The 200,000+ Rule
This rule states that you should be looking to invest in an area that has a drawcard population of 200,000 or more. Historically, areas with these population numbers tend to be self-sustaining and self-generating economies. These areas present much lower risk investments that offer the opportunity for stable growth and rental returns both now and into the future.
Rule out areas with a population fewer than 200,000 people
The 4 Pillars Rule
This rule states that you should target areas that are supported by multiple employment sectors. Aim for areas that have a good spread of employment across multiple industry sectors, such as:
- Mining
- Agriculture
- Tourism
- Education
- Government (e.g. Health and Defence)
- Private enterprise
- NGOs
These pillars provide stability in real wage growth, choices of employment and transience in population, which are strong indicators of self-generating economies. The more of these industry sectors an area has, the more sound the property investment.
Self-generating economies have a good spread of employment across multiple industry sectors.
The $1 / $1,000 Rule
This rule states that you should receive a minimum of $1 in rent for every $1000 spent on your investment property. In other words, your base rent needs to keep pace with your property value in accordance with this rule over time. This rule of thumb will ensure that your rental returns reflect the evolving value of your investment property within the market.
Remember, consistency and sustainability is the key to establishing wealth creation. The size of your property portfolio will ultimately depend on the level of growth and consistency of rent each property within it achieves.
$1 of rent = $1000 of property value.
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