Characteristics of a good investment suburb

It seems like everyone has their own ideas about what makes a good investment property. Some tricks work and others don’t. One common thread is that some towns and suburbs attract a much larger number of investors than others.

What characteristics attract people to invest their money in these areas? Is there anything investors tend to avoid? While it is hard to generalise, there definitely are things to look out for when deciding where to invest.

Invest in the best

According to Angus Raine, CEO at Raine & Horne, any potential investment property should tick a number of boxes not just for yourself but also for prospective tenants.

“Location is paramount. Look for investment homes that are close to shopping, schools, hospitals and recreational facilities, and if they’re in walking distance, even better. Tenants must be able to get to work as quickly as possible, so access to motorways and railway stations are other valuable features to look for when buying an investment,” Mr Raine advises.

“For regional and coastal property investments, smart investors are looking for towns with growing populations, many of which have robust education and tourism sectors, not to mention a diversity of industries supporting the local economy.”

Mr Raine also advises buyers to consider both the size of the town or suburb they are looking at and the composition of housing there.

“The size of a suburb is important in that larger suburbs will generally have a blend of structures, giving you more choice when it comes time to invest. Whether it be freestanding houses, units, apartments, villas or townhouses, a larger suburb can offer ways to add diversity to your investment portfolio.”

Thirdly, Mr Raine urges buyers to consider what he calls ‘the ripple effect’.

“Buyers that are priced out of an area will look further afield to nearby streets or suburbs which more closely match their budgets. In turn this pushes up real estate prices in those neighbourhoods, creating a ‘ripple effect’. The ripple effect is probably more common in suburbs that are on the rise and/or on the edge of more popular areas.”

Buyer beware

The big negative to look out for is a glut of rental properties in the area.

“Suburbs with low vacancy rates are quite obviously popular with tenants and therefore investors, but conversely, a suburb that has a high vacancy rate can give you a pretty clear indicator about whether or not it is a good place to invest,” Mr Raine says.

“This is where your research plays a crucial role – check as many websites and magazines as possible for data on the areas you’re looking to invest in and speak to a local agent as well.”

Expert investment advice

When asked what key piece advice he would give to would-be investors trying to determine whether a particular market is a good place to invest, Mr Raine says the answer is simple.

“Avoid going to centres which are one-trick ponies. For example, any investment location needs to have several opportunities for employment. Look for areas that have more than one industry supporting them.

“In the same way, areas of enormous subdivision I would avoid as an investment, as there is a huge supply and not a very big differentiator between them.”

As Mr Raine points out, “It goes without saying that some suburbs are better to invest in than others, and the better ones can appeal to particular demographics. However, the best investment suburbs will always have a combination of key factors – such as location, transport, infrastructure and investment/development.”

Critique potential investment locations from a tenant’s perspective: a potential tenant will look for a place where they can set up a happy and stable home.