In years gone by it used to be very easy to invest in property and see strong growth. Previous generations of investors simply had the luxury of purchasing a property in the area they already lived in and over many decades have seen significant growth.
If you’re looking to invest in property and build a portfolio this type of approach to investing is just not going to work anymore.
In fact, if you only look to buy a property in an area that you’re familiar with or where you currently live, you’re likely making a big mistake.
The first thing to understand is that Australia is not one single property market. There are tens of thousands of smaller markets all around the country. When you look at the opportunity to invest in property the odds of you just randomly selecting the right place to invest are very low. The odds that it’s the same suburb you already live in are even lower still.
The biggest mistake most investors make early on in their property journey is to choose to invest where they know or where they are comfortable. By doing this many miss out on hundreds of thousands of dollars in lost opportunity cost becuase they aren’t focused on finding the best investment. They mistakenly believe buying any property is enough, however, that’s just not the case.
You can take a look at a market like Perth or Darwin for example. If you had purchased a property in either one of these cities, you’ve probably not seen any capital growth for more than a decade.
Smart investors understand that you need to look at all areas of the country to find the very best opportunities. When you break down property to a suburb by suburb level, you can see which suburbs are seeing strong demand and have very tight supply. These are the types of suburbs that will see strong growth in the short-to-medium term.
If you’re going to build a property portfolio, you’re going to need to continue to purchase properties that appreciate in value or you’re simply not going to be able to move forward.
The other reason to look to invest all around the entire county is that you might not be able to afford to purchase a property in your current location. Just take a look at house prices in Sydney and Melbourne and for many investors, they will simply just not have the borrowing capacity to buy anything that would represent a good investment.
If you buy a property in Sydney or Melbourne it will likely have a few other implications:
- You will quickly run out of borrowing capacity after 1-2 properties
- Your property will be heavily negatively geared and you’ll be forced to make up the difference out of your income.
- You might not be choosing the best option for potential growth
If you wait and keep on trying to save to buy something in either of these cities you are really just losing ground when you could in fact be outperforming by identifying areas that are already growing around the entire country. If they were to look all around the country, there are many areas that are both affordable and have the potential for excellent capital growth.
The real question becomes how do you identify an area or a property that is likely to see good capital growth?
That’s where it’s important to use professionals that have the knowledge and experience to help you locate the right property.
At KPI we work with buyers to find the perfect match in the right location, at the
right price so that they can start generating passive income through real estate investing. We use numerous analytical tools and data reports to find the most suitable suburb for investment.
So don’t fall into the trap of investing where you know. It might feel safe right now, but the odds are it’s not the best investment you could possibly find.