One of the biggest mistakes novice investors make when trying to pick a hot spot is taking short cuts. Everyone either doesn’t want or have the time to do their homework while looking for an investment property. If you decide to take a short cut and take a prediction of a booming suburb from a magazine or a friend you can risk missing the mark completely! To help make sure your ‘hot spot’ is not going to become a ‘not spot’ here are some tips from iThink Principal Ben Walker.
LOOK TO THE HORIZON
If you’re not looking at least 5-10 years down the track then there is a good chance you will make a mistake. Most hot spot lists usually only consider short-term performance of a property which is not the way you should look at investments. These lists are a good starting point but make sure you follow through with your own research. Don’t know what sort of research you should be doing? Try these:
- Check out how the property prices have moved in the past two to three years.
- If prices have grown steadily, look at the demographics. An increasing number of young residents with decent income is a solid indication that the suburb is about to grow;
- Look for signs of new houses or renovated homes springing up in the area;
- Look for new cafes or retailers opening in the suburb.
PICK A DIAMOND IN THE ROUGH
Choose a well positioned property over a ‘pretty ’property. Remember this is your investment, not your dream home. An un-renovated property can often be purchased under market value, offering the chance to improve and increase equity over time. If it is well supported by strong infrastructure and lifestyle amenities, then the chance of gaining a good investment return is higher.
THE RIPPLE EFFECT
Usually the high growth suburbs are too pricey or have already experienced their price peak and boom. Go for second best and choose to invest in a less popular, surrounding suburb. Chances are you’ll be buying in a suburb which is yet to boom and will provide you with a great return! Here are some tips for finding areas before the ripple of growth hits:
- If there is more than a 5% variation, chances are the suburb next door will be playing catch-up;
- Closely monitor median price trends on a quarterly basis. Once you are certain the cycle has kicked off, look for properties within your budget that are as close to the growth as possible. Subscribe to alerts from realestate.com.au and domain.com.au for properties coming on to the market
SUPPLY AND DEMAND
A key driver of price growth is the supply versus demand ratio of properties. If there is no more capacity to build in the suburb but demand keeps on growing, prices will likely climb. Tip: Look for areas where the rental yield and population are rising.
LOOK FOR LARGE INFRASTRUCTURE OR PROJECTS UNDERWAY
Having good and reliable access to nearby highways, shopping centres, public transport and schools appeals to renters. It’s a good idea to look at local council & government websites to see if there is any planned infrastructure in the works. Large infrastructure can positively impact the future of sales price of the property. Tip: Look for projects that have already commenced as projects can fall through as governments rotate and budgets shift.
BEN WALKER – PRINCIPAL & LICENCED REAL ESTATE AGENT
0418 160 960
Following his successful NRL career, Ben took his passion for Real Estate to a new level, moving from simply buying, selling and developing his own investments, to becoming a Licensed Real Estate Agent and helping friends and family deal with the often stressful and time consuming sales process.
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