When new home-buyers seek out their first abode, it’s not often high on their priority list to seek out a property that is falling apart.
However 12 years ago, Mark Armstrong, CEO and co-founder of real estate reviews and rankings website RateMyAgent, did just that. He purchased a home in Northcote, Melbourne, an inner north suburb that he describes as having been “full of outdated houses and old tired infrastructure” when he first entered the market.
But, as Armstrong explains, “first homebuyers should view themselves as first home investors – because their first home is unlikely to be their dream home”.
“It should be a stepping stone onto bigger and better things,” he says.
Today, the suburb of Northcote has reinvigorated, and property values have sky-rocketed as a result, revealing a valuable strategy for the taking.
“Buyers should look for emerging areas that have great infrastructure that may be old and rundown but ready to be gentrified,” Armstrong advises.
By treating your first home as a propeller into future wealth, it could potentially lead you down the track of giving you the financial capacity to afford your ‘dream’ home. But what other aspects of a location should first-time buyers be mindful of?
Look for a suburb that has potential
A location’s access to stable employment is one of the leading drivers of future growth.
“Major cities have large financial, education, medical and government institutions that provide a very strong base of employment regardless of what’s happening in the broader economy,” Armstrong explains.
“We always need teachers, doctors, nurses and access to money, so real estate that is close to this kind of workforce tends to be a more reliable long-term investment.”
The growth of regional areas shouldn’t be overshadowed by city front-runners. A more affordable entry point can also come with proven capital growth in certain outer-city locations.
Armstrong proposes honing in on regional areas that are easily disposed to a train line. He says that “this gives you quick access back to the city and is wise from an investment point of view”.
“This will be more attractive to [potential future tenants] who are looking to make a tree or sea-change but still stay connected with a large city,” he shares.
Purchasing in a capital city
While there are many lifestyle and economic yields that make living in a capital city attractive, Armstrong says that the most affordable locations for home buyers will be further away from public transport and shopping amenities.
“If buyers have the choice of a modern property in an isolated area or an older property in a more established area, I would certainly choose the latter,” Armstrong shares.
For buyers who are on a tighter budget and are looking at which parts of their purchase criteria they should strike out or keep searching for, Armstrong says that they should remain focused on the things they cannot change and compromise on the things that they can change.
“For example, they cannot change the location, land size or position in the block if it is an apartment,” Armstrong says.
“Getting these things right should be non-negotiable. However, the condition of the property, size and floor plan can be altered down the track and as such isn’t as important.”
Could rentvesting be the ideal way to get on the property market? Rentvesting is a method of investing where a person buys a property in a place they can afford to buy, which they rent out to a tenant, while they continue to rent where they want to live. Learn more about making this strategy work for you.