When it comes to investing in property, one of the most common pieces of advice is to stick to what you know – in other words, remain in your comfort zone, and buy property in areas that you know. Undoubtedly, this little nugget of wisdom is something that we’ve all heard before… but when it comes down to the facts, is this advice really accurate? Is investing in property in your own backyard really the best way to build a successful property portfolio?
While investors should always place a priority on gaining a comprehensive insight into the market they intend to invest in, staying close to home is not necessarily their only option. When it comes to maximising your investment and creating a successful, long-term property portfolio, sometimes it pays to expand your search past your backyard!
Do Your Research
When it comes to any major financial decision, would you invest simply because it’s the closest option? Think about it this way…. You wouldn’t purchase shares just because the company headquarters are located around the corner, would you? No, you wouldn’t – you’d base your decision on a careful analysis of facts and figures. The same should apply for property investment! Instead of focusing solely on the location of a property, dig a bit deeper and find out what’s really going on. When it comes to investing, what makes us ‘familiar’ with an area is much, much more than simply having lived there.
Investing outside your comfort zone doesn’t come without risk, and often investors feel less confident about their decisions when they are not intimately familiar with the area. Instead of closing yourself off to these opportunities, empower yourself by doing your due diligence and thoroughly researching the area. Look into recent sales and historical price growth; have a chat to local real estate agents and property managers to get an idea of activity in the market, or even engage an experienced Buyer’s Agent to do the hard yards for you. If it’s feasible, I also recommend taking some time to actually hit the ground yourself and check out the area face to face.
Expand Your Search Zone
Often growing up in an area means you have certain perceptions of what suburbs are ‘good’ and what suburbs are ‘bad’. These preconceived opinions may ultimately cloud your judgement and potentially leave you overlooking a great investment opportunity. When it comes to investing, it’s important to separate your feelings and emotions from the decision, and start thinking logically and financially instead. In the grand scheme of things, your personal opinion on a location and whether or not you would live there matters little compared to the cold hard facts.
Instead of making judgement based on reputation, look for how the local property market performs over the long-term. Things to consider first and foremost are whether you can afford to buy and hold; the historical growth the area has displayed; local rental prospects; what the pool of tenants look like; the popularity of owner occupiers; and of course, the future potential for above average capital gains.
Geographical Diversity
Don’t put all your eggs in the one basket! Or in this case, don’t put all your investments in the one area. A geographically diverse property portfolio has the potential to offer investors a much better chance of wealth creation. Why? Simply put, not all areas are going to experience the same highs and lows of the property market at the same time. So, while one State may be experiencing a downturn in house prices, another could be holding stable, while another again is showing an upswing in value.
Diversifying your investment portfolio ensures that you won’t be stuck with a bunch of properties that are all experiencing a downturn at the same time – something that could ultimately hinder you from being able to grow your portfolio any further!
Engage an Experienced Buyer’s Agent
If you’re still concerned about investing in a certain location and are wondering about the potential property investment opportunities, you can always engage the services of a Buyer’s Agent!
Enlisting the help of a Buyer’s Agent will not only save you time in locating the best suburbs and properties, but they can also assist you with the due diligence process. By having the help and guidance of a professional, you’ll also be able to actively minimise any potential risk, as any experienced Buyer’s Agent will be well aware of any state regulations or issues in an area that could end up being costly (such as flooding or mine subsidence issues).
Remember – investing outside your own backyard can open up a world of new opportunities that may be better suited to you, your circumstances and your goals. Instead of focusing on location alone, make sure your investment is backed up by the numbers. The Edge Property Buyers are here to help, so if you’re looking to invest but aren’t quite sure about your choices, get in contact with us today!