Login
ISCOVER
With rental yields contracting in many of Australia's capital cities, one property research firm has warned investors to steer clear of certain property price brackets.
Aviate Group owner Neil Smoli said investors with larger borrowing capacities often want to purchase more expensive investment properties, despite their questionable performance.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
He said properties around the $1 million mark are particularly risky choices, and that properties around half the price tend to perform much better.
"Just like purchasing two investment properties in the same development represents an inappropriate risk, so does committing too much money to a single property," he said.
"If the suburban market were to inexplicably turn, or if the property was subject to unforeseen circumstances, the risk exposure to the investor is too great."
Mr Smoli said it made far more sense for investors to diversify.
"To generalise, investors with a $1 million borrowing capacity would be much wiser to purchase two properties priced around $500,000 each instead of putting all their eggs in one basket. The capital growth opportunity generated is greater and the risk is more evenly spread," he said.
He also said that sound investment properties generally yield around five per cent per annum, which can be jeopardised if the purchase price is too high.
"The tenant market for more expensive properties is limited, since those who can afford the asking rents are more likely to choose a mortgage on their own home," he said.
Mr Smoli reminded investors that their properties should be treated as money-makers not status symbols.
"The best investment properties are economical to hold, reliable in terms of attracting and keeping tenants, with minimal maintenance requirements, and efficient in terms of providing steady returns," he said.
[Related: Federal inquiry attacks negative gearing]
