Finding the best area to invest in can be quite a challenge for many investors—seasoned or newbie. The wrong area may cost you money and lead to your property failing to grow in value over the long term.
To help you choose the best area for your next investment, consider these steps:
- Set a goal. Your financial goal will dictate the area where you’d invest. Setting a goal, knowing what you want to achieve, and your timeframe can help you scout for areas where to invest. If the location doesn’t fit your targeted achievement, discard it.
Set realistic goals based on your budget and what you want to achieve. You may create a checklist to help you set a goal.
Property investment checklist
Rental property under $400,000
Should be near jobs, employment
Low vacancy rates
Easy access to and from a CBD
For example, you want a rental property under $400,000 near jobs, so it’s appealing to tenants. You also want to invest in an area with low vacancy rate with easy access to the CBD. By writing down the things you want an area to have for your next investment, it may help you stay focused on your search because you already have a point of reference.
If a location doesn’t have most of the items you have in your checklist, it may be an indication that you need to move on and look at another location. You may also check our Top Suburbs page to see which areas have a growing property market.
- Look at the population and employment. To find the best area for your next investment, look into population and employment trends.
Employment in the country continues to grow strongly at 2.5% in year-ended terms. In September 2019, the unemployment rate had been 5.2%, according to the Reserve Bank of Australia. Meanwhile, the country’s population is set to double by the year 2075, says the Australian Bureau of Statistics.
Population trends may give you an idea of an area’s housing demand. Looking at the employment trend is also important because a job is where buyers or tenants will get the money to pay you. An area with growing employment may lead to increasing rents and home values—buyers and tenants may have more money to spend on their dwellings.
For example, if you’re looking to invest in a residential property, you may want to look at areas with higher demands for houses like Syndey and Melbourne. Prices in these cities continue to increase due to strong population growth driven by strong employment opportunities.
Consider looking at the latest population and employment trend through the Australian Bureau of Statistics’ website.
- Monitor lifestyle shifts. Looking at the typical lifestyle in an area is a fantastic way to gain more information about what kind of dwellings tenants and buyers may want.
For instance, high-density sites comprised 73.1% of all residential development sites sold by volume, followed by low-density with a 20.9% share, according to Knight Frank’s Australian Residential Development Review. It means more and more Australians prefer high rises and townhouses in major population hubs.
In Sydney, there has been a shift to a shared urban lifestyle, says Urban Taskforce Australia CEO Chris Johnson. Thirty percent of Sydney homes are strata at the 2016 Census.
The shift from quarter-acre block to high rises and townhouses may help you determine the type of dwelling worth the investment.
A quick google news alert notifying you of any update about the changing lifestyle in your prospective area may help you in your monitoring. You may also want to subscribe to our newsletter and magazine to get the latest information about the country’s property market.
- Spot gentrification. Gentrification means the process of improving a district so it conforms to middle-class tastes. It is the transition of a community from low-income or working-class to middle-class or affluent status, according to Forbes contributor Peter Saunder.
A location undergoing gentrification may be the best area for your next investment. A property in a transitioning neighbourhood may be in high demand once gentrification goes full swing.
To spot booming areas, you may look at some of the following signs:
- Income growth. The income in the area may significantly change as residents become better educated and hold higher-paying jobs. A suburb with income growth may mean people who live there can pay for higher prices for a property.
- New infrastructure. New businesses and development in the area may signal that the neighbourhood is booming. Consider monitoring the local news and visiting government websites to keep a close eye on the area’s economy.
- Real estate trends. Increase in prices in the neighbourhood’s property market may indicate that the area is booming. To know more about the property market in the area, you may contact a realtor or visit it yourself. Consider going to open houses to observe the trend first-hand.
- Put yourself in the tenant’s shoes. To find the best area for your investment, look at the area as if you’re the tenant. Some of the things a tenant may look for are:
- Accessibility. No one wants to live in an area where commuting can be difficult—it may also make going to and from work a lot harder. A buyer or tenant may want their dwelling to be easily accessible via public transportation. They may also consider restaurants and other establishments nearby when looking for a house or unit.
- Schools. For families looking for a new dwelling, the schools in the area may be important. They would want to send their children to a reputable school in a good neighbourhood.
- Security. The area’s security is important to buyers and tenants alike. You may want to check the area’s crime rate to see if it’s quite safe.
- Lifestyle. Buyers and tenants may want their dwelling to be located in an area where there are a lot of activities to do that may fit their lifestyle. For example, tenants and buyers who like nature may want a property in a regional suburb that offers many outdoor activities.
Consider the type of tenant you want to attract when looking for an area to invest. Remember that your property investment isn’t exactly for you—it doesn’t have to adhere to your taste, but it should tickle the fancy of prospective buyers or tenants.
Do your due diligence, plan ahead, and research on your prospective areas. Don’t be fooled by spruikers telling you that a particular area is set to boom without proofs to back it up. If you’re unsure and need more help in your investment journey, talk to a licensed professional.
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