How to make $216,000 a year

With the cost of living biting millions of Aussies, there are some smart tricks around to make yourself some serious cash.

Buying good property is far simpler than most people believe, and it can be the difference between no returns; or a $200,000 windfall.

Last year, the best performing property areas went up by 21.2 per cent, while other areas went down by 0.4 per cent.

On a $1 million property, that’s a difference of $216,000 in your investment return.

This shows that knowing which property areas will perform well, and which to avoid before you buy, will make you serious money.

The gurus make buying good property seem a lot more complicated than it actually is. Avoiding this noise and making smart choices will deliver you a significant upside, and help you get ahead faster.

When it comes to property, some areas perform well in the short term, some perform poorly; but the ones you really want are the ones that perform consistently, making you money year in and year out.

The good news is that finding quality investment properties is lot simpler than most people think.

Finding quality investment properties is a lot easier than most people think.

When you buy property, if you want to make money, there are three areas you need to get right.

Stick to the fundamentals

There are a lot of factors that drive property prices, but by far the most important factor is also the simplest one: supply vs. demand.

If you own a property where supply is limited, and demand is strong, the value of your property will increase.

If the demand is low, supply is high, or both – you won’t get the same level of growth. When supply and demand are really wrong, you can even suffer from negative returns.

But a funny thing sometimes happens when people are buying property, they start thinking about all these different things,

This includes whether they like the property, is the neighbourhood a good one, could they picture themselves living there, and a whole range of other considerations.

The reality is that these things matter a lot less than supply and demand.

The most important factor to consider when buying a property is supply vs. demand. Picture: iStock

When you’re buying property, if you want it to make you money into the future, you simply need to find somewhere where the supply and demand factors are working in your favour.

Looking at the growth in property over the last several decades, you can see that the areas that have performed best are those where supply is limited and demand is strong.

Looking at the areas that have performed averagely or poorly, the supply and demand equation isn’t as strong.

What this means is that buying a property in an area where the supply is more limited will benefit your bottom line.

For example not buying in an area where there is lots of new development, big areas of vacant land, or where there are plans to significantly increase property density over time.

And on the other side of the equation, you should be looking at areas where the demand is strong.

This means the population is growing, and is expected to continue growing in the future. Think desirable suburbs close to major employment centres, universities, hospitals etc.

This might all sound fairly complicated, but in reality finding these areas is simple.

Looking at Australia’s biggest property markets in Sydney, Melbourne and Brisbane, you simply need to look at the areas within 5-10 kilometres of the CBD.

In these areas demand is strong, the population is growing, and no matter what happens in the economy and the world, people will always want to live in these areas.

Buying a property in an area where the supply is more limited will benefit your bottom line. Picture: iStock

Once you have your list of high demand suburbs, you can screen out the areas where there’s a lot of development, where large high rise developments are either happening or planned – this way you ensure the property supply is limited and that you’re benefiting on both sides of the supply and demand equation.

Stick to boring properties

Property features like pools, gyms, elevators, and outdoor spaces can make a property look and feel good.

But these features are expensive, and the ongoing costs will drag on your investment returns. Further, they can reduce the pool of potential buyers, with many people preferring to avoid these higher ongoing costs.

These features can be nice to have, particularly if you’re living in a property. But they don’t add a lot of investment value; they can take it away.

Avoid these features and you’ll benefit from a stronger investment that will perform more consistently into the future.

Avoid the emotion

Property is an emotional purchase, and avoiding or managing your emotions and psychology when buying property can be hard – but it is an important part of ensuring you end up with a quality, rock solid investment.

You shouldn’t let your emotion or psychology drive your decisions; stick to the numbers and investment potential. Picture: iStock

When buying a property, it’s natural to think about things that are more emotional than rational; whether you like the property, whether you could see yourself living there, your kids growing up there, what your life would be like in the property etc.

Reality is that these things don’t really impact how much a property is worth, or how it will grow into the future. At the end of the day, your job as a property investor is to find a property that will make you money. This should be your focus above all else.

This means that if there’s a property you don’t personally like or one you wouldn’t want to live in, but all of the other elements are stacking up, you shouldn’t let your emotion or psychology drive your decisions. Instead, stick to the numbers and investment potential, and you’ll be rewarded.

The wrap

When you stick to these principles, you might not make fast money – but you won’t lose it either. Taking this approach is also less work because the properties are simpler to find and assess. Further, you’ll benefit from an investment that will make you money not just today and tomorrow, but consistently into the years and decades ahead.

Ben Nash is a personal finance and investing expert commentator, financial adviser and founder of Pivot Wealth www.pivotwealth.com.au. You can follow more of Ben’s free content on Instagram | Facebook | Podcast.

Ben is also the Author of ‘Replace your salary by Investing’ and Get Unstuck, and runs regular free online money education events. You can check out all the details and book your place here.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.