Stop Buying Investment Properties Like You're Going to Live There. Three Rules That Changed Everything.

Every unprofitable investment property I have ever audited shares one thing in common. The buyer purchased it using the same criteria they would use to buy a home for themselves.

Nice kitchen. Good natural light. Quiet street. Close to cafes. "It just felt right."

The market does not care about your feelings. It cares about land value, rental demand, and development potential. I went from arriving in Melbourne with $2,000 in my pocket in 2014 to managing $300 million in institutional investment projects. The transition happened when I stopped thinking like a consumer and started thinking like a capital allocator.

After helping our team buy over 100 properties in the past 18 months, I have distilled everything into three rules. They are not complicated. But they require you to kill some sacred cows.

Rule one: replace your subjective feelings with land value ratios

When most people walk into a property, they look at the walls, the flooring, the kitchen benchtop. Maybe the garden. Perhaps the view from the master bedroom.

None of those things matter for investment. Not one.

When I walk into a property, I look at one number: what percentage of the total price is land value? Our hard minimum at PremiumRea is 80%. If a $700,000 property has a land value below $560,000, we walk away. Full stop.

Why? Because buildings depreciate. Every year, the structure loses 2.5-3% of its value through wear and natural ageing. Over 20 years, a building that cost $140,000 is worth perhaps $60,000-$70,000 in residual terms. But land? Land in established Melbourne suburbs — where no new supply exists — has appreciated at 7-10% per annum historically.

A property where land represents 80%+ of value means you are riding the appreciation wave with maximum exposure. A property where land represents 40% — a typical apartment or new-build townhouse — means more than half your capital is tied up in a depreciating asset.

This is why we buy ugly old weatherboard houses on 600+ square metre blocks. The house looks terrible. The land beneath it is pure gold. We spend $10,000-$15,000 on a cosmetic refresh — paint, floors, hardware — and the property rents for the same as a brand-new townhouse on 250 square metres. Except our asset appreciates at three times the rate.

"Your front five seconds of content determines whether your audience stays or scrolls. In property, your front five seconds should be spent looking at the land, not the paint colour." — Joey Don, PremiumRea

Rule two: turn every setback into an active value-creation play

I see it every week on property forums. Someone misses out on an auction and spends the next three days posting angry comments about how the market is rigged, agents are corrupt, and prices are insane.

That energy is completely wasted.

An investment mindset converts every setback into an action. Could not win the auction on the property with the existing granny flat? Fine. Go find a comparable block without one, buy it for $50,000-$80,000 less, and build your own granny flat for $110,000 plus GST.

Here is a real example from August 2025. A property in Coolaroo — a suburb in Melbourne's northwest — with a pre-existing 20-square-metre granny flat was listed with a guide of $500,000-$550,000. Over 40 groups inspected. It sold at auction for $725,000. That is a 30%+ premium above the guide.

Our response was not to complain. Our response was to find a similar block in the same corridor, purchase it for $620,000 through our off-market network, and commission a 30-square-metre granny flat build ($110,000 + GST). Total cost: $740,000 including construction. The completed property — main house plus granny flat — will have a bank valuation of approximately $820,000-$850,000 based on comparable sales.

Net equity creation: $80,000-$110,000. Plus two rental incomes totalling $830-$900 per week from day one of granny flat completion.

The person who bought the Coolaroo property at auction got an existing granny flat for a huge premium. We created the same outcome — arguably better, since our granny flat is brand new with a fresh OC — for a similar total outlay, plus $80,000-$110,000 in manufactured equity.

That is the difference between a reactive mindset and an investment mindset.

Rule three: pick one lane and dominate it

This is the rule that separates professionals from hobbyists.

I see investors who look at a CBD apartment one week, a regional farmhouse the next, and a townhouse in the eastern suburbs the week after. Their portfolio — if you can call it that — has no coherent thesis. No geographic concentration. No strategy for capitalising on a specific market dynamic.

Our lane at PremiumRea is narrow and deep: middle-class family housing in Melbourne's established suburbs, where land supply is finite and population growth is structural. We buy in suburbs where the median household income is $120,000-$140,000, the typical buyer is a 30-40 year old skilled migrant with a family, and the healthy lending multiple of 7-8x income sets a natural floor price of $840,000-$1,120,000 on housing in these corridors.

When you buy a house at $700,000-$800,000 in a suburb where the organic demand floor is pushing toward $1 million, you have margin of safety. You are buying below replacement cost. You are buying where the fundamental demand exceeds current pricing.

Contrast that with buying a $1.5 million property in a prestige suburb where the price already reflects everything the market expects. There is no margin of safety. There is no development upside. You are paying full freight for an asset that needs a 7% annual increase just to justify the holding costs.

I came to this conclusion after completing a global MBA and comparing property to equities, cryptocurrency, and fixed income. Property — specifically, Australian residential land in supply-constrained corridors — offers the best risk-adjusted return of any asset class I have analysed. But only if you specialise. Only if you go deep rather than wide. Only if you treat it as a business rather than a hobby.

When the market sees you making the same disciplined purchase, in the same corridor, over and over again — it starts rewarding you with off-market deal flow, preferred lending terms, and valuations that compound on each other. That is a virtuous cycle. It does not happen when you scatter your capital across five different asset types in five different cities.

"The best investors I know do not diversify for diversification's sake. They concentrate where they have an edge, and they defend that edge relentlessly." — Joey Don, PremiumRea

Frequently asked questions

How do I calculate the land-to-price ratio? Find recent vacant land sales in the same suburb. Calculate the per-square-metre land rate. Multiply by your target property's land area. Compare that figure to the asking price. If the land value is 80%+ of the total, you are in the right territory. Council rate notices also show site value, though these can lag the market.

What if I can only afford an apartment — is that still worth investing in? For wealth building, no. Apartments have minimal land content, high body corporate costs, and compete with unlimited new supply. If your budget is genuinely limited to apartment territory ($400,000-$500,000), you are better off investing in regional Victoria — Geelong, Ballarat, or the Latrobe Valley — where that budget buys a house on a real block of land with genuine appreciation potential.

How do you guarantee 5% rental yield? We write it into our service agreement. We achieve it through post-purchase renovation — cosmetic refresh plus granny flat or internal reconfiguration — that increases rental income by 50-80% relative to the property's un-renovated state. If a standard rental on a $700,000 house is $450/week (3.3%), we target $700-$850/week (5.2-6.3%) through our value-add program.