Not a week goes by that I don’t get a question about hotspots: Where should I buy my next investment property -- what’s the next hotspot!? I simply tell people that there’s little value in chasing a hotspot, and here’s why:
The thing that people need to know about investment property is that it’s easy to measure the simple stuff. Hotspots are made of that kind of measurement. So when you look at it, the yield, median or average prices in small areas – well they’re the things that are easy to measure, and they’re the figures that can prove misleading to potential investors. A hotspot is usually classified by the median house price over a period of time, and the growth seen for the median prices.
More often than not, this type of measure is a flawed means for assessing an area’s heat, as often you’re simply just seeing what has been sold within a period of time, and not a measure of what the actual value and change is for an investor.
When you move away from the hotspot buzz and start to look at some of the more important measures for determining where to invest in property, you begin to see that the concept of a ‘hotspot’ is an imperfect measure for identifying potential for growth. Let me explain: You should look at an area to invest in by assessing its long-term investment potential, and conduct a thorough and measured analysis before investing anywhere.
You can always invest for your future gains by remembering these simple rules:
- Don’t look at the change in median or average prices, as you’ll only have the potential to astray and get sidetracked by inflated measures.
- All locations – and it doesn’t matter if they’re ‘hot’ or ‘not’ – will experience every single stage of the property cycle. And that’s a promise. What that means is that no matter how strong the performance is now, you’ll see a peak, a downturn, a trough, a recovery and an upturn – and then repeat. You’re in it for the long haul; so don’t get into investment property on an upturn hoping it’s not going to lose. If you’re looking for tips or information about where is good to buy then you should always consult with industry experts for advice. That brings me to my next point:
- You won’t find an area where property prices don’t go down – that doesn’t happen in the real world! Buy and hold strategies are the most effective when you do your research to get the most from your purchases, so a combination of a w ell-researched property held over a longer period of time will yield the highest returns.
- You need to look at more than just the location. Infrastructure, population growth, developments in the area and proximity to schools and relevant areas of use to tenants are all things that need to be explored.
- Look at the design of the property and the size of the land (if you’re buying a house/house and land package), because these factors will come into play in the future.
- Look at the opportunity to add value to your investment property with a renovation, as this can be a huge opportunity to increase the value of your property over a shorter period of time.
- Assess the suitability to your target market – that is, is the property rentable now, and suitable for resale again in the future?
If you want to learn more about investing or have questions about investing, then come along to our next complimentary Property Investor Night – we hold them in major cities all around Australia. Our powerful two-hour workshops help you learn the investor mindset and teach you exactly what you need to know to get to successful levels as a property investor.
- Invest in property with no impact to your lifestyle
- Access the equity in your home to enhance your borrowing power
- Invest in a range of property to balance your portfolio and manage risk
- Improve your buying capacity – and minimise your opportunity cost
- And much more…
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.