Although size, building types and price are all important factors to consider with any investment property purchase, how do you get the location right?
When we refer to an investment property, the term is usually used to describe houses, apartments or townhouses that investors buy and, in turn, rent out to another person to live in. In Australia, the concept has long been regarded as one of the safest methods for long term wealth generation, particularly when approached in ten or twenty year increments.
Despite this philosophy, not every house, unit or apartment will make a great investment and a budding landlord needs to be able to strategically choose a property that will appeal to the right renters, while still ideally setting themselves up for capital growth.
While there are a number of factors that will help you to determine whether a specific investment property is the right choice for your portfolio or not, there’s arguably none bigger than its location.
Why Your Investment Property Location Matters
Fundamentally, an average-looking house in an excellent location is better than a great-looking house in a regular location – after all, there’s a reason why some of the most successful investors opt for the worst house on the best street, as there’s nowhere to go but up.
It’s also important to keep in mind that the location of your investment property is permanent, but the house itself can be temporary. Investors will often have the option to renovate, demolish or even subdivide further down the track, but this all hinges on the fact of choosing the right block.
When finding the right area to invest in, the general rule is that the lower the vacancy rate is, the better for investors, as this is indicative of a positive outlook for capital growth. Property investment does not rely on emotion or instinct, and instead utilises logic and data to make informed decisions. As such, aim to consider the following when selecting a location.
Employment Opportunities – China’s huge appetite for coal peaked in 2011 and the central Queensland mining town of Moranbah was well placed to feed it, with house prices more than doubling in a year – until the market crashed when the new mine build was complete and everyone left. The moral of the story here is to avoid investing in areas that rely on one primary industry or income stream, as diversity is the more sustainable long term choice.
Micro Economies – The existence of thriving micro-economic facilities like parks, coffee shops, take away shops, restaurants, bus stops and corner shops are a sign of a well-established community where people like to live, meet with friends and love living. If the location is already a regional centre and close to a major city, it’s likely that it will continue to expand into the future and that property prices will inevitably rise alongside such growth.
Access To Transport – While access to schools and shopping centres is important, transport options – or a lack thereof – can make or break your odds for capital appreciation. Trains, trams and bus options are crucial for indicators of how a region is expected to perform in the years to come, so it’s also a good idea to find out if there are any infrastructure improvements or new additions in the pipeline via the local council.
Price To Rent Ratio – The price to rent ratio is a quick and easy calculation that compares the median home price to the median annual rent and is a key tool used to identify the areas that could be good for owning rental property. Most investors use the method to determine whether a location is good for buying for capital gains, or if choosing an area for rental return is the better option. In addition, the ‘right’ answer will usually depend on your long term plans.
Should you be looking to sell your home or purchase a new one, enlisting the services of a free property advisor like ESPA can often be a game changer. As an example, your advisor would likely research the property, local agents, check the zoning, evaluate market conditions and communicate clearly with you regarding all of your options – but where do you find one?
Take The Stress Out Of Selling Property
As a completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.
Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.
If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.