Solution finder
I'm looking to and

Five steps to work out where to invest

Interested in owning an investment property but not sure where to buy? Ask yourself these five key questions to narrow down the choice.

Interested in owning an investment property but not sure where to buy? Ask yourself these five key questions to narrow down the choice.

As an investor the world truly is your oyster. Without constraints like the need to be close to family, work or your child's school, you are free to pick virtually any spot on the map.

But that doesn't mean taking a pot shot to the atlas to figure out where you'll buy. An investment property should be a money making venture and it is critical that any area you buy into will help you achieve personal goals.

Try asking yourself these five questions to narrow down your property search.

1. What do I want from my investment?

If healthy capital growth is your main aim it can be worth focusing on Australia's capital cities, which typically outpace regional locations for price appreciation.

The mining boom of recent years tended to buck this trend. Some resource-based regional townships achieved rapid, and at times, spectacular price gains over short periods. However the tapering of the boom has seen many of these areas experience declines in value.

That's why it makes sense to look for an area with a diverse local economy - and large regional centres plus metropolitan areas fit the bill.

If you're more interested in high yields – that's annual rent expressed as a percentage of the property's value – regional locations tend to deliver higher yields than the metropolitan areas.

2. Do I need to be near my investment?

If you're a home owner it can make financial sense to invest outside your own suburb. It's a form of diversification that can protect your wealth if your local area experiences falling values.

Investing interstate shouldn't be overlooked, and the good news is Mortgage Choice brokers have plenty of experience arranging investment loans for interstate properties.

The main hurdle to investing outside your own area is the ability to thoroughly research a market you may not be familiar with. It can also take more time and effort to physically visit properties – not just at purchase time but also to inspect the place once or twice a year.

Be mindful too that being a long distance landlord can make it more practical to use a professional property manager. Be sure to factor their costs – usually based on a percentage of weekly rent, in your cash flow projections.

3. What is my long term plan?

Property delivers its best returns over the long term – usually seven to ten years or more. Be sure that a lengthy investment period suits your personal goals.

Equally critical is the need to consider the future prospects of an area. Check upcoming plans for development by the relevant state/territory government and the local council, which could impact property values. Infrastructure developments like the construction of transport links, employment hubs or major hospitals and schools tend to have a positive impact on capital growth. 

4. What kind of tenants would I like to attract?

As a landlord you may be keen to secure a long term tenant. This brings the benefits of reduced vacancy rates and lower turnover costs. If that sounds like you, it can pay to focus on a house rather than an apartment, which may appeal to families for whom stability is often very important.

Apartments can experience higher tenant turnover though this can bring opportunities to make some renovations, or give the weekly rent more frequent upticks.   

5. Do I want to live in my investment property at any stage?

This can be a game changer. You may choose to buy an investment property today that you would like to use as your personal home further down the track. With this strategy, consider the tenant appeal of the place and how well it would suit your personal needs. Bear in mind, your own circumstances may change and giving priority to the qualities of the property as a good investment first and foremost can be a wise move.

For more tips, check our guide to finding the right property and when you're ready to think about a competitive investment loan contact your local Mortgage Choice broker to enjoy a generous choice of loans and lenders – all in one spot.

Posted in: Property investment

Things can change quickly in the market.

Subscribe and stay informed with news, rates and industry insights.