The key to capital growth in property is resale value. So, how do you determine what sort of property is likely to sell well in the future?

As a general guide, we recommend you look for the following features when considering whether a particular property is likely to be an above average performer in the capital growth stakes.

1.  An architectural style that is compatible with the area. For example, a Victorian terrace in Paddington is something that the majority of buyers in that area are looking for. So a 1980s cottage in the same area, no matter how nicely presented, is always going to attract less interest from buyers.

2.  A good, quiet street – not a main road. Tree-lined is the ideal, within an easy walk to amenities and public transport. In every suburb there are specific streets that carry a certain cache – and buyers are often prepared to pay a premium for these addresses. Just think of Telegraph Road Pymble.

3.  The ideal aspect is a garden facing north or north-east. If buying a semi-detached house, look for the one where the windows are on the northern side. Good natural light is what you are after, particularly in the living areas and garden.

4.  The floorplan needs to make sense, with good flow and balance. An unbalanced house would be one with 4 bedrooms and a tiny living area or limited outdoor space. An example of poor flow is where you have to walk through the laundry to get to the courtyard, or where the bathroom comes straight off the dining room. The only exception to this rule is if the floorplan can be simply rearranged without significant structural work.

5.  Parking is always preferable to no parking, however there are many inner city areas where there simply isn’t the availability. So in the absence of off-street parking, make it is easy to get a space on the street.

6.  Aussies love to live alfresco, so usable outdoor space is always a big plus for resale value.

7.  Good property doesn’t always have a view, however the best properties do have some sort of outlook. This can be as simple as ensuring each window looks out onto garden. You could plant a climber so you look at greenery instead of looking at fence palings. Or a row of bamboo or pine trees to obscure the house next door. If you can’t obscure an ugly outlook or rectify a privacy issue, don’t buy the property.

8.  Presentation of properties for sale can be misleading. It is easy to fall in love with the appearance and trimmings of a styled property and fail to see the nuts and bolts of what is actually for sale. Conversely, it is just as easy to overlook a fundamentally good property simply because it hasn’t been tarted up for sale. In fact, you might be able to add immediate value simply by addressing the presentation. Great examples are tenanted properties and those owned by older people who have dated colour schemes and furnishings.

9.  The condition of the property can set it apart. A well maintained property will need less money spent on it that one that has been neglected. And any savings you make in upkeep go straight to your bottom line come sale time.

When taking into account these general attributes, it is important to note that every micro-market has its quirks and it would do you well to understand these. For example, a weatherboard house in Balmain is not going to be worth less than a brick one, but in more recently developed areas there will be a significant price difference. If you understand the primary elements of a good property and combine this with local knowledge, you should be well on the path to a successful real estate investment.

I have a real issue with property spruikers claiming to know the next hot spot, the inference being that if you buy in these areas you will automatically be making a great investment decision. Particularly as there are so many would-be investors who are trying to identify the next big location in their hopes of striking real estate gold.

The thing that is so rarely talked about is risk. Now don’t get me wrong, there is a time and a place for taking risks in the hope of big capital gains. But this is the realm of serious investors who are educated and experienced (or pay for advice) and who already have substantial equity to back them up. It is not an investment strategy that we advise for first time investors or those with a large debt to equity ratio.

There are two main elements to capital growth. There is the location and there is the individual property. Many people providing property investment advice will focus on buying in the next hotspot to the point where the actual piece of real estate becomes secondary. In fact many of their clients purchase property sight unseen, with decisions made solely based on “the numbers”. We believe that this is the riskiest strategy of all as every suburb and town has a median growth rate, which means that 50% of properties in that area will under-perform. If you are not focused on the actual property and it’s attributes then you run a very real risk of missing out on the opportunity for good capital growth, let alone maximum returns.

The thing that I love about buying real estate is that on one hand it is so simple, the fundamental principals are pretty basic. But on the other hand it is a very complex game, largely because human beings are involved and we often have to be lay psychologists to make sense of it.

One of these fundamental principals applies to capital growth. It is this simple: for a property to grow in value above the median rate for the area it needs to appeal to buyers. So the key to capital growth is understanding what sells well. Brooke and I spent many years as selling agents, and we have stood at the front door of open houses and dealt with often brutal buyer feedback, or lack of feedback as the case may be. As a result we know what sort of property sells well. And we can see when there are simple ways to create buyer appeal as opposed to features that cannot be changed. And we can also see when buyers are being seduced by great presentation and overlook a property’s down-sides.

For this reason, when we are providing property investment advice to our clients, we firstly cast a fairly wide net in terms of location (within our preferred 10km radius of the CBD) and then actively seek the best opportunities within that area. And what makes a good opportunity comes down to the actual property and it’s future saleability.

There is little benefit in filling your head with statistics about projected population growth, infrastructure development, job creation projections etc in order to determine WHERE to buy if you make mistakes in choosing WHAT to buy.

Know your price before the auction. Don’t wait until the stress and pressure of the auction before making your mind up on what your bottom sale price or top dollar is.

If you are selling your property it is vital that you understand what it is worth. Sounds pretty basic, doesn’t it? But this is actually quite hard to do, especially as so many property owners get quite emotional when it comes to selling their home sweet home.

So how do you do it? Firstly, most people get a few agents in to give an appraisal. Each state has its own rules about the process the agent must go through to arrive at a suggested sale price. Fundamentally you can expect the agents to return with a list of comparable sales that demonstrate what they think your home is worth. But you need to remember that there is often an element of flattery in these comparisons, as the agent at this stage of the game is pitching for your business. So try to remain level headed as you consider these recent sales and whether you can truly expect something similar or better.

If you watch Selling Houses Australia, you will see that Andrew Winter takes his difficult vendors through a property that is currently for sale and competing with their home. This is an important part of understanding value as this is shining a spotlight on what buyers today are looking at right now, instead of concentrating on history. Most markets are pretty dynamic, so you need to get an understanding of the situation at the time you are planning to sell. Buyers usually have choice. Based on what else is available for them to buy, would they choose your home at that price?

Lastly, when determining what your property is worth, you need to listen to the feedback from buyers that are inspecting your property. Now, hopefully you have appointed a gun agent who has been able to attract a lot of buyers to the viewings. And this gun agent should have been able to press these people for their thoughts and also be able to read and interpret the non verbal communication. And then this gun agent should be communicating with through throughout the sales campaign so that you truly understand the positives and negatives of your property and how they impact on price. And through this process they should have been able to gain your trust and faith so that, come to the crunch, you will seek and heed their advice. Lastly, the gun agent will have been able to convert some of these buyers into red hot prospects, who are prepared to register and bid at your auction.

Now, whether you have twenty prospective bidders or only one, the principal is the same. Your clear understanding of what the property is worth will give you the confidence to know when you have achieved a good price or whether to pass it in and hold out for more dollars.

Where sellers often go wrong is when they set the reserve too high and they take too long to decide whether they will move from this figure. A successful auction relies on momentum and the decision on a bottom line sale price needs to be made ahead of time with a clear head, not in the middle of a stressful auction. Too often we see what could be a competitive auction stalls as the agent wrangles with the vendor to get the property put on the market. Which is great for us as buyers!

Likewise, when you go to bid at auction, you need to set your top dollar (or maximum bid) beforehand, with a clear head. You also need to know where this property sits in relation to the rest of the market. When you understand value, along with a premium that you are prepared to pay if this home uniquely suits your needs, you are less likely to get drawn into a foolish competition. We ask our clients to consider the level at which they are prepared to let another buyer have it. It is crucial that you know this figure ahead of time and make a commitment to yourself to stick to it!

On the flipside, if you are the only bidder prepared to make a bid, or the highest bidder on a property that has passed in, by understanding value you can confidently continue negotiations and know when a fair price has been reached, or when the vendor simply wants too much. Increasing your bid after an auction isn’t always a silly thing to do, particularly if you know that you are still way short of a fair price. By all means try for a bargain and take advantage of being in the box seat. But keep in mind that if you are way off the mark, and the owner does have a realistic price expectation, in all likelihood they will find another buyer before too long.

Whether you are a buyer or a seller, knowing the value of the property in question will enable you to confidently agree on a price, or know when it is wiser to let it go.