Finding a location with a lengthy history of excellent capital growth and the potential to continue outperforming the average is something I advise looking for.
That’s extremely different from a “hot spot” or the next great thing, which many novice investors tend to find. And you’ll discover that not all land is made equal when you delve further into the data. You can also visit https://buyersagencyaustralia.com.au/property-investment-strategy to get more about property investment strategies.
There will be certain suburbs that are more well-liked than others, some places that will be scarcer than others, and some land that will appreciate more value over time. Then you’ll see that excellent performance strongly correlates with the local demographics. Due to lifestyle preferences, a lot of owner-occupiers prefer to live in these areas. Learn more six property investment strategies every new investor should know.
I search for suburbs where earnings rise faster than average and increasing discretionary income.
There will be one of these:
1. Discretionary areas
The “established money” neighborhoods, where the majority of the population has lived for a long time and where many residents paid off their mortgages years ago, are the costliest areas in our capital cities.
These areas are often established inner-ring suburbs of our capital cities or waterfront suburbs. This market sector outperforms the other sectors over the long term.
Naturally, not everyone has the financial means to purchase at this end of the market; thus, strategic buyers agency sydney frequently opt to invest in.
2. Desirable locations
These are the affluent neighborhoods and urban gentrification hotspots in our main cities. As they transition into the stage of their lives where they are starting families, many wealthy millennials have aspirations to move to these areas.
A financial floor is created under your investment property when this rich demographic arrives in a suburb, making it a place where residents can afford and are willing to pay a premium price to live there.
As you meander around these suburbs, you’ll see a neighborhood in transition, with new construction and infrastructure both enhancing the quality of services for the locals and promoting economic and job growth.
What to look for when making a real estate investment?
If Covid-19 has taught us anything, it is the value of residing in the appropriate kind of home in the appropriate area.
People will pay more to live, work, and play within a 20-minute drive, bike ride, or walk of their homes in our new “Covid Normal” environment.
They will search for locations that are 20 minutes away or less from places to shop, businesses, schools, community centers, recreational and sporting opportunities, and some jobs.
Residents in these neighborhoods have grown to value the opportunity to socialize on the street, support neighborhood shops, get active with neighborhood schools, and enjoy neighborhood parks.
However, location isn’t the only factor that matters.
In my opinion, the location of your property accounts for 80% of its performance; the remaining 20% or so, however, has to do with choosing the appropriate property in that location.
Even in the most desirable suburbs, there are some homes I would steer clear of because they aren’t good investments, and there are others that I would be eager to add to my portfolio.
There are three main categories of property:
- A-Grade homes and “investment grade” properties are the kinds of assets you want to own and the kinds of places where outstanding renters want to live, not because they have to but because they want to and are willing to pay more to do so.
These are not only residences; they are also kid- and family-friendly flats in desirable areas.
- B-grade houses still have a lot going for them and perform well in hot real estate markets, but because of their second-rate suburb locations or other flaws, they will suffer more during down periods when buyers and tenants are picky.
- Avoid buying C-grade properties unless you plan to demolish them and rebuild them with something better suited to the area or they’re in a nice neighborhood.
The following are some things to consider while choosing an investment-grade property:
I strongly believe in purchasing real estate below its true market value. This is why I steer clear of newly constructed homes and properties still in the planning stages because they typically have higher asking prices.
I also seek homes with a high land-to-asset ratio, but keep in mind that apartments also have attributable land value.
I enjoy homes with unique features. I’ll only shortlist investments with an “X-factor” that sets them apart from their competitors. This “X-factor” must be present in your investment.
And for those with the means, I advise investing in real estate that can provide capital growth through restorations or redevelopment.
The questions you should be asking are:
- What do I hope to accomplish with my real estate portfolio?
- What must I do to get those outcomes? And
- Who do I need on my team to ensure that I can reach my goal of financial freedom with the least amount of risk?
Talk about lowering your risk
Smart investors actively take measures to reduce the risk associated with their real estate investments, such as diversifying their portfolio of properties.
Here are a few typical methods for lowering investment risk:
Cash Buffer: Make sure you have a reserve set aside so you can pay for any unforeseen costs that may emerge in the future (e.g., during unoccupied periods).
Fixed-rate or split loans: To have a piece of mind knowing exactly what your monthly repayments would be, you might want to think about dividing your loan or choosing a fixed-rate loan.
Invest in different areas: As previously said, “putting your eggs in one basket” is not an excellent strategy to minimise investment risk. If there is an economic slump in one place, ensure you have other properties operating well in different areas.
Market research: Conducting thorough market research on the industry you’re investing in is another strategy to lower your investment risk. Think about regional supply and demand issues, the typical rental yield for comparable properties, and check with the local council to see if any infrastructure projects are planned that would affect the demand and supply of real estate in the area.