When it comes to capital growth, the success of an investment property is dependant on the location of your land. Whilst the value of the house itself typically depreciates over time, it's the land that should drive up the price of your property.
With property a game of supply and demand, the best assets are those which continue to be sought after over a long period of time. Whether it’s the right suburb, the right street or the right house, the difference in performance can be enormous.
Choosing a good investment location doesn’t mean buying in the most expensive suburbs. A property investor on any budget can achieve great capital growth by following simple investment-grade criteria.
Research is so important but it can be hard to know how to assess the quality of potential locations. To help, we’ve broken down how to find the perfect location for an investment property.
How do I find a good suburb for an investment property?
The first step when finding the location for your investment property is to research the right suburb. Each suburb performs differently over time with many factors helping or hurting the value of the area.
The surrounding community plays a huge part on the desirability of a property and can be a deterrent for many potential buyers in the market.
Occupants want a sense of safety from the neighbourhood they live in and are inclined to pay more for it. A higher rate of crime will discourage certain demographics from living in an area and can lead to difficulties in attracting favourable tenants.
‘Proximity’ is also a big lifestyle driver. A suburb’s proximity to good schools, the beach, amenities and employment opportunities will all help dictate the long-term growth of an area.
It’s important to note any plans for future development in an area. Enhanced transport infrastructure, parks, walking tracks, shopping hubs, schools and hospitals can all dramatically improve the liveability of a neighbourhood.
When making your assessment of an area, your overarching focus should be analysing how well a suburb meets the evolving needs of the consumer.
How do I find a good street for an investment property?
Finding the right street within a suburb can be just as significant as the suburb itself.
The characteristics of each street will often produce large variations in growth amongst different pockets of an area.
For a lot of buyers, ‘walkability’ is seen as a key attraction. Streets where residents can walk to their favourite spots like shopping strips, train stations and schools are consistently sought after and demand higher prices accordingly.
The appearance of the street itself should also be a consideration. A street in an industrial area with rundown housefronts and little plantation will be far less desirable than a wide street lined with plane trees and heritage housing.
The old adage in property investing is to ‘buy the worst house on the best street.’ Although not a blanket rule, this is because it is what surrounds a property that will drag land value up with it.
Don’t eliminate entire suburbs because of a reputation or stigma attached. You will often find that certain streets within these suburbs do meet investment-grade criteria and can achieve competitive capital growth over time.
How do I find a good house for an investment property?
Once you’ve found a good street, it’s time to find the best spot on it. Lot location is a big influence on price, with many factors influencing the long-term performance of land. Although properties positioned next to a train line or highway might offer you a cheaper price, it is likely to impact your ability to sell in the future.
The visible landscape from a property should be part of your investment decision. Having a nice view out your window is seen as a major selling point for many potential buyers. Views of the beach, parks, water or the city skyline can all push up the value of a home and are consistent long-term attractions. You should also consider whether future development in the area might impede the home's field of vision. Many buyers pay extra for a view only for it to be blocked or obscured later on down the road.
The type of investment property is also an important ingredient. Houses, townhouses and apartments all perform differently and at different stages in the market.
If you’re in it for the long haul, capital growth is the name of the game. A high-rise apartment can earn you a strong rental yield but its value may underperform when compared to other types of housing. Historically, townhouses and apartments have achieved weaker capital growth than houses situated on good sized blocks of land.
Wherever you decide to buy your investment property, carefully researching the right location will put you in the best position to achieve your investment goals.