Investment for Capital Growth
The two key pillars of property investment are cash flow and capital growth, but they are not mutually exclusive, although sometimes it would seem that is the case.
Both cash flow and capital growth are dependent on similar key attributes including -
Location
Repeatability
Quality of the tenant
Lease terms (WALE)
Stage of the asset lifecycle
Gentrification of the locality
Planning parameters and zoning changes
These categories can be broken down into many more sub-topics but these form the basis of the approach.
As with all investment analysis, try and keep it as simple as possible. As such, in my opinion, the key attributes for ensuring maximum capital growth are –
Repeatability – Is the location of the property, the access, visibility, suitability for use, topography etc easily repeatable? The less repeatable, the more scarce that resource is, and hence the greater chance of capital value increase over time.
Gentrification – Look for areas that are gentrifying. Areas that are changing perhaps from industrial to residential, or to higher impact retail uses.
Planning Parameters – Look at the city plan and especially where councils see the future growth corridors. This often goes hand in hand with gentrification.
Of course the basics of WALE and tenant quality are key to consistent capital growth through cash flow and capitalisation rate, but the items listed above are where greater than market growth can be found…provided you have patience.
Don’t forget to check out our services page for more information.
