How to decide if a suburb is ‘investment worthy’

There are dozens of different strategies people can follow when investing in property, so it’s no wonder that when investors come to us, they’re often confused.

Here is Philippe’s advice on selecting suburbs to invest in:

“Where should I invest? What type of property should I buy? Should I chase positive cashflow or capital growth – and why can’t I chase both?”

These are some of the most common questions people ask me when I sit down with them for a strategy and planning session. I understand their confusion – I was exactly the same when I started investing! I recently reflected on my early property investing days when writing my book, Creating Property Wealth in any Market; I was so gung-ho that I bought a number of properties without doing adequate research. Thankfully they all worked out for the best, but I could have easily made some very costly mistakes.

If you’re considering your first or next property investment, what are some of the key criteria you need to look out for to secure a good quality investment location? With over a decade of investing experience behind me, this is what I’ve learned matters most:

  • Proximity to work: Understandably, people like to live close to where they work. In a bigger city, look for suburbs that are closer to the CBD or easily commutable to the CBD; Generally yield is inversely proportional to the distance to the CBD, so it is a matter of finding the right distance for a balanced cash flow.
  • Lifestyle amenities: What does the suburb offer in terms of shopping, schools, childcare, beaches, restaurants and entertainment? A leafy, family friendly suburb or trendy inner-city neighbourhood is generally going to hold lasting appeal, whereas an area with a large industrial or commercial pocket may not remain as appealing over time.
  • Thriving population: Population growth is extremely important. Think of it this way: if you invest in a regional town where population growth is going backwards, you’re at a much greater risk of your property sitting untenanted than if your property is located in a central, sought after suburb. Stick with well-populated areas with a strong track record of solid population growth, and you’ll be well positioned for corresponding property price growth, too.
  • Infrastructure: As a driver of capital growth, nothing beats infrastructure investments. A large infrastructure project close to your location will underpin growth and attract residents, especially if we are talking about transport infrastructure.

There are other factors to consider too, such as public transport and local market conditions. Every property market in Australia operates separately; you just have to look at the difference between Sydney and Perth at the moment for evidence of this. If you are looking for current market movements in detail, I strongly recommend you to read the recently released State of the Market Report.

It’s also very important to consider your own personal goals and your investment timeline when deciding where to invest, as someone with 25 years of capital growth ahead of them can adopt a different strategy to an investor who has only got 10 years up their sleeve.

However, as a starting point, I suggest that you keep these key criteria at the forefront of your mind when browsing potential property listings, as they’re applicable regardless of your ultimate property goals. Suburb selection is a very important part of the process, because with the right ‘investment worthy’ locations in your portfolio, you’ll be well on your way to building lasting wealth.