When ‘Location! Location! Location!’ fails

I imagine there’s a lost tribe somewhere deep in the Amazon who’s had no contact with western civilization, yet if you asked them what they look for in a home camp, their answer would be, ‘Location! Location! Location!’

From an early age it’s drummed into us. The immutable truth that location is the one aspect of real estate that cannot be altered. Until science delivers us a teleporting device that will instantly beam us to work, school or our favourite café, then we have to accept that in order to be close to the services and facilities we desire, location is the answer.

I obviously agree with the importance of location – our ASPIRE advisors spend countless hours and extensive resources ensuring they select the best possible investment suburbs.

But anyone who relies on location alone needs to reassess their thinking, because there are multiple factors beyond location which separate a good asset from a dud.

The unsung heroes

Selecting the right location is foundational to good investing, but locations aren’t just about services and amenities. The best possible hotspots are also derived by demographic analysis.

For example, you want areas that have a high proportion of owner-occupier residents. You want suburbs where there are high-income professionals and where’s there’s a density of population within close proximity ensuring substantial buyer and tenant demand.

All these demographic elements work in tandem with the physical proximity of necessary conveniences to pinpoint excellent investment locations.

But it’s still possible to find a great location, and then totally strike out by choosing the wrong asset.

I’ve heard it said that it’s betters to have a dud property in a great location than a great property in a dud location.

My response is – why select a dud property in a great location in the first place? Do your job properly and you can have a sterling asset that fulfills all the criteria.

Selecting the right property

There are three elements which encapsulate a great property option in a great location for me.

Firstly, there’s position.

Position refers to where a property physically sits within a given suburb. Position can the difference between having multiple tenants begging to rent your investment, and it is sitting unloved and vacant.

Great positions include easy access (preferably walking distance) to community hubs and facilities. The position is ensuring you’re within the best possible school catchment. Position seeks to include quiet streets, elevation and aspect.

Conversely, a bad position includes real estate that fronts a busy road, is next door to a service station or an all-night takeaway food joint favoured by revellers on their way home from an evening out. Likewise, if your position puts you at risk of catching aromas from a nearby industrial estate, then this is not a property worth considering.

Next up is design

It’s crazy to do all the research involved in demographic analysis of a suburb, only to invest in a property that has no appeal to the dominant renter and owner type.

For example, you know an area is full of upwardly mobile professionals with good incomes and two-cars. Most have (or plan to have) children and many work from home for a percentage of their week.

Armed with all this knowledge, why would anyone invest in a one-bedroom apartment in a high-rise block in that suburb? It will sit idle, waiting for a tenant at a vastly lower rent than the suburb median. Worst of all, when it eventually comes time to sell, you won’t find nearly enough buyers. The capital growth potential now lousy – despite your excellent locational selection.

Finally, I believe the third X-factor is quality

I find new construction particularly appealing to investors. Not only do new builds offer excellent deprecation benefits, but the chances of extensive repair and maintenance are minimised. In addition, tenants love a new home – it smells and feels like a new car.

I’ve seen and heard stories from plenty of investors who’ve come unstuck because the quality of the property they bought was subpar. When you invest, make sure your developer/builder has a track record of excellent work. Good reputations translate into increased value in your portfolio for years to come.

As you can see, I’m passionate about a holistic approach to choosing an investment beyond the ‘Location! Location! Location!’ mantra. This is why you cannot simply read some self-serving article on a commentator’s web page revealing their latest ‘hotspot’, and then charge in holus-bolus without being decerning about your asset selection.

Instead, you must draw on the expertise of qualified and well-connected property investment advisors. Not only will they ensure you choose the right location, but that you select the ideal property as well.

Always review any property location research and investment analysis data, with a professional, QPIA (PIPA Member) qualified & accredited ASPIRE Property Advisor Network Advisor. Never rely on glossy sales brochures or property marketing information, ensuring a property is right for your strategy. Property Investing is about BUYING a property that matches your goals and aligns with your investment strategy, never be SOLD an investment.

Visit www.aspirenetwork.com.au or call our office to be connected with a Property Investment Advisor on 1300 710 933.

Related Articles

Dealing with a low bank valuation

Dealing with a low bank valuation

I came across an incredible story recently while talking to one of our advisors. He’d helped a client put an excellent new-build investment under contract and had just received the bank valuation back from the financier. It had come in $70,000 below the contract price...

read more
The psychological security of bricks and mortar

The psychological security of bricks and mortar

The world feels uncomfortably uncertain right now. We’ve been delivered blow after blow of upending news leaving many people psychologically punch drunk and staggering. The troubles have been relentless – not just the pandemic but political upheaval, international...

read more
Will interest rates kill the market?

Will interest rates kill the market?

Australians are an interesting lot. When it comes to important issues deliberated around the kitchen table, there are some tried and true discussion starters. It could be about the effectiveness of our political leaders, or which sporting franchise is up the...

read more