The importance of ‘where’ and ‘what’ in property investment

The importance of ‘where’ and ‘what’ in property investment

It is said so often that it is almost a cliché – ‘location, location, location’. We believe it is said often for a reason – when it comes to property investment, location is key to success. But when selecting the ideal property placement there are more factors to consider than many investors realise. Strategizing on which states, suburbs and streets will provide better returns is a key part of what the DBA team offer clients, and in this article we will share our thoughts on a few of these considerations.

But before deciding ‘where’ you need to first make sure you know ‘who’ – who are your ideal tenants? Because your who will impact your where! For example, some choose to appeal to students and therefore buy property near a university. Yet it is important to consider that students are transient tenants with long holidays – which can mean long vacant periods. When you can fit all of your belongings in the back of a car there isn’t much stopping you from leaving at the end of a lease!

Family tenants on the other hand generally stay longer, and once they are established in an area they are less likely to want to leave. If this group is your target market, not only will you choose to design a family orientated house, but you will think about their locational needs. It is important to consider the psychology of why they select a location to raise their family, and the different lifestyle drivers, human interest assets and economic activity indicators they will consider.

Here are some of the factors that come into play when deciding on the right place to invest to attract this market:

What opportunities does the location give for children’s education?

When there is a good school in an area, people are willing to move nearby so they are in the right catchment area. Often this can be the only way to get your children into a particular state school. Another important factor is the number of child care centres nearby – even if the parents work in another area, they often want their children to go to a good facility close to home.

How easy is it to get around?

People like to be near major transport hubs. For some this may be public transport options such as train stations and bus routes, or for others being near (but often not on!) major road networks, highways or tunnels. If you buy a property that is more isolated, and in a regional or rural area, you’ll tend to find lower capital growth and the property is harder to rent.

Is there a good shopping centre nearby?

There has been big shift in Australia over the past few decades where the community meeting point is no longer the main street, but the local shopping centre. Your tenants will be looking to make sure there is one nearby where they can go to meet all their social needs. It’s important that you find a property with a good shopping centre close by, or one that is proposed to open in the near future.

Are there plans for major infrastructure projects?

New or existing major infrastructure often means new jobs and a desire for people to live near these areas. This may be a new major hospital, airport, shopping centre, transport hub or industrial area, but it’s important to get in early before it has been constructed. This will allow you to benefit from the rewards that projects like this will bring. But as a word of caution be sure the project is set to have sustainable community benefits once delivered, not just significant involvement during the build. We have seen a lot of investors burnt in the mining towns because there was a big demand for housing during the setup phase, but that same demand wasn’t there once the project was fully operational.

Is there opportunity for employment nearby?

In a modern Australia, people get tired of travelling a long way to work unless they really have to. So finding a property that is close to significant employment hubs is essential to maximising the growth of your property, both for tenants and long term resale value.

What lifestyle opportunities are on offer?

Be sure to also evaluate what lifestyle opportunities are around the area you’re looking to invest in. Many tenants will be thinking of what weekend options the property will give them, being close to a beach, sporting facilities, good cafes or other lifestyle factors can be another box to tick off. People work hard during the week but want to enjoy where they live in their down time.  And so if you can walk to a park, water body or café, this will assist in increasing rental returns.

What are the established capital benchmarks?

One of the final factors to consider is areas where good capital benchmarks are already established. When you go to the bank and the valuer goes out to value your property, having good comparable sales in the area can really help your property grow in value, especially if you want to leverage the equity in your house.

These are just some of the considerations we make when reviewing property opportunities for clients. We understand that tenants make decisions on where to live based on many factors – rational, emotional, social and economic. Understanding the psychology of what tenants are looking for and trends in the market place are key when choosing where to invest. If you’d like more information about the areas that are currently ticking boxes for us, please contact our team – we are always happy to share.