if you can, or at most 30 percent or 35 percent.

The interest component is tax deductible, however the proportion we pay to reduce or repay the principal is not.

With a typical twenty-five year home loan, the principal is progressively repaid over the term of the loan. In the early years most of the payments are in fact interest. In the later years the amount of principal repayment we are making increase as the amount of interest you are paying falls in the line with the reducing principal.

On the other hand, an Interest-only Investment Loan requires you to ONLY pay the Bank the interest. Any principal payment is flexible and entirely up to you. The whole of your repayment is then tax-deductible.

The financing equation can be critical to real estate investment.

  Your cash-flow improves as you are not making large, fixed, principal repayments.

You are maximizing your other income, by not having to use it for this property.

However, these loans are not for everyone.

The less money you outlay, the higher your percentage returns, you utilize leverage, and you can buy more properties.


Many investors make this mistake. They reject a one-bedroom bargain because "they couldn’t live in it".

They pay top dollar for a three bedroom luxury apartment because in the worst case they could "move into it".


Do the numbers. Do the research. What will rent the best? Give you the best capital growth?

What has been the capital growth for the past year, the past 5 years, the past decade?

You, should be looking to acquire an investment property that will continue to work for you for many years to come.

What is the current occupancy rate? What has been the capital growth over the past year, past 5 years, past decade? How many properties are currently on the resale market? How many rental properties are empty? What percentage of the total stock is this?

Knowing the answers to these questions is critical, as is knowing how to analysis the data.

If you don’t know HOW to get this information, ASK property professional. If they DO NOT have this information for you, find someone else to talk to.

Buying and selling for your own residence is emotional. Investment property should not be.

Note: Report compiled by the Citylife Group based on information supplied by industry analysts and other sources deemed reliable but not guaranteed. Investors should rely on their own enquiries before making any decisions. ©Citylife Group. All rights reserved. WWW.CITYLIFEGROUP.COM





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