---
title: "We Bought 100 Properties in Melbourne This Year. These Three Rules Made Them All Profitable."
description: "100 properties, all positively geared, all on 600+ sqm, all in Melbourne's southeast. Here are the three rules that made every single one work — and how to apply them yourself."
author: Joey Don
date: 2023-05-18
category: Guides
url: https://premiumrea.com.au/blog/melbourne-property-three-rules-outperform-market
tags: ["Melbourne property", "positive cash flow", "year review", "investment rules", "capital growth", "rental yield", "southeast corridor", "land value"]
---

# We Bought 100 Properties in Melbourne This Year. These Three Rules Made Them All Profitable.

*By Joey Don, Co-Founder & CEO at PremiumRea — 2023-05-18*

> A hundred properties in twelve months. Not one was negatively geared. Not one was in Sydney or Brisbane. Every single one was in Melbourne — and every single one was cash flow positive from the first quarter. Here's the playbook.

I want to share our report card. Because I think transparency matters more than marketing, and the numbers speak louder than any pitch I could write.

In the past twelve months, our team bought nearly 100 properties in Melbourne. Every one was positively geared — rent covering the mortgage, insurance, rates, and management fees from the first quarter. Every one sits on 600+ square metres of land. Every one has a land value ratio exceeding 80%.

If you want to retire ten years earlier than you otherwise would, buying one property right in Melbourne right now can get you there. And if you learn these three rules, you'll understand exactly why.

## Rule 1: If you earn under $500K, only buy positive cash flow properties

I'm going to say something that will upset every financial planner who recommends negative gearing as a "tax strategy."

Unless your annual income exceeds $500K, you have no business buying negatively geared property. None. Zero.

Here's why. Negative gearing means your rent doesn't cover your costs. You're topping up from your salary. Yes, you get a tax deduction on the loss — but you're still out of pocket. A $10K annual loss might save you $3,700 in tax (at the 37% marginal rate). You're still $6,300 worse off in actual cash [1].

At $500K+ income, the maths changes. Higher marginal rate (47%), larger deductions, more capacity to absorb losses. But for the vast majority of investors earning $80K-$200K, negative gearing is a cash flow trap that limits your borrowing capacity and delays your next acquisition.

Every one of our 100 properties this year was positively geared. We didn't accept a single acquisition where the projected yield after renovation fell below 5%. Most exceeded 6%. Several hit 7-8% [2].

This isn't aspirational. It's our minimum standard. And it's achievable in Melbourne's outer southeast — Cranbourne, Hampton Park, Narre Warren, Berwick, Frankston — at purchase prices of $590K-$750K. You do not need to accept negative cash flow. Anyone telling you otherwise is either lazy, conflicted, or inexperienced.

## Rule 2: Land drives growth, not buildings

This is our foundational principle and I will repeat it until I'm blue in the face.

The land underneath your house appreciates. The building on top of it depreciates. Over a 30-year hold, the building loses most of its value through wear, ageing, and obsolescence. The land does the opposite — especially in established suburbs where no new land is being created [3].

Our hard rule: land value must exceed 80% of the purchase price. If a property is listed at $650K and the land alone is worth only $400K (62% land ratio), we walk away. The building is too expensive relative to the dirt.

How do we calculate land value? Two methods:

1. **Depreciation replacement cost (DRC):** Estimate what it would cost to rebuild the house from scratch (based on square metres, construction type, age, condition). Subtract that from the purchase price. The remainder is implied land value.

2. **Vacant land comparables:** Check what vacant blocks or demolition-ready properties in the same street/suburb have sold for. That's your floor for land value.

In our portfolio, the typical purchase looks like this: three-bedroom brick house, 120-150 sqm internal area, on 600+ sqm of land. The house might be worth $100K-$130K to rebuild. The land is worth $500K+. Land ratio: 80-85% [4].

This is why we avoid newer, larger houses on small blocks. A four-bedroom, 250 sqm house on a 350 sqm block might sell for the same price — but the land ratio is 50%. Half your capital is invested in a structure that loses value every year. That's a losing bet over time.

Our east and southeast corridor — particularly the suburbs I keep mentioning — still has pockets of older housing stock on generous blocks. This is where the opportunity lives. And it won't last forever, because every year more of these properties get renovated, their land value gets recognised, and the discount closes [4].

## Rule 3: Watch the three-month data, not the twelve-month data

Most investors make buying decisions based on twelve-month price change data. "Melbourne's been flat for three years" or "Brisbane's up 15% this year."

This is backward-looking and it leads to backward-thinking.

The twelve-month number tells you what already happened. The three-month number tells you what's happening now — the leading edge of the next trend.

Here's what I saw when I compared both datasets for Melbourne at year-end. The twelve-month data for the eastern suburbs showed flat to slightly negative growth. No surprise — that's been the story for three years. But the three-month data told a completely different story. Positive price movement. Rising auction clearance rates. Declining days on market. First home buyer applications increasing [5].

That's a cycle turn. The twelve-month data won't confirm it for another six to nine months. But by then, prices will have already moved 5-8%. The easy entry points will be gone.

I also noticed something interesting in the northwest corridor. A couple of suburbs — which I'm not going to name publicly because my clients are actively buying there — showed three-month positive trends despite twelve-month negatives. That's the earliest signal you can get. We're deploying capital there next year [6].

The point is this: if you wait for the twelve-month data to turn positive before you act, you're buying six to twelve months after the smart money. You'll pay 5-10% more for the same property. That's $30K-$60K on a $600K house. Patience costs money in a turning market.

## The year ahead

To every client who trusted us this year — thank you. We helped first home buyers take their first step. We helped middle-income families plan early retirement portfolios. We helped experienced investors restructure and optimise existing holdings. And we helped a developer or two find excellent land [2].

Melbourne is turning. The data says so. Our transaction volume says so. And frankly, the energy in the market says so — inspections are busier, offers are moving faster, and the agents who used to call us begging us to buy are now calling with genuine urgency because they know we'll move quick.

If you're considering Melbourne in the coming year — whether it's your first property or your fifth — the three rules haven't changed:

1. Positive cash flow only (unless you earn $500K+)
2. Land value above 80% of purchase price
3. Watch the three-month data, act before the twelve-month data confirms

These three rules, applied consistently, are why every one of our 100 acquisitions this year is making money. Not in theory. Not on a spreadsheet. In real, deposited-in-the-bank-account cash flow.

I'm Joey Don. I'll see you on the other side of the cycle turn.

## References

1. [Australian Taxation Office, 'Rental Properties — Negative Gearing and Tax Deductions', 2020. Tax treatment of rental property losses at different marginal rates.](https://www.ato.gov.au/individuals/investments-and-assets/rental-properties/)
2. [PremiumRea portfolio data: ~100 transactions in Melbourne, all positively geared, 600+ sqm, 80%+ land value ratio. Rental yields 5-8% post-renovation.](#)
3. [CoreLogic, 'Land Value Trends in Established Melbourne Suburbs', 2020. Divergence between land appreciation and building depreciation over 20+ year periods.](https://www.corelogic.com.au/research)
4. [PremiumRea acquisition criteria: Typical purchase profile — 3-bed, 120-150sqm internal, 600+ sqm land, 80-85% land ratio. Older housing stock on generous blocks in southeast corridor.](#)
5. [Domain, 'Melbourne Market Indicators — 3-Month vs 12-Month Data', Q4 2020. Leading indicators showing positive 3-month shifts in eastern suburbs while annual data remained flat.](https://www.domain.com.au/research/)
6. [CoreLogic, 'Melbourne Suburban Heat Map — Quarterly Price Changes', Q4 2020. Northwest corridor emerging as early-stage growth signal.](https://www.corelogic.com.au/our-data/interactive-maps)
7. [SQM Research, 'Property Market Forecast 2021 — Melbourne', Louis Christopher. Projected recovery trajectory for Melbourne's outer ring suburbs.](https://sqmresearch.com.au/publications.php)
8. [Real Estate Institute of Victoria (REIV), 'Annual Review — Auction Clearance Rates and First Home Buyer Activity', 2020.](https://www.reiv.com.au/)

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Source: https://premiumrea.com.au/blog/melbourne-property-three-rules-outperform-market
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent