Investment strategy is an investment plan at a high, general or overall level. It includes overall investment targets and the necessary actions to achieve those targets according to assumed investment environments. The strategy is set over the investment period for example, 5 or 10 years but is most applicable at the initial stage of the investment as it will determine the type of investment property bought. It also applies to the initial investment period but modern thought is that the middle and later stages of the investment period should be flexible with the ability to change the strategy because of the dynamic nature of property investment. That is, circumstances change that could not have been foreseen at the start of the investment.

The investment strategy is personal to the investor and depends largely on:

The above factors are not mutually exclusive but overlap.


Expertise and experience usually go together. The investor may have experience and expertise in:

An investor with suitable expertise and experience will lower the risk of investment compared with an investor without that expertise or experience.


The source of investment funds affects investment strategy as follows:

The investor with their own funds has much greater freedom of investment strategy than a borrower.


Whether or not the investor is a risk taker is also subject to the expertise and experience of the investor and source of funds. Good property investment is logical and rational decision making and therefore, an investor who appears to be a risk taker to an outsider, may be in fact be engaging in a “canny” or clever investment because of some comparative advantage such as expertise the investor possesses. That is, that investor does not see themselves as a risk taker.


An investor with expertise in motels while inspecting motels in the US noted that a number of successful motels were located in industrial areas. This would have been a novel location in Australia where conventional wisdom has it that motels must be located fronting a busy road or just off the road. The investor built the first motel in Australia in an expanding industrial area of Sydney and it was a success because it was a popular destination for executives and sale representatives visiting companies located in that area.

To the outsider the building of the motel in an industrial area and not fronting a busy road would have been high risk. However, to the investor although it was riskier than conventional building a motel on a busy road (as it had not been proven in Australia) it was not as risky to them because of their expert knowledge and experience. The fact they knew that the new location had been proved in the US reduced the risk of the new location in Australia.

A number of pioneer land uses are uses proved overseas. The investor has the comparative advantage of seeing that use in operation and that it is successful overseas.

Another example is the successful development of Pier 41 in San Francisco. This development spawned comparable pier developments throughout the world including Sydney.

Whether or not the investment is short or long run

The investment strategy will depend to a large extent on whether or not the investment is short or long run. Again, such a strategy cannot be excluded entirely from the factors mentioned above. For, example, a risk taker using their own funds will look to short run investments because of a need to “roll the investment over” so as to be able to generate new funds for further investments. Because the short run investor is concerned with small investments for example, building a block of 10-20 flats the investment period will be the time taken to build and sell. The period would typically be 18-36 months.

On the other hand a superannuation fund is concerned with investing in the long run which will reduce administration and management costs. The long run investor is looking for reasonable capital growth over a 10- 20 year period and therefore, is attracted to large and safe property investments.

Strategy will also be affected during the investment period. For example, tax depreciation allowances for the building at 2.5%pa allows the total claim over a 40 year period. The short run investor will not be able to enjoy the tax advantages for that period but will still be able to onsell the residue value of the allowances at the end of a shorter investment period to the buyer. This will be part of the short run investment strategy.


We have already covered the sources of data for investment analysis in learning outcome 2. This included economic data such as Gross Regional Product, demographic data such as population change, and sales data allowing the valuer to determine market value and the market’s expected return on investment.

The quality of the data affects the risk of investment. The better the integrity and quality of data, the more reliable are the expectations and forecasts in the investment strategy. Some data is better quality and more reliable than other data.


The ABS data on economic growth and population is the most reliable data available as it is based on a good sample and has been scientifically checked for integrity and reliability. It is the most reliable data that the investor can use for economic and population growth.

However, ABS data is often out of date because of the lead time in compilation and preparation. For example, population change data may be 2-3 years old having been based on the previous census.

Because the property investor is dependent on topical data, ABS data may have to be augmented with more recent data. The best source for up to date information is the local council particularly if they have an investment support or development section. Such a section will have up to date economic and demographic estimates that the valuer can use. The section should also have a copy of ABS’s snapshot of the region or local government area which is a compilation of all relevant data.

Similarly, state governments will provide economic and population data at state levels from departments and sections promoting development and investment in that state. That body may also have data at regional level. Such data is reliable data for the valuer to use in investment reports.

The valuer should acknowledge the source of the data. This is not only professional but also part of risk management in case there is a dispute about the data used.

If up to date information on economic and population is not available then the valuer can use trend lines to project the existing data to the present.


Other investment data includes sales and market information. The valuer may be able to compile a sufficient and reliable sales report from their own sales data but usually this is not of sufficient sample size for reliable trends to be established. The valuer may have to augment sale information from other sources (eg newsletters, trade newspapers) published by real estate firms. However, such subsequent data is less reliable.

The most reliable data are the latest sales information available from Council by way of notices of transfer. The notices of transfer are legal documents and therefore, reliable evidence of sales. The valuer should maintain and keep sales evidence up to date on a regular basis.

Analysis of such sales to find rates of return will weaken the reliability of the evidence as it will be necessary to ascertain the expected income and/or benefits of the investment property. For example, the valuer will have to ascertain rentals and outgoing information from the property manager or owner. This information is less reliable or more general (because of privacy concerns) compared to the sale price derived from the notice of transfer.

The further removed the source of information is from the valuer, the less reliable it becomes. The reliability of subsequent data is dependent on the source. For example, investment data prepared and published by a large national real estate company and prepared by their full time research section will be more reliable than that published by a small agency.


Recommendations and comments by the valuer can be considered according to the stages of the investment.

The valuer’s most important single role in the investment is to find a suitable property that meets the investor’s strategy and determine the market value of that property. In practice it is often difficult to find investment properties that fully meets this criteria and therefore the valuer will probably recommend about 4-5 suitable properties, leaving it up to the investor to decide which one to buy. Once the investor has “firmed” or narrowed the range of properties to say, one or two, then the valuer can carry out further research and provide up to date market values. The valuations will be the deciding factor in which property the investor should buy.


The valuer will also be engaged to make the following recommendations during the investment period:


The final recommendation will be at the end of the investment period when the valuer will carry out a market value of the property to determine a fair asking price if the investor decides to sell. The valuer may also be asked to make recommendations on the most suitable method of sale. That is, private treaty, auction or tender.

In the alternative the investor may decide to keep the property particularly if there are good quality tenants in occupation subject to long leases. The valuer can advise on the best alternative. This may mean a valuation of value to the owner rather than a market valuation.



Feedback is necessary during the investment period during which there should be ongoing and regular reports on the state of investment particularly; rate of return against current market value. The valuer will be called upon to provide a review of investment report and if rents or new leases are due; a market rental value report. This report is used to monitor the status of the investment. If the property is showing a return on investment below a reasonable level then remediable action should be taken.
Review of the investment will involve an up to date valuation to decide the property’s performance from a return on investment perspective. This valuation will also provide an indicator of viability. For example, if land value is increasing against the improved value then the building is showing the effects of depreciation. This is to be expected as a building becomes older so does the drop in depreciable value. If there is a sudden and large rate of increase then this could be an indication of the need for remedial action.
A fall in rate of return will not necessarily mean that the property is not performing as well as it did at the initial period. The establishment of the subject property together with further surrounding development supporting that land use will result in a building less risky than it was at the start and therefore, a lower rate of return is appropriate.
On the other hand a higher rate of return may come about because of a large drop in market value. This would indicate that the investment is losing value and risk has risen. This scenario is more important during the review of investment as it may indicate that when the existing tenancies fall due the investor may have to settle for lower rents.
The investment review will allow the investor to assess and address problems that have risen. They may carry out remedial action which may be renovation, change of use or even cutting losses by selling. The ultimate remedial action is decided by the investor and the valuer can only advise on what they think is the best option.
Dynamic qualities of property investment
With the large number of factors covered above in SWOT it is apparent that a property investment, particularly in the long run, will change over time. That is, property investment has a strong dynamic quality. The changing dynamic factors can be considered under the heading of external and internal factors.
The main concern for the investor is changing external or fixed factors as these cannot be controlled. Changing costs and conditions such as rates and taxes and government laws have to be, because of their nature, accepted by the investor.
A new government law requiring more expensive fire control measures is a cost that the investor has to endure. Such unavoidable property investment costs are part and parcel of property investment and one of the reasons why the required rate of return is substantially more than the “risk free” rate.
If the new external costs are “across the board”, applying to all other investment properties of this class of land, the extra costs can be passed onto the tenants or if not, the land value will fall. If an increase in external costs becomes too onerous then the valuer’s review of investment will help the investor decide whether or not to try to remedy the situation or sell.
Another important external dynamic factor affecting the investment is the state of the market including market competition. Competition in the locality may mean that market rents are falling so that the expectation is that future market rents may be less than currently being achieved. This may not mean that the value of the investment is less as the market value may have risen with the locality becoming a safer investment.
With periodic review of the investment an up to date market valuation will show the investor the current status of the investment so that the investor can prepare for change and if necessary take remedial action. For an existing investment property, a falling rental market is not as critical as existing tenants generally, prefer not to move, particularly if they have incorporated a number of tenant improvements, established site goodwill (eg naming rights). When the leases of such tenants fall due, the investor may still be able to negotiate a good rent.
The valuer plays a role during the review of investment period in deciding the best option taking into account variable costs. Micro, internal or variable costs are those costs that can be changed by the investor.
If the cost of running the air conditioning has shown substantial increases in recent years the investor can decide to: The valuer can help the investor to decide the best course of action by determining the NPV of each option. The option with the lowest NPV is the preferable option.
The valuer plays an important role in assessing and identifying the dynamic qualities of the property and will be part of their monitoring and review of the investment report.

See privacy


Development of strategic analysis is the “mission” of the investor and sets the basis for the whole investment program. Strategy is at a high and general level and it is most important at the initial or buying period of the investment plan.

During the investment period the dynamic qualities of property investment means that the strategy will change over time. That is why the valuer should monitor the perfiormance of the investment and report back to the nvestor so that any problems can be remedied.

The headings of the report be SWOT headings as these provide a thorough analysis from 4 perspectives.

All information used and received by the valuer is confidential and private. If the valuer even inadvertently releases confidential information they will be in breach of the Privacy Act and probably, the common law as well,

See establishing investment requirements

See developing investment strategy