There’s a myriad of aspects to consider when researching an investment property. To help narrow down your search for the perfect investment property, we’ve created a list of 7 places to NOT invest in property. Look out for these 7 red flags as you research, and you’ll be set on your way to finding the perfect investment property.
1. DON’T INVEST IN: Single Industry TOWNS
A single industry town or location is a place where residential properties have been built surrounding a particular industry, such as mining or defence. This kind of location is best to avoid due to the high-risk involved.
For example, if the mine shuts down, or the defence force moves their personnel to another base, the rental demand surrounding the area will drop, driving both rent and property prices down.
2. DON’T INVEST IN: Dodgy Neighbourhoods
Despite cheaper house and land prices, investing anywhere with a reputation for being a “bad neighbourhood” is not a great investment strategy. Capital growth in these suburbs is generally less than other areas, as demand is lower due to fewer people wanting to live there.
Finding and maintaining long-term, good quality tenants who can afford the rent and will respect the property can also be more difficult. This may cause the property to remain unoccupied for longer periods of time, meaning less rental yield back in your pocket.
3. DON’T INVEST IN: Aesthetically Displeasing AREAS
Your tenants, and what they expect from the area they live in, should be at the forefront of your decision making.
A pleasant look and feel of the location are huge drawcards for good tenants, and having amenities, schools and activities nearby will also be appealing to renters and assist with your long-term prospects for capital growth.
4. DON’T INVEST IN: Suburbs with a Large Percentage of Rental Properties
Another aspect to investigate is the percentage of rental properties in the suburb you are considering investing in. Some suburbs can have a percentage of rental properties upwards of 60% of the total property market. This means to tenant your property you will be competing against a larger number of landlords, causing them to lower their prices to get an edge on the competition. Ultimately, this will lower rent prices across the entire suburb.
Renters also tend to not care for their houses as well as homeowners do, causing unkempt-looking properties, which can diminish the streetscape and affect the overall desirability of the suburb.
5. DON’T INVEST IN: Small Towns
It goes without saying that if there is no-one to rent your investment property, then there will be no rental yield coming in for you! The larger the population in an area, the bigger the rental pool (the amount of people that could move into your property) will be – as well as making for a better resale market should you need to sell the property. A good rule of thumb is to look for an area with a population of at least 100,000 people within a 20km radius.
6. DON’T INVEST IN: Areas with Outdated Infrastructure
Areas with substandard public transport, outdated airports and roads, low-quality internet and utilities, or lack of satisfactory schooling and medical facilities will not be appealing to tenants. Before choosing an area to invest, it’s worth doing some research into nearby future developments to get an idea of how the area will improve over time.
In addition, localised issues such as large, outdated overhead power lines can cause health issues for your tenant, as well as change the way in which your bank views the property, meaning you may not get the loan you were after.
7. DON’T INVEST IN: Mainstream Hotspots
You might find some “insider information” on social media or in a property investment publication stating that a particular area is a “hotspot” for investors. However, often by the time this information reaches the general public, the area’s property clock has neared its peak and prices are about to plateau.
To avoid this, we recommend looking for more niche locations that are not yet mainstream, and distinguishing the factors that will mean they become a hotspot in the future, such as major employment zones or large transport corridors being created. People like to live close to where they work, so these aspects increase demand, which in turn drives rental yield and property values up.
Where Can I Get Help Finding a Good Investment Property Location?
As you search for the best location for your investment property, feel free to refer back to this article.
However, if all this research sounds like it could be too time consuming for you to undertake on your own, that’s okay too! There are professionals you can turn to who know exactly what information to look for, and where to find it.
Prospa Property Advisory, for example, is part of the ASPIRE Property Network, which has researchers constantly searching for up-and-coming locations to best benefit you, saving you the trouble!
If you’d like to speak to a professional property investment advisor about the best locations for you to invest in, then give us a call on 1300660335 or email email@example.com.