How to spot a good location to buy a rental property.

‘Location Location Location’ is often cited as the most crucial factor when choosing a property to buy. But there is a second element that comes into play for investors, more so than owner-occupiers and that is capital growth. Let’s apply those principles to buying an investment property.

Transport infrastructure - this includes both public transport services and road corridors. Tenants often place a high priority on good access to public transport.

But don’t overlook a property in an area that is targeted for an extension or improvement of these services as this can have a huge impact on property values. Brisbane’s Airport Link tunnel is a good example of this. Sweeping through the northeastern suburbs to the airport, this transport corridor saw property prices soar in older suburbs that had been overlooked for decades. Suddenly the travel time from these suburbs to the city or the airport was slashed. The result delivered significant capital growth for property owners in the area, and increased immediate returns for investors as rents rose too.

Social infrastructure – on a similar note the planning and construction of shopping, entertainment, education or health precincts are going to have a flow-on effect for house prices. Keeping an eye on government announcements can help with this. Especially documents like town plans or declaration of preferred land use and developments. Monitoring commercial real estate advertising can be useful too. This is where you might spot a land sale with development approval for a shopping centre for example.

For current returns look for an area with a café strip and access to retail. Proximity to recreational open space will reap benefits too. Tenants with families search for homes near childcare and schools. Older tenants (who are generally brilliant tenants in the way they look after their homes) seek access to medical services.

Real estate action – this includes, average days on market, auction clearance rates and even the traffic through open homes. If these indicators are on the move, then the suburb is heating up. So where can you find this information? Do the groundwork by visiting open homes and attending auctions. You can also get good data from realestate.com.au and domain.com.au through their ‘suburb profile’ tools.

Neighbouring suburbs – consider looking in the suburbs adjacent to the current ‘hot spots’. This is especially true for suburbs along a rail corridor. You are almost guaranteed that the activity that made the desirable suburb hot, will create buyer/tenant demand that will spill over to the bordering areas.

Lots of property renovations – this tells you that the locals like it so much they want to stay, so it must be a good suburb. Though you have to be quick on this one as it might mean the bargain buys are harder to find.

Beware of areas that are experiencing price growth and demand due to a specific economic stimulus. Once that ends, market values may well fall dramatically. Several mining towns are a good example of this. They experienced tremendous expansion and price growth during the mining construction boom, but have crashed significantly in the last couple of years. Unfortunately trapping many investors. Other areas like this might be linked to tourism or agriculture. Tourist towns rely on continued investment in the quality of the product. If the resorts, hotels and attractions become run down then the effects will flow on to general property values. The closure of a meatworks or food processing plant can have a similar effect in agriculture centres. Our advice at C1 Realty is to be very careful about buying in single-industry towns.

As with all investment choices, picking a quality investment property requires you to do your homework, in this case following things such as government decision making, and keep an eye on the market. But the real key is to be prepared to make an informed decision in a timely manner. Hesitate and you are lost.