Jon Cunliffe, head of JM Finn's investment office, looks at how the skills needed to win at Monopoly can also help you make astute investment decisions.

As Monopoly celebrates its 90th anniversary today, its enduring appeal remains strong. 

Yet beyond its nostalgic charm, the game provides an insightful framework to understand real world property investment.

While it simplifies many aspects of real estate acquisition and development, it still captures core principles that investors can apply in practice.

Monopoly is fundamentally a game of strategy, capital allocation, risk management, negotiation and, inevitably, luck. These elements are equally central to successful bricks-and-mortar investing.

1. Cash flow: Don't go bust

At the outset, it's worth stating that the most important lesson Monopoly teaches is the importance of cash flow.

Owning properties is a necessary but not sufficient condition for success alone, because it's the rental income that keeps players in the game and enables future acquisitions.

The same holds true in real estate investing. Properties that generate consistent rental income provide a buffer against market volatility and allow investors to reinvest, diversify, and weather downturns.

Monopoly reflects this reality: liquidity pressure can quickly escalate into insolvency, often forcing the sale of valuable assets below fair value.

2. Strategic purchases: Location, location, location

One of Monopoly's most valuable lessons lies in the power of strategic acquisition - because not all properties are created equal.

Astute players should target the orange and red sets (including Bow Street and the Strand), which offer strong returns relative to their cost and are frequently landed on due to their proximity to jail.

This mirrors a fundamental truth in real estate of location, location, location.

To illustrate, successful investors focus on areas with high foot traffic, growing populations, or planned infrastructure development - especially transport links.

They also recognize that a well-positioned mid-tier property can outperform a premium asset in a less desirable location, echoing the adage: never buy the best house on the worst street.

Ultimately, Monopoly rewards foresight and portfolio construction that balances acquisition cost with income potential, while mitigating concentration risk.

3. Deal-making: Trade with other players

Another valuable lesson from Monopoly is the importance of strategic deal-making. The most successful players aren't those who simply accumulate properties, but those who actively negotiate trades to complete property sets and strengthen their position relative to the competition.

This reflects a key reality in property investing - collaboration is essential. Strategic partnerships enable investors to pool capital, share risk, and access opportunities that might be unattainable on an individual basis.

Monopoly reinforces this principle - success often hinges on the ability to compromise and collaborate, even with competitors.

4. Development: Build out houses and hotels

Monopoly also highlights the value of development within a property portfolio. Whilst owning a property is a good start, it is much better to build houses and hotels.

In Monopoly, the jump in rent from unimproved properties to those with developments is substantial.

This reflects the real-world approach of adding value through enhancements such as renovations, improved cost management or repositioning within the market to boost both rental income and overall asset value.

In summary: passive ownership can generate modest returns, while active enhancements can unlock a significant amount of additional value.

5. Risk management: The chance card

Monopoly also aligns closely with real-world property investing in its emphasis on risk management.

Uncertainty is embedded in the game through chance cards, unpredictable dice rolls, jail terms, and costly landings on opponents' properties can disrupt even the most carefully planned strategy.

Likewise, real estate markets are shaped by a wide array of unpredictable forces be those interest rate movements, economic cycles, tax policy changes, planning regulations, and shifts in investor sentiment, all contributing to a dynamic and often volatile environment.

Successfully navigating these risks is essential to long-term success.

6. Diversification: Don't neglect the stations

Monopoly encourages players to diversify, for example acquiring the railway stations, which offer consistent yields and favourable strategic positioning across the board.

This principle translates directly to real estate investing. A portfolio concentrated in a single geographical area or sector is inherently vulnerable to localised endogenous shocks.

Diversification, both in asset type and location, is therefore essential to building resilience and long-term success.

7. Timing: Start buying early

Timing also plays a crucial role. In Monopoly, to gain the most from compounding returns one should invest early, as acquisitions late in the game often fail to recover their cost.

In the real world entering a market before it becomes saturated or overpriced can lead to outsized gains. 

Conversely, chasing trends or buying at the peak often generate poor returns. Monopoly rewards those who act decisively and invest early, reflecting how successful real estate investors operate.

8. Endgame: Resilience and opportunism

As Monopoly progresses into its endgame, there is less liquidity in the market, and bankruptcies become more frequent.

The players who remain in the game are typically those who build resilient portfolios early on, manage their cash flow prudently, resist the temptation to overspend on premium properties and opportunistically acquire the properties of forced sellers at below market value.

In real estate investing, long-term success similarly rests on a combination of strategic planning, discipline, patience, and decisiveness. These qualities provide a strong platform to capture market upside whilst creating the capacity to withstand market downturns.

9. Multi-asset portfolio: Beyond the game

It would be remiss of me not to consider the role that property plays in a multi-asset portfolio of equities, bonds and alternatives.

Property can add significant diversification to a multi-asset portfolio by offering a relatively low correlation with equities, bonds and other assets, thereby smoothing returns and reducing overall volatility.

It can deliver stable income through rental yields, which are often higher than seen in the fixed income markets and can be inflation-linked.

This makes property particularly attractive during inflationary periods, as both rents and asset values tend to rise with inflation. Over the long term, property also offers capital appreciation, especially in urban markets, where supply is constrained.

Sector choices - such as residential, commercial, logistics, or healthcare – also allow for tailored exposure.

Whilst property does carry risks - for example, illiquidity, valuations which can lag the market cycle, and a degree of sensitivity to the level of interest rates – nonetheless, it remains an appropriate vehicle to enhance risk adjusted returns at portfolio level.

10. Investing insights: It's more than dice, money, cards and tokens

Monopoly's enduring popularity highlights the continued relevance of the lessons it teaches. While no board game can fully replicate the complexities of property investment, Monopoly distils many fundamental principles into an entertaining and instructive format.

For those willing to look beyond the dice, money, cards and tokens - and the inevitable family rivalry it will spark over the festive season - the game offers a surprising array of insights.

It demonstrates that success in real estate depends on strategic thinking, the ability to read others, and the skill to turn opportunity into advantage through shrewd and effective dealmaking.