3 characteristics of a good property investment location

However, Propertyology’s Simon Pressley believes that a systematic approach to research can alleviate most worries. The property research expert strongly recommended starting on a broader study of locations and eventually narrowing down the scope of research—from states to cities and from suburbs to streets.

According to him: “After understanding markets on a city-level, you can go down to the street-level research with confidence.”

“It also highlights how complex it is to make this really important decision called investing in property,” he added.

In contrast with analysing cities for property investment where investors take on a broader approach in research, studying the pockets of an area, commonly referred to as suburbs, entails an understanding of the ‘microeconomic factors’ that influence market movements.

When identifying cities, investors study market cycles and compare local economies, level of supply and demand and consumer confidence. Meanwhile, narrowing the options down to pockets of an area will depend on more specific factors such as livability, style of property and asset class.

Mr Pressley enumerates the common characteristics of a good location for property investment:

1. Proximity to employment hubs

Mr Pressley believes that the central proximity to employment nodes is key to success in property investment.

Being in the center of employment hubs are likely to appeal to most tenants or owner-occupiers, ensuring that the investor doesn’t suffer from the consequences of prolonged vacancies or an unsellable asset.

The property expert explained: “We want to make it appeal to the biggest segment of that particular town or city possible, and we know that proximity to work is a key decision that everyone makes, whether it's your own home as an owner-occupier or a tenant.”

“A property in close proximity to big employment nodes, whether that's close to the CBD or it’s the biggest cities that multiple employment nodes spread out in the suburbs, that's what we look for,” he highlighted.

2. Style of dwelling: apartments vs houses

There's always an ongoing debate about the pros and cons of investing in apartments and houses, and while there is no definite answer, Mr Pressley believes that an investor can settle the personal dilemma through simple research.

First, look back into your city-level research on the level of supply and demand. From there, analyse and compare the vacancy rates of apartments versus houses and then study the volume of building approvals.

These simple data, coupled with an understanding of demographics and market cycles, can help you determine which of the two types of real estate assets have more potential for growth and carry less risk.

The property expert also advised investors to be practical about their purchase. After all, new doesn't always mean good.

Mr Pressley said: "Personally if I'm gonna invest in a house or apartment, I will never touch new. The price of any new property, no matter where it's located, is loaded with so many taxes and all the commissions for all the marketing people and the first buyer is paying for all of that. You're behind the eight ball from day one."

"Keep it simple. I call it the meat-and-potatoes property. Low density, small complex, low maintenance. It doesn't rightly matter what age it is. In fact, if it's old, it means the builders took more care back then.

"Avoid the big-ticket expenses like lifts and swimming pools. Tenants might like them but tenants won't pay for them," he added.

3. A look into the future

Finally, while the current physical state of a particular area is naturally critical to an investment property’s success, the future of its infrastructure, zoning and other factors that will affect dwellings are more telling of how it will fare through multiple market cycles.

Unlike the characteristics mentioned above, this data could be hard to acquire without the help of professionals and city officials, so as property researchers, Mr Pressley and his team usually take time to meet with the key decision-makers in the community before proclaiming an area good for property investment.

He said: “We literally drive down every single street before we buy anything, but before we drive down every street and form opinions with our eyes, we meet with the key decision-makers in that community face-to-face, including the mayor and town planners,” he said.

“What's more important is not how it looks now, but how it's going to change over time,” the property expert highlighted.

Having an insight into how a particular area will grow and evolve can help investors plan for their long-term commitment to wealth-creation through property investment.

According to Mr Pressley: “Sitting face-to-face with council, more often than not, they're happy to say to us, ‘This isn't a guarantee but this is what that decision hinges on and it's quite likely to happen because of A, B, C, D.’ We can then factor in that change that hasn't occurred yet into our decision as to which part of that city might we invest in—zoning changes, density changes, infrastructure projects like roads, tunnels, factories.”

The local council will essentially be the people who will formulate strategies for the growth of an area and will consequently shape its future in the years to come.

Their attitude and aptitude towards embracing change in the community will be an insight to how the area will develop over time and how these developments could affect your investment through the years.

"A forward-thinking, open council who's looking to diversify its economic base, that's what you need. It's a huge driver of growth," the property expert said.

Tune in to Simon Pressley's episode on The Smart Property Investment Show to find out more tips about purchasing the right investment property.