Do you think buying/investing in your local area is better as you “know that suburb”? Would you baulk at looking into investing in property which is located in an area classified as low socio-economic?
There are many factors to consider when choosing your investment property and location is a key factor in deciding where to invest. Other key factors are amenities, infrastructure, rental demand, the rental amount and the potential for capital growth.
Buying in your local area isn’t necessarily the best investment choice. There could be better investment prospects in areas outside your own, which will achieve your property goals quicker.
If you had the choice of a premium suburb vs. a low-socio economic suburb which would you choose? Which option aligns with your investment strategies better?
There are pros and cons of investing in either type of suburb.
What is a considered a premium suburb? The properties are expensive, people generally have higher incomes, found close or in the heart of the city, vacant land is highly unlikely and generally is the best location with respect to amenities. Even in the down times of the property cycle there is demand. Generally a premium suburb will have long-term capital growth.
What is considered a low socio-economic suburb? The properties are very affordable or ‘cheap’, incomes are usually lower than those in the greater region, usually found on city outskirts, there may be an abundance of vacant land, may not be as close to amenities. Housing affordability is working in their favour and therefore seems to have a larger pool of potential buyers and in turn could result in the ability to sell quickly. There is a potential for rapid capital growth if significant infrastructure projects are approved/commence.
In regards to rental yields, these are a risk for investors to consider when buying in a premium suburb. Premium suburbs have expensive properties; this can mean that their high rent price tags don’t attract a high number of renters. Some suburbs can have as low as 2.5% in rental yields! This unfortunately can be one of the downsides of a premium suburb. Conversely, rental yields in a low-socio economic can be almost double.
If you are fortunate enough to purchase a cheap (quality) property in an area during the right time of the property cycle, this could be an excellent move for your property portfolio.
If you don’t look outside your “patch”, you could be missing out on some truly great investment opportunities. Properties in our city outskirts are seeing some of the best capital growth potential and excellent rental yields that an investor could hope for.
With sound research and identifying desirable attributes, a property’s location really depends on if it aligns with the investors strategies. Remember that you are buying the property to invest, not to live in!