Australia is a very big country, so how do you find the best place to buy an investment
property in Australia? That's what we're going to be covering in today's episode.
Hi I'm Ryan from OnProperty.com.au, your daily dose of property education an inspiration.
If you haven't checked it out yet, check out our free course on how to find positive cash
flow properties all over Australia. Go to OnProperty.com.au/free, you just have to type
in your email address and you'll get free access to that.
So today I've got ten points to help you find the best place to buy an investment property.
Firstly, I just want to say that the best place to buy an investment property varies
from investor to investor. Depending on what you want to achieve and how much money you
have, the best place to buy is going to be different for you than it is for me or it
is for another investor who has a different financial situation to you. So I'm not going
to go in too specific as to this suburb has this going forward and this suburb has that
going forward, because truthfully by the time you watch this, it may be into the future
and that's no longer the case. When I actually google this to do some more research for this
article, the top figure was a suburb analysis from 2012 and to me in 2014 as I'm recording
this, and truthfully data from 2012 basically means nothing, so I want to provide you with
some tools that you can use to find the best area that suites you and your financial situation
and suite you for the market that exists right now.
So the first thing to do is to set financial goals. By setting your own financial goals
and knowing exactly what you want to achieve and the time frame that you want to achieve
it in, can help you to analyze property and to discard a lot of properties than aren't
going to move you towards that goal. For example; if you want to achieve $50,000 in passive
income per year within the next 5-10 years, well maybe investing in heavily negatively
geared properties that are going to take maybe 10 years to mature and get the growth you
want, isn't going to be the best investment for you. Doesn't matter what area it is, it
doesn't match up with your financial goals, so setting your financial goals first is very
important. Tip #2 is to understand the supply and demand
of an area. If there's a lot of properties and not many people buying, well prices tend
to stagnate or drop and if there's not many properties on the market and a lot of people
who want to buy or want to rent, well then that's going to push prices up. So when looking
for the best area to invest in, try and look for an area where supply and demand actually
favors the seller and will favor the seller for the long term. This could occur because
people are moving into the area because there's a lot of jobs in the area or the economy is
very good or maybe there are lifestyle opportunities that don't exist anywhere else or it may be
because a certain area is [inaudible 3:05], like a lot of Sydney is actually [inaudible
3:07] because you've got the water on one side and then you've got a lot of national
parks around it. So because more and more people move into Sydney every year and there's
no more land, well it's obvious why Sydney continues to go up in value. So understand
the supply and demand and try to look for indicators that are going to show you that
there's going to be continued demand and maybe not enough supply.
Tip #3 is to search for some of those indicators and I've written down..., I've got population
growth or decline which you can find easily through sensors quick stacks. You can find
out 2001, 2006 and 2011 data as to what the population of an area is; and you can see
how the population has changed whether it's growing or whether it's declining and this
can help you to do more research to find out exactly what's happening now. I've also got
the economy that you can look at so you can see whether the area's doing well and there's
more and more jobs in the area or whether the job's actually declining because or market
forces. You can also look at government investment, like I know the new castle area has a lot
of government investment and even, there's a new freeway that's going all the way out
west pass Maitland and Kurri Kurri and out to Singleton and so there's huge government
investment in that area and in turn that's helping to drive prices up. And then you also
need to look at lifestyle choices, with the economy changing more and more people are
now working from home like I work from home, this is actually my bedroom at the moment,
with a lot of people working from home that actually opens the door for people to move
to places that's better for their lifestyle. I live on the Gold Coast, I moved here for
lifestyle reasons. A lot of people I talked to have done the same thing, whether or not
that's the trend, I don't know but it's definitely something to look into.
Tip #4 is to try and find out where a boom is going to spread to. Currently as I record
this, Sydney is going through a bit of a boom and I was recently talking to one of my friends
who live on the Central Coast and she has talked about how the boom has spread out.
What tends to happen when an area is booming is that obviously prices go up; this then
locks some people out of the market who can't afford the increased prices. Those people
who are locked out then tend to move away from the area in I guess you call them growth
bands and so you have people who can't afford that one area, so they move further out and
the boom spreads out and then they can't afford the larger area and then they go further out
again, and so by looking at one area that's booming now, you can potentially predict what
areas are going to be booming into the future. Tip #5 is to try and find a property where
you can add value. So the best place to invest is not always a suburb where the market's
going to grow by itself but sometimes it's a property where you can actually go in and
look at this property with fresh eyes and create an opportunity for yourself. This could
be through a cosmetic renovation or could be through some form of development but by
purchasing a property that has the opportunity to add value, you're actually less relying
on the outside market and so any growth you get is plus.
Tip #6 is to try and purchase a property suitable for the market; again you can find this through
the census quick stats. You can find what types of properties people are living in.
They're living in 1 bedroom units, 2 bedroom houses, 3 or 4 bedroom houses. What is the
majority of the population living in and what do people want to live in? By finding out
exactly what people want to live in you can look at purchasing a house that's going to
appeal to the most people, this means when it comes time to sell your property you've
got more people interested in it, which can push the price up and it also generally means
a faster sale. Tip #7 is to research vacancy rates. If the
vacancy rates of an area are extremely high, that means that there's more supply than there
is demand at least in terms of rentals. If the vacancy rates of an area are extremely
low, that could be a sign that there is more demand in the area than there is supply. People
who are renting there may eventually want to buy there and so that could affect prices
in the area as well and obviously if that demand is there, then rental prices are going
to go up overtime as well. To learn how to find out vacancy rates I did a full episode
on it, go to OnProperty.com.au/150. Tip #8, when looking at an area and trying
to find the best place to invest, is to consider rental yields for an area. Lower rental yields
around 3 - 4% can often signify an area with a lot of owner occupiers and a lot of people
wanting to purchase. And an area that has kind of a medium rental yield of that 6, 7,
8% may be a healthy balance. And then an area that has a higher rental yield of maybe 9
or 10% or more, could indicate an area where there's a lot of people who are looking to
rent but not necessarily a lot of people who are looking to buy. So depending on your financial
goals, rental yield could determine where you want to purchase your property and what's
going to be the best place to invest. Obviously the higher the rental yield, the better chance
of a positive cash flow and the lower the rental yield, the more likely your property
is going to be negatively geared. Tip #9 is to consider house vs. units. They
do actually fluctuate differently and just because houses in an area are going up doesn't
mean units in an area are going to go up as well. So don't just look at the area as a
whole but try and break it down into how houses are performing and how units are performing
as well. Inside OnProperty Plus I'll show you a bunch of different ways that you can
research areas, you can find out all the statistics I've talked about, it's a step by step guide
to show you exactly what to do. You can check out OnProperty Plus by going to OnProperty.com.au/plus.
Beware though, memberships are limited and they are filling up fast so if you are interested
go and check it out and see if it's for you. And Tip #10 when looking at an area to invest
in, look for signs of what's called gentrification. Now gentrification is when an area is undergoing
a large-scale improvement and going from what you call a dodgy low-economic area and moving
into a higher economic and trendy area. The higher the economics of the area and the more
rich people that want to live there, well that's going to push prices up. A good example
that I can see at the moment is somewhere like Nobby's Beach, which is on the Gold Coast.
You've got a lot of these new build mansions you'd call them, and then you've got a lot
of older blocks of units or older houses that are next to it. And when you're seeing this
difference where you've got a lot of beautiful homes and then some dodgy old homes, well
that may be a sign of gentrification in the area. New trendy caf�'s and shops opening
up as well can be a good sign of the area. I know Miami which is again on the Gold Coast,
there's some awesome caf�'s that are opening up down there and that could be a sign of
gentrification and also government upgrades can be a sign as well. When the government
is upgrading the street or upgrading the shopping area and stuff like that, that can drive more
money and more rich people into the area because it's becoming more desirable.
So there are 10 different things that you can look at to work out how to find the best
place to purchase an investment property. Obviously I haven't given out suburbs and
there's a reason to that, which I've already told you, but knowing these things and actually
going and doing your own research means that you're more likely to stumble upon an area
that's bound for growth rather than an area that's in decline because if I just told you
a suburb, you don't actually have any more data on that. You go and invest in it; well
it could actually go down in value so markets are always changing. You never really know
100% but by doing research you definitely increase your chances significantly.
I hope this has been helpful to you. If you want me to show you positive cash flow properties
well then go to OnProperty.com.au/plus and consider signing up for OnProperty Plus. Ever
single week I list new positive cash flow properties. I also teach you how to research
an area and how to find your own positive cash flow properties as well so it's really
popular, a lot of people are signing up, a lot of people are really pleased with it,
so check it out if you're interested. Otherwise, until tomorrow, remember that your
long term success is only achieved one day at a time. I'm Ryan Maclane and I'll see you
guys in the next episode.