One of the questions we hear often about investing in real estate is ‘Can I buy in my area?’. The short answer is – maybe! There are several key areas we look at, when choosing an investment property, both inside and outside of super. If your area fits this criteria, then absolutely! So what are we looking for?
- Capital Growth:
Capital growth is the lifeline of property investment, reflecting the property’s appreciation over time. Identifying areas poised for growth requires a pulse on market trends, such as demographic shifts, urban regeneration initiatives, and growing real estate dynamics. Look for regions on the cusp of gentrification, zones earmarked for government investment, or spaces attracting commercial interest. These indicators often signal a spike in property values, presenting ripe opportunities for investors.
- Ensuring Consistent Rental Demand:
Without stable rental demand, even the most promising properties can quickly turn into financial sinkholes. Investors need to pinpoint areas offering a continuous stream of tenants. Proximity to universities, hospitals, business districts, and leisure hubs often guarantees a steady demand – we’ll get into this in more detail below. Additionally, understanding the demographic makeup can guide investors towards property types that resonate with the local tenant pool (like units for areas with large student or young professional populations), balancing rental pricing with occupancy rates.
- Making Sure all Stakeholders are Satisfied
- You, as the Investor:
Ultimately, you have to be happy with the decision you’re making. Does the property tick all your boxes when it comes to making an investment? Does it take you on the path to your financial goals – will it get you there in the time frame you want it to?
The Lending Institutions:
Lenders have considerable influence, often dictating the viability of investments through their financing terms. They favour properties in economically vibrant areas, showing sustained growth, low vacancy rates, and resilience in market downturns. Each Lender has their own policies when it comes to who they lend to, where they will lend and what rate they will offer. Having access to multiple lenders is a big bonus when it comes to investing in Property. Interestingly, a lot of the big banks will say they lend in the Super arena, where in reality, their rates are uncompetitive or they just won’t lend.
The Australian Taxation Office (ATO):
If you’re looking to buy in Super, the ATO takes keen interest in those investing in Property. It’s a highly regulated space, which often turns people away, however with the right knowledge, you can satisfy both your own investment wants and the ATO’s regulations. The number one thing the ATO has directed is that when you buy property with your Super, it must be for investment purposes only. That means, you can’t live in it, or rent it to anyone you know. In addition, it must be making money – no negative gearing here! That’s why what we are looking for with these drivers is so important, as is where you do end up buying. So where should you look?
- Population Growth as a Catalyst for Investment:
Population growth is synonymous with housing demand. Investing in areas experiencing an upsurge in population can herald substantial returns. This growth often signals a region’s liveability and economic health, drawing more residents and, consequently, tenants. Smart investors pay attention to these changes and pick places to invest based on where populations are thriving.
- Infrastructure Developments Enhancing Property Values:
Infrastructure developments such as new highways, airports, and public transit systems to hospitals and cultural centers, can substantially elevate property values. For savvy investors, infrastructure projects signal an area’s growth trajectory. Staying informed about planned developments allows investors to capitalise on opportunities early in the growth cycle.
- Employment Opportunities Driving Housing Demand:
Areas abundant in employment opportunities naturally attract a workforce requiring accommodation, creating a vibrant rental market. Regions welcoming new businesses, tech hubs, or industrial complexes indicate thriving job markets. Properties in these areas are not only attractive to renters but also to future buyers, this allows cash flow now as well as capital growth for later.
- Proximity to Essential Services:
A property’s vicinity to services significantly influences its attractiveness. Easy access to shopping centres, schools, healthcare facilities, and public transport is high on the priority list for most tenants and buyers. Different demographics have varying needs, and understanding these is key in selecting properties that cater to these preferences, ensuring sustained demand.
- Long-Term Performance for Optimal ROI:
Maximising Return on investment (ROI) transcends initial property acquisition; it encompasses long-term performance strategy. Effective property management and balanced rent pricing to ensure both profitability and tenant retention are crucial. Investors need to think about how much they’re earning now versus how much the property might be worth in the future, focusing on growing the property’s value over the long term.
As per usual, successful real estate investment hinges on ‘location, location, location’. But what you’re looking for as an owner/occupier is significantly different to what you’re looking for as an investor. Keeping emotion out of it, and constantly looking at satisfying the criteria of your stakeholders (you, the bank and the ATO) as well as looking at the driver’s for ‘where’ the best investment is, will set you on the right path for cash flow now and good ROI later.
We have a team of people sourcing properties that fit the criteria, but they do move quickly. Reach out to see if one might suit you.
