We've discussed the importance of location when it comes to property investments. We’ve even shown you a few of our top suburbs to invest in. Ultimately, homebuyers and investors alike are looking for areas that offer the best capital growth potential, with the least amount of risks. However, not all investors are the same: we all have different personal and financial circumstances, different reasons for buying or investing, and different goals. These are all factors when it comes to finding the right area to invest in. Today we have a closer look about how to evaluate and find a good suburb to invest in.
When you evaluate, you need to take a broad view of all your options. Many beginner investors fall into unfavourable investment deals out of sheer convenience. It happens more often than you’d think – three weeks into your search, you’ll already be fatigued from eight, ten or even twenty inspections; You’ll be twenty kilometres from where you originally wanted to buy, and fed up with losing your weekends to walk through other people’s houses. Then you’ll come across a property you get a “good feeling” about. This should be a warning sign that you’re settling out of convenience. Here’s the inside scoop – properties don’t experience capital gains - suburbs do.
"Is this a good suburb to invest in?" is the first question you should be asking, not “do I like this house?”. When you start to look for good suburbs to invest in, you should look at it from a state level. This will allow you to narrow your decisions faster, easier, and with more strategy behind it. The actual property comes much later.
Alright, so let’s walk through it. Let’s pick a state - for example, New South Wales. There are plenty of locations to learn about: Sydney, Newcastle, Wollongong, to name just a few iconic locations. You have to determine which areas you feel most comfortable investing in. How? Research is vital to the process. What you have to do is to analyse the state's past capital growth history and look at the demand and supply chain of the area. To aid your research, you can also look at council websites and assess what infrastructure developments are underway, if there are any. Check out our recent suburb spotlight about Redbank Plains for a perfect example on how this might look.
You then want to start to ask the right questions that will allow you to whittle down your options.
Compare these factors across three, four, or even a hundred suburbs, and you should start to get a pretty clear picture of where you stand. When you start to ask the right questions, you get a clearer idea on which areas are the most probable for investment growth.
So how exactly do you evaluate a good suburb? The answer is simple. You compare and contrast. It's good to research different suburbs and not just one. Many people stick to one suburb and then ask whether it's a good suburb to invest in. Though it can work, it's not always the best approach. The ideal method is to look at all the different suburbs in your chosen area then compare those suburbs to each other. You can start broad, collect and analyse data on each one, and rank them to find the best one. How do you exactly do that?
Evaluate suitability Your life stage, relationship status, and personal interests will come into play when you decide on a suburb. More than affordability, you have to consider areas which best suits your lifestyle. Factors such as proximity to your workplace, medical centres, schools, parks, and beaches are well worth considering. As an investor, looking at it from a homeowner's point of view will also allow you to understand the demographics of the area as well as gain insight into the potential rental market.
Determine Risk Factors Risk factors are indicators that the suburb may have attributes that can decrease the value of your property or may affect your capital growth in the future. It can be in the form high vacancy rates that may indicate an oversupply of properties or not enough demand. Through determining risk factors, you then get an idea which suburbs may or may not be the best for your investment needs.
Do speculative research One of the best ways to prove the risk factors is to go into the area and do speculative research. You can talk to the council or residents and try to determine "Are there more renters than owners?" In doing this, you will be able to cancel out the riskiest suburbs and be left with low-risk areas.
Once you have a shortlist of potential suburbs to invest in, it's time to choose the best one. How? Go back and review your financial goals and try to determine from there. Are you planning to hold the property long-term, or just grab it while the market is on the way up and flip it? Are you planning to lease the investment property, and if so what Yield can you afford to accept?
Choose a suburb that you know will help you achieve your financial goals in the least possible amount of time with the lowest risk. Evaluating a suburb should go hand in hand with your property investment goals. Coupled with adequate research, you will then be able to determine the best location.
A9 Property can help you evaluate better as we provide an impartial outlook on different suburbs in Australia. Our weekly real estate blog discusses a variety of property-related topics, including property investment strategies, real estate industry trends, and current property market shifts to give you valuable insights and help you make informed decisions. We specialise in off the plan properties – a popular investment strategy in Brisbane and Australia. If you're looking to invest, Check out our carefully selected portfolio of off-market properties for sale or contact us for an obligation-free chat to discuss how you can succeed in the business and make the right property investments.