Today I am off to Fiji to attend a conference for the Australian Lending Company (Alco). My Australian company won the business of the year last year and this year we are once again finalists.

When I am there I will be talking to mortgage brokers who come from all across Australia and no doubt the topic of conversation will turn to real estate and the cost of it.
As a lot of these brokers will be coming from the main centres of Australia their perspective of expensive or value will be tainted by the prices they see everyday.
This price/value comparison is one I see every time I look at prices in the Mount and Tauranga area after looking around Auckland.
Just this weekend gone I was amazed at how much property you can buy in the Mount and Tauranga compared with Auckland, where my second home is.
You can understand why it is so difficult for people to decide what a good investment is when you can buy a pretty nice home in Tauranga for $600,000 yet in Auckland this will get you everything from a four bedroom home in a nice suburb through to a two bedroom apartment in the viaduct.
Read the blurb from the real estate agents, however, and each and every one of those properties is a great investment.
So how do you, as an investor in the property market, determine what a good investment is? (Oh yes and when I say investment I am talking about a long term investment not a speculative short term trade, that's another topic altogether and one I will get to.)
I have six simple methods of determining whether a property is a good investment for me.

1. Would I buy it if I had the cash?
I use this question because often people only buy an investment property because they can borrow the funds and with the gearing aspect counted the property looks great, but how does it look if you were paying cash for it?
2. If I borrowed 100 per cent will the property pay for all of the expenses?
This is just about never the case unless you factor in the tax benefits. Many people like to ignore this aspect if government is going to pay you to own an investment then why not take the money?
3. Is there a story behind why the property may appreciate in value over time?
If you are going to borrow money to invest, then one of the fundamental laws is that the investment must provide the opportunity for capital growth. Hopefully this growth will be in excess of inflation.
4. Is there a story behind why the rent on the property will increase over time?
Just like capital growth, the property needs to be in an area where the rent will increase over time as well.
5. Is the property in an area where it will be simple to sell if I need to?
A lot of people have found out that trying to sell their investment property in certain areas has been difficult whilst other people have had theirs snapped up within days of listing.
6. Can I sleep at night?
At the end of the day no matter how much the property costs me to buy or to keep I need to be able to sleep at night. If I worry about the property then I am going to sell it sooner rather than later and the chances are that I will need to sell it at the wrong time. Make sure you can hold on to your property for the long term because that is how you make the greatest gains.

This list is not exhaustive and everybody will have different requirements. However, most of my clients over the years have liked this simple approach to investing and most importantly – requirement number six.