The infrastructure that holds the key to all property investment
Shopping, education, recreation and transport infrastructure is the critical mix that will ensure strong long-term capital growth and provide the most solid launching pad for every property investment journey.
And taking the time to find real estate that ticks all the location criteria can add at least 10 per cent to the value of your asset.
Selecting a property within a 15-30 minute drive to the airport will all also add value exponentially. In recent years, proximity to airport has become one of the biggest considerations for property investors with overseas and fly-in fly-out connections.
International and local buyers also continue to chase the suburbs that sit in the top school catchments, as well as those with easy access to the elite private colleges.
You will pay more for this infrastructure suite, but you will definitely make up the extra outlay over time.
Once you have a shortlist of areas that provide these basic but pivotal facilities, there are some other location-related boxes investors need to tick.
My golden rule for clients is to restrict property investments to capital cities and only buy properties in the country if they are for lifestyle or retirement motives.
Try to spread your property assets north and south of the river, typically within 15-20km of the CBD. And if your budget allows make additional investments outside Western Australia, particularly Melbourne and Sydney where the bigger demographics are.
Settling on diversified locations for your portfolio requires a complete picture and lots of homework by you and/or your buyer’s agent.
When I’m in initial discussions about a new or expanded property portfolio, I first determine if the client is risk averse or willing to take a risk. Determining this investment profile is an essential first step.
If the client is risk averse then typically I’d suggest following the infrastructure and finding land-based properties north and south of the river. Land is the key here.
Then it’s a case of looking at government policy to ensure the suburb has the right mix of amenities planned or in place, check out the population growth and income levels for your suburb shortlist, plus you should consider annual capital growth, current rental yield, and the demand for rental properties.
Taking a walk through an area is also a great way to gauge demographic. It’s the best tool at your disposal to see what people are spending on their properties, where they are shopping and eating, and if there’s a boat or a trampoline in the front yard you’ll get a sense of lifestyle priorities.
Population trends can be as easy as determining high school numbers over the last five years.
An example of a client who followed this strategy owned three rented residential assets in Perth and decided to diversify to the East Coast. We chose landed properties in Toorak, Richmond and Footscray – all with a few kilometres of the Melbourne CBD. The annual profit generated by these assets is 3 per cent and the properties have all grown by more than 30 per cent in the five years since purchase.
This strategy doesn’t work for everyone, but it’s certainly one route worth exploring when you heed advice about the importance of location.