How to Choose a Suburb for Investment

By Michael Mackinven | Property

Mar 13
Suburb for investment

How to choose a suburb for investment is not an easy one but before I get into details, I'm going to blow our trumpet for just a second.

Last year we ran our free events to promote our property coaching course in February 2016. During this event we told everyone that if they joined our property coaching course that part of what they would get is exclusive access to our hot suburb that we had chosen for 2016 as a great suburb for investment . Now of course we could have chosen any suburb in New Zealand at random but that is not what property investing is all about. Using specific guidelines to make sure you choose the right area/suburb to invest in is where you make your money. As they say location, location, location.​

We chose this suburb for investment because of many specific reasons which I have pointed out below but this particular suburb we chose won ‘Best Community of the Year’ award which was Randwick Park in South Auckland.

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Purchasing in the right suburb is one of the critical factors when investing in property. You need to spend quality time doing your due-diligence to work out which suburbs are either up and coming or suburbs that will have continued growth.

Randwick Park is not your high capital growth suburb like Ponsonby or Remuera nor does it have the glamour of those areas, but how many actual property investors can purchase a property in Ponsonby or Remuera, not many. But time and time again first time investors want to purchase an investment property that is well out of their reach financially plus if it isn't out of your financial reach then it will bleed your cash flow very quickly.

Investors that purchase in areas like this have either very high incomes and or this type of property is seen as a capital growth/negative cash flow investment so investors use their positive cash flow properties they have in their current portfolio to top up negative cash flow properties, this way they don't need to put any of their own money in.

Do your home work and you will reap the rewards in the future. Below are 5 tips ohw to choose a suburb for investment.

1

INFRUSTRAUCTURE

Infrastructure is an important feature when trying to find a suburb for investment. Obviously you don't want to purchase a property right next to a commercial building.  But you do want to buy in a suburb that is not far from the CBD, smaller business hubs, other large employment areas like hospitals and airports. It may be nice to purchase a property in a rural area but your vacancy rates will be higher and potential for capital growth lower.  By purchasing in areas close to employment your vacancy rates will decrease dramatically, plus you will potentially get good hard working tenants that stay.

2

TRANSPORT

In big cities transport is important.  Does the suburb have good roads and motorway access to schools and jobs.  This includes access to public transport, buses, trains etc. Or can you walk and or drive a short distance to get to public transport.​ 

Being close to good transport will reduce your chance of high vacancy rates and keep rents up as people want to be close to transport links.

But buyer beware, buying right next to train tracks or a noisy motorway will hinder your changes of good capital growth.  You will also have to have the rent lower than normal to attract tenants. Plus the vacancy rates will increase.

3

SCHOOLS

Schools are one of the highest reasons people choose a property to rent or to buy. So when choosing your suburb for investment you are not only looking at current schools in the area but also future schools that may help the potential capital growth you get over time.  Sometimes families will rent in an area just to get in the correct zoning so their kids can go to that particular school.  Either way easy access to schools by foot, car and or public transport is a key factor when looking for a suburb for investment. 

4

NEGATIVE TALK

Past stigma of a particular suburb can be a factor that puts a lot of people of buying in that suburb.  But suburbs change over time and especially the ones on the outskirts of suburbs that have had growth and are popular.  Once one suburb goes up the suburbs around it tend to increase in value and popularity due to the fact that investors get priced out of one suburb so invest in the closest one to it.

Don't be afraid to choose a suburb for investment that your friends or family are saying is not a good area.  Go take a look for your self and talk to the real estate agents in the area to make your own decision, not the decision of others that have never been their. ​  These types of suburbs for investment are often cheaper and give more value for your money. 

5

FUTURE

When selecting a suburb for investment, look for any planned infrastructure.  For example new roads or highways going in.  New schools, public transport (trains etc), shopping malls, businesses and new employment opportunities.  You can get this information from local council websites and government transport organisations.  

Some of the work may not happen for years but purchasing a property for the long term is also about what outside influences can increase the suburbs value.  But be careful certain future infrastructure can reduce the suburbs value.

 

 

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About the Author

I have been a property investor for over 13 years and have created a multi-million dollar portfolio including residential and commercial. I could go on about this but I’m not here to impress you but to impress upon you that YOU TOO can create wealth through property whether that be $100K or $5 million. I’ve been through the boom – bust – boom so I know what it takes to stay in the market. I live locally in Otahuhu with my wife and new baby boy. I love to help and teach people about buying well and for long term. We can all make a quick buck but the real strategy is creating long term wealth.