USING PROPERTY to increase wealth and create financial freedom is a long-term investment strategy requiring much patience.
So at the point-of-purchase, the pressure of knowing you have bought the right house is high.
At the risk of sounding clichéd, the likelihood of success when buying property is directly linked to one thing: location.
The effort of searching for the right location can seem difficult and tiring. There is good and bad in every suburb. What seems problematic today may be a hidden gem for tomorrow.
The fundamental principle of demand is the key driver of growth and so there is a direct relationship between location and future demand.
Your goal then is to pick somewhere that is growing and you can afford.
Know your comfort level
What works for some is not always best for others. It’s important to know your limits, both personally and financially.
What are your current circumstances and household budget? What are your long-term financial goals? What do you want to achieve from buying a property? How will you achieve this? What does the property need to do to achieve your financial goals?
Consider your personal risk appetite i.e. will I sleep at night, and then assess your borrowing capacity by speaking with a good mortgage broker.
Related Reading: 'Avoid home loans that rob you of your personal time'
Know your location
In his recent report called ‘How to Identify Real Estate Hotspots’ Terry Ryder, Founder and Director of www.hotspotting.com.au says the following 10 attributes are key to a good location and that if 3 or 4 of these are present at any one time, then the location is viewed as favourable.
- Public transport and commuting infrastructure.
- Ugly duckling syndrome i.e. hidden gem.
- Government plans to investment in urban renewal.
- Lifestyle attractions.
- Industry boom town syndrome.
- The stayers.
- Essential services clusters.
- The ripple effect.
- Sea change or tree change.
- Employment cluster.
Research and homework
Once a spending limit is confirmed e.g. home loan pre approval, it’s time to narrow your options by shortlisting a group of suburbs that fall within your price range. Speak with real estate agents specialising in the area to find out what’s available in your price range and why people like the suburb.
Each suburb has a cluster of streets that are more popular than others. Ask the real estate agent to help you map preferred pockets and those pockets that are on the rise.
Think outside the box
It also pays to consider neighbouring suburbs of a lower price range. Increased demand in preferred suburbs can spill into neighbouring suburbs as availability tightens and price increases.
Conversely, a neighbouring suburb in a higher price range may have a hidden gem waiting to be improved to an increased value.
Sales data
There is a mountain of data now available online such as detailed property reports and the sales history of any location in Australia. Obtain and analyse this information. Check the opinion of local real estate agents against the figures.
Housing development
Are there any new housing developments planned that will increase supply and slow the return on investment for holding a property.
Key attractions to look for
Community infrastructure
Future hot spots can be found where any planned infrastructure has been announced such as new schools, shopping centres, medical facilities, sporting facilities and other amenities that will improve the appeal of a location.
Lifestyle attractions
Suburbs offering views and lifestyle are a good investment. Unique selling points include beach access, city views, parks and playgrounds, cycling paths and walking trails - to name a few.
Public transport and logistics
More options and easy access to public transport, major roads and freeways is attractive to people for comfortable commuting to work, schools, kids sport, shops and so on.
Once again, be sure to consider the impact of these key influencers on surrounding suburbs that may currently be undervalued and could provide a great return on investment as prices catch up.
Politely ignore naysayers
There are plenty of suburbs that have shed their stigma and experienced rapid growth. The fundamentals of what makes a good location to buy property, should be viewed though objective eyes.
Whilst the goal is to formulate an opinion about the future, this should not include being too swayed by everyone else’s.
Related Reading: 'Don't give up on your dreams. Simply use a bridging home loan'
Take-home message
It’s always location. Simply taking a stab in the dark as to where that will be is dangerous.
Formulating a view on where the best location may be to buy a property within budget, is less about crystal balls and more about developing an educated understanding and opinion about the future.
There is more than enough evidence to suggest that the best way to make money from property is to buy at a location where values will rise thanks to some pretty apparent fundamental reasons. It’s a matter of finding those reasons.
Don’t make emotional decisions. It’s about making money. Explore your options and keep yourself open to new possibilities.
Are you ready to check your borrowing limit?
As with all investments, it pays to understand your future circumstances, your individual risk profile, the key risks involved in property investment and of course always consult with financial and tax experts.
At Loan Avenue we know one size doesn’t fit all. It pays to have a conversation with a real person who wants to hear your story and run through some examples with you.
Why not incorporate a discussion about property investment as part of our free no obligation home loan review?
It’s just one of the many features and benefits included in a tailored home loan from Loan Avenue – affordable home loan solutions for everyday Australians like you.
Let us show you. To make an appointment with one of our experienced and accredited finance professionals call 1300 56 26 28 today or leave a message here.
