Median priced property has consistently grown in value at a greater rate than inflation - due to the continuing high demand for this type of property. High demand results in good, solid long-term capital growth.

As we saw earlier, more different groups of the population are residents of this category of property.

Around one third of the Australian population live in rental accommodation, and as a vast majority of them choose to reside in median priced residences, this means that there will always be a strong rental demand for this range of property. The strong rental demand, coupled with the good growth delivered by median priced property, is what makes it particularly attractive to property investors.

As with lower end properties, it is vitally important that a lot of research is undertaken when selecting these properties, to not only ensure that you can purchase for below the FMV (Fair Market Value), but also to ensure that you are selecting a property that will appeal to the category of tenant that you are looking for.

You may choose to look for a house on a block in the suburbs, close to schools to appeal to the average family.

On the other hand you may decide to focus on the two income professional couples/single professionals who share - and purchase a good quality townhouse in one of the inner suburbs, that has special features to appeal to the 'quality' tenant, and is close to the 'café society' area of the city.

Decide before you start looking at properties, what type of property you are aiming to purchase, be it house, townhouse, unit, flat or apartment - or house with granny flat, then begin researching the market to find out recent sales in the particular area that you decide to buy in. There are various sites on the Internet that can be extremely helpful in attaining this sort of information.

Sites such as www.domain.com.au show not only the median and average prices for suburbs, but also gives you a lot of useful demographic information about the suburb, such as the age of the population, the work categories, education etc.

The local councils also keep a register of recent sales in the area, which can normally be accessed for a fee.

Familiarise yourself with an area, the type of properties available, the recent sales figures and the local facilities available and their locations, before making any offers on property.

The more information you gather, the more level headed (less emotional) you will be able to remain, when viewing and deciding on the merits of any particular property.

Buy a map of the area and highlight all the important relevant features such as schools, shops, churches, public transport, rubbish dumps, factories etc. This will help you narrow down the best locations in any particular suburb to look for a property that will be the most appealing to tenants. It will also highlight areas to be avoided - such as those close to tips.

If you decide that you want to find a property that has good renovation potential, then you should also research the costs of such renovations, allowing for the worst-case scenario on costs.

You may decide to look for properties that are spick and span and ready to move into, or decide to find something that needs a good clean, and a garden makeover. If a property in the latter category is selling at far below FMV then it could well be worth the effort of organising someone to do the work for you, or doing it yourself if you prefer.

Visit as many real estate agents in the area as you can. Let them know the type of property you are looking for and ask them to keep you informed if any come onto their books.

Don't be afraid to be totally up front with the agents. Tell them your budget is such and such, and you are looking for a property that will give you 10%+ return - and let them do the work and find you a property that will fit your criteria. If you hint that you will also be offering them the property management, then you should find yourself getting good co-operation from the agents.

One thing to keep in mind though, is that when they do advise you of a property that they feel will fall into the category you are after - be sure to double check the rental figure they are quoting you. Does it sound like a reasonable rental, compared to current rentals in the area? Are there any properties currently on the agent's books that look similar? If there are, what are they currently renting for?

In business, you cannot afford to simply take a salesman at their word, you need to be able to verify that the information they are giving you is correct.

It is always better to have done the research first, and know the rental market, then when the agent quotes a particular expected rental return from a property you will be able to respond if you feel they are over-quoting the rental figure. This of course can also give weight to negotiating the property price downwards, so that it will then fall in line with the rental returns that you require.

Often the best buys that people get, are on properties that have not yet been advertised - so making yourself known to the agents can be extremely beneficial. After all, if they have a potential buyer already waiting for a property, then it will save them time and energy. They may even be forthcoming with information such as whether you are looking at a motivated vendor (extremely useful for deciding just how hard you want to push for a reduction on the sale price).

Motivated Vendors.

There are many reasons that a vendor may be keen to sell up their property quickly. They may be moving interstate or have already bought another premises with a short settlement and need to sell their home quickly. It may be being sold due to a divorce settlement. Perhaps it is a deceased estate that the family are selling. The property may have been on the market for a few months, with the owner desperately needing to sell.

Finding a motivated vendor, can allow you to negotiate a substantial reduction - the trick is finding one.

Whenever you are looking at properties, try to get as much information from the real estate agent as possible. Ask them about the circumstances behind the sale. Ask them how long it has been on the market, have the owners already bought a new property, what settlement terms are the owners looking for, would they be willing to sell it with vacant possession. The more information you can extract, the easier it will be to establish just how hard you can push for a reduced price.

House and Land packages.

You may decide that instead of purchasing an established property, you would like to build in an area that has well priced land, and is a quickly expanding area that is likely to see good capital gains within the near future.
There are several advantages with building one of the main ones being that you can save quite a large amount in Stamp Duty (if purchasing in Victoria), as if you purchase a house and land package - or buy off the plan, then you only pay Government Stamp Duty on the value of the land. The other advantages are the increased Depreciation allowances available on the "Building" and "Fixtures and Fittings".

If you do decide to build, make sure the builder gives you a fixed price contract, so that you do not have to contend with any unforseen increases in construction costs, that you have not allowed for.

Check out recently constructed properties that the builder has completed to make sure you are happy with the finished product that they are producing. Look at properties that they have built for clients, not the Spec homes. If you can get references from clients who have built with the builder several years ago - and find that they are still happy then you should be able to be confident with the expected end result.

Make sure the builder is registered with the Builders Licensing Authority in their state.

When estimating the costs, always take into consideration how much it will cost for landscaping, carpets, curtains, connection of the telephone line, concrete driveways and paths, fences and clothesline. If you can get a builder to include all of these in their price, you may find that it works out cheaper than organising them all yourself. Builders will be able to get items at trade prices, apart from the phone connection.

When a builder gives you a price for a house and land package, do not accept this as the absolute price - you can often negotiate the price down. I purchased a house and land package in November 1999, where the original asking price was $144,000.00. This was negotiated down to $129,600.00.

Builders who are working for developers who have purchased an entire estate will have more flexibility that individual builders who are just purchasing one or two blocks of land at a time.

If you are looking at purchasing a townhouse or apartment "off the plan" again make an offer. If the project has been on the market for some time, then they will probably be more willing to drop the asking price.

A friend of mine recently purchased an apartment in St Kilda, which was originally advertised for $420,000.00. After extensive negotiations she was able to purchase for $385,000.00.

Most developers could be expected to have around 30% margin built in to their developments - so it is not unfeasible to purchase up to 20% below the original asking price - if you can find a motivated vendor.

Make sure that the contract for any "off the plan" developments includes a clause that "guarantees completion". You do not want to be stuck in a situation where you have paid a deposit (or tied up a deposit bond) and then the developer pulls out of the development due to lack of demand - or inability to obtain loan funds for the development.

Purchasing a block that already has council approval for a unit development, and then building say three units, may end up not costing a lot more that it would have cost to build a four bedroom house - but you will end up with at least double the rental return, due to three rents coming in, rather than one.

Small developments.

Many investors have made very good capital gains, by purchasing a property on a large block, keeping the original property as is/renovating if needed, subdividing the land and building a unit in the back yard - or next door in the case of a corner block.

You will need to be aware of the local council regulations prior to embarking on an exercise like this.

I saw an example recently, where an old house on a corner block was advertised for $105,000.00. It sold quite quickly. Several months later a small unit was built next door, around 9 squares in size (I estimated the cost of this to be around $55,000.00 - $60,000.00 to build). A fence was erected to divide the unit from the previous property, a new drive way was installed - and then I saw the add in the local paper advertising the new unit for $145,000.00 and a Sold sticker on the board out front three days later. Even taking into consideration the costs involved in subdividing, there certainly appeared to have been a healthy profit made in this exercise.

Picking the growth suburbs.

Once you understand the factors influencing capital growth, then it will be easier to distinguish geographic locations which will supply the highest capital growth in the long run.

Median priced property in general has had consistent growth, but there are still areas that sometimes have far higher than average growth, and being able to predict these areas and purchase properties there, can be highly advantageous in helping your assets grow even quicker.

Factors which influence capital growth, all basically stem from the basic principle of supply and demand. An area that is in high demand will grow in value the quickest. What makes an area become in demand? Firstly population growth will have a large influence. The more people wanting property in the same place, the higher the prices will go. Other factors are things like lifestyle preferences - this is often seen in inner city suburbs that become popular with the café society.

It is said that capital growth often goes in waves, where as one area fills and becomes too expensive, often over a period of twenty to thirty years, then a new wave begins as people move further out. As this in turn fills and becomes overpriced, then people move further out again. This continues until an eventual outer limit is reached, usually due to infrastructure restrictions, or geographic features such as mountains, etc. Once the outer limit has been reached, normally in around fifty to seventy five years, then the original inner city locations, which are by now a bit worse for wear, suddenly become popular again with extensive renovations taking place to the once vogue inner city properties and the new wave begins again.

Often the best way to find a well priced property, that has good potential for capital gain, is to look for a suburb that is currently booming - and then buy in the suburb next door.

Buying in anticipation of the gradual expansion of the popular area, can prove to be extremely beneficial - especially if your investment philosophy is that of "Buy and Hold".

Another area to keep in mind, when looking for expected future capital gains is the growth corridor between Brisbane and the Gold Coast, stretching along the Pacific Highway. Extensive population growth in that area is likely to have a large influence on the property demand. The population growth has been fuelled by the high number of people migrating to that area, for lifestyle reasons. Many retirees and younger people are heading for the warmer, more relaxed atmosphere of Queensland.

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