As a property investor, it’s easy to get caught up in media or spruiker hype about new, ‘hotspot’ locations to invest. As Property Investing becomes more sophisticated, it’s more crucial now, than ever before, to determine your particular strategy, including what your goals, key considerations, and motives are, before you can find the right location for an investment property.
The beauty of property investing is that a, ‘one size fits all’ approach never applies when it comes to your location strategy.
While it may sound vague and sometimes even dare we say it, evasive, every investor is different – income, cash-flow, risk profile, any existing properties as well as your work prospects, means each of us is an individual with particular circumstances that need to be taken into account carefully – in order to build a clear and precise plan that is designed around you.
The list below will help to put you in a position where you are far better able to determine the right style of investment, and location, for you.
What are your financial limits?
Right now, the banks and their lending criteria are all over the place. So obtain an overview of your finances and perhaps get a pre-approval (if your bank is issuing them) before beginning your search. This will put realistic confines on where and what you can purchase. There is no point wasting time looking in locations you can’t really afford.The best thing that you can do in this regard at the moment, is to speak with a good, solid broker. Someone who has access to many lenders and can tell you what’s right for you RIGHT NOW.
Determining typical rental income and expenses
A true recognition of the rent for the chosen type and location of your property is essential, to be able to determine the yield return. Also there are always costs and tax considerations involved in the purchase of any property. This is where a good buyer’s agent can guide you, in terms of what you can really afford, and what your key considerations and costs will be.
Once your numbers are crunched, and your finance is approved, you now know what your parameters are.
So – what should you consider when looking for the perfect location? Here are some key considerations:
Keep your options open to find the right location for you
Start with a big picture vision in terms of potential locations. Be careful to keep an open mind to areas that you are not familiar with. Many make the mistake of looking for opportunities in areas they personally like, or live around the corner from – but this will very often not be the best investment area – and may well conflict with your motives and strategy in terms of optimising your returns.
Talking to a buyer’s agent and qualified property investment adviser who is truly independent and an awarded member of the Real Estate Buyers Agent Association of Australia, means they are working for you, the buyer, and not the seller. Their insights in helping you to nail-down your strategy and plan, as well as their insights, data and analysis of interesting opportunities beyond the few square kilometres where you live, and the current property cycle, will give you the key up-to-date information you need to start narrowing down your search to a handful of areas to consider in earnest.
Don’t be afraid to branch out into better investment areas out of state or somewhere unexpected
Unless you intend to renovate yourself, or otherwise be hands on in fixing up or directly managing the property, then you don’t need to live nearby. Having the right network of people around you who study these markets, and are on the ground with strong relationships with agents in these areas, means you don’t need to be running around the country looking through properties and suburbs yourself. This allows you access to a broader range of areas, and the likelihood of a better result based on buying where the data, rather than your familiarity, suggests.
Consider Buyer Demand and Demographics
What are employment opportunities like in these areas, what infrastructure is there already in place or planned around transport, schools and amenities? Is the suburb being upgraded and gentrified? What kinds of people are attracted to the area, and how is the growth rate for the area? How do prices, yield, infrastructure development, and growth compare in nearby suburbs? What property type is most valued in the region? and now more than ever, how diversified are the local industries ? You don’t want to be buying in an area where there is one major industry keeping everyone employed. Do your research.
The Desirability Factor
Supply and demand is a critical factor when looking for an investment property. Is this an area where people want to live, and is attracting more viewers to property sales and rentals? If people like living, visiting and renting in the area, such as those aesthetically or geographically pleasing – or perhaps closer to urban centres, for example, it can seriously influence strong and consistent capital growth, and lower vacancy rates.
Note that Council websites are a mine of local information
..they’ll list things like an economic forecast for the area, as well as publish their own statistics so you don’t have to trawl through detailed ABS stats on employment figures, vacancy rates, how many people are renting, how many are owners – you can usually get all of that from council websites.
Knowing how to find the best areas to investigate, and then what considerations in those areas are important, will help you to source suitable properties that match your investment strategy and plan.
Using an experienced and awarded professional property agent will help you nail down your plan, recognise the best opportunities, and find the right location for your investment property.
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