Why investors must get out of their “comfort zone”

It wasn’t that long ago in the grand scheme of things that investors could take their pick of locations in myriad locations around the country for around the $500,000 mark.

But, that was then and this is now, courtesy of the stellar price growth that has occurred in a variety of areas near and far.

Now, that’s not to say that investors can’t still secure investment-grade properties for around a half a million dollars, it’s just that the options are just not as many or varied as once they were.

Plus, for many potential investors, they actually have the financial ability to easily buy in a higher price bracket, but they are stuck in a comfort zone that is no longer fit for purpose.

Superior offerings

For many of these would-be investors, increasing their budgets to the $700,000 to $750,000 price zone would make a huge difference to their options as well as potentially to their returns over the long term.

That’s because this higher price point will take them out of the mortgage belt as well as first home buyer territory in many markets.

Now, this could be in a major regional area, or it could be in one of our capital cities.

Regardless, the point I’m trying to make is that entry-level buying can often not be the best investment strategy – especially when you have the ability to manage a higher budget.

While I accept that there are people who are more financially conservative than others, it’s vital to recognise that prices are higher than once they were, which clearly means you need to spend more to secure a strategically selected investment property that has the best possible upside potential.

Capital growth drivers

The drivers of capital growth have generally stayed the same for decades now, with one of the most important factors being the types of property buyers who are attracted to a particular area.

The areas that are the most in demand from buyers as well as those that are attracting a new and wealthier type of homebuyer have generally been the recipients of the best capital growth over the years.

This is because it is aspirational homebuyers who drive up (true) property prices and not other investors or first-time purchasers.

Their desire to not only live, but also own property, in certain suburbs is part of the reason why property prices continue to rise in these areas.

Likewise, these locations usually have a constrained supply of properties to purchase, which underpins more demand than supply.

And, generally speaking, these are also the suburbs that are not at the very affordable end of the scale, depending on a few factors such as geography.

Trying to purchase an affordable property just because it’s affordable has never been a wise investment strategy.

Rather, we are constantly searching around the nation for opportunities that feature a variety of investment fundamentals, including the prospects for sound yields and solid capital growth.

And, these days, those investors prepared to get out of their comfort zones by adopting a $700,000 to $750,000 budget (that they can easily manage) have access to many more prospects than they would have had otherwise.

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