When it comes to buying an investment property, the majority of the information out there revolves around financing issues, such as borrowing capacity and loan repayment rates. At Infinite Wealth we have found that when deciding to become a property investor, there are other equally important issues that tend to be overshadowed by property financing.
A lot of property investors don’t think much about buying investments interstate, buying outside of the city or the impact that governments can have on the property market in Australia, so we wanted to take a closer look at these topics.
A popular notion held by a lot of investors is that it is the safest option to purchase an investment property in the state in which they currently live, the underlying assumption here being that they have a better understanding of the local property market. Other people want to purchase locally so that they can drive past the property on the weekends to keep an eye on it, or to manage tenants themselves. There is also the belief that if you don’t personally inspect an investment property yourself it may not be up to scratch, so people buy locally for convenience.
To become a successful property investor, you should not be using any of the above arguments. The key to investing in property is to make the best possible purchase you can and sometimes to do this, the property that is right for you and your resources may be interstate. Rather than looking only at your local property market, consider Australia in its entirety so that you can pin point what area delivers the greatest rental returns or capital growth that you are seeking.
Buying outside of the city
When investors first get started in the industry they tend to look to the premium suburbs close to the city for investment properties, believing that this is where the majority of potential tenants want to be. What investors fail to recognised is that premium suburbs tend to perform unpredictably, such as those in Melbourne and Sydney, where every few years we see spikes in house prices which are always followed by sharp declines. When looking at capital growth records over the long term, premium suburbs fare poorly by Australian national standards.
Property investors should be looking at the middle and outer city suburbs which behave in a more consistent manner. Looking over long term prices of properties in these areas, growth averages tend to be higher than those experienced in premium suburbs. For new entrants into the property investment industry, houses in the outer city suburbs are a solid choice, they have a lower purchase price, higher rental yields and higher capital growth rates than their premium counterparts.
It’s easy to get caught up with what the mass media tells us about the property market in Australia, what property investors should really be looking at is how governmental shifts will impact property investment at a more micro level. Here are two of the most relevant ways that governments can influence property investment:
- Most developed cities, which is where investors should be looking to purchase properties, have town planning and urban renewal plans which target specific areas and suburbs that are due for rejuvenation. This can include old suburbs that governments are planning on attracting new buyers to or industrial areas that are being converted into residential housing. The influence of renewal plans like these can spread to property values surrounding them.
2. When a city is experiencing high growth rates, governments look to regional planning and development in order to spread population growth throughout the city. Injecting new hospitals, major shopping centres and schools is how the government achieves this objective. Any areas that are due to see such development projects can command higher rental yields and growing property prices.
Want to live the life you really want? The team at Infinite Wealth can provide the education, direction and on-going support you need to reach your property investment goals. Get in touch with us today on 08 9438 6333 or click here to contact us.
The information provided is of a general nature and is not intended to be constituted as financial advice. We recommend that you seek independent advice from qualified professionals before employing any strategies outlined.