I recommend buying a property that is 10 per cent to 20 per cent above the median price of a home in that suburb. An average home in an in-demand area will likely yield good capital growth. But a slightly more expensive house is likely to have more desirable features and be more in-demand, and thus yield superior growth.
The difference in funding an investment property worth $400,000 versus $350,000 will often not be that much when you take into account the higher rental you receive. And those extra features – a garage or district views, for example – may mean an extra 1 per cent growth, which can make a big difference over time.
For owner-occupiers, it may be a little more difficult to fund a better property because you won’t be receiving a yield the way an investor does from renters. However, with some careful budgeting, you may be able to manage it. If you need to reduce your usual spending for a few years to fund a better property purchase, I say it’s worth it!
Your home is your greatest asset – the most important property you’ll ever own. Not only will you achieve greater capital gains over the years compared to a less expensive property, you will also enjoy the benefits of a better quality home – a large sunny backyard for the kids or being able to walk to the train station, shops and cafes. These are the features you will pay a bit more for when buying your next property. The good news is that other people will also pay more in the future when it comes time for you to sell.
Here are the staples of an 'above average' property:
Buy an above average property to achieve higher capital growth and enjoy the ride.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice
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